COLUMBIA — In a move that could spark a new wave of major development in South Carolina’s capital, Columbia and Richland County governments have agreed to offer major tax breaks to major developments.
They are offering a 10-year, up to 50 percent joint property tax break for large commercial and residential projects that exceed $30 million in investment. Developers must spend the money saved on improvements such as sidewalks or a parking garage.
The tax break, approved by city and county councils, echoes deals that encouraged development of private student housing near the University of South Carolina campus. Four student housing projects in Columbia each worth at least $40 million took advantage of a 10-year cut in their property taxes of 50 percent from 2014 to 2015.
Aiding large development around Columbia is needed because the region’s high taxes send projects to other Southeast cities, advocates say. Two-thirds of Columbia goes untaxed because of large swaths of government-owned property, such as the University of South Carolina and the Fort Jackson Army training base.
“A large majority of our (land) is not on the tax rolls,” Columbia Mayor Steve Benjamin said. “You wind up with this really weird concoction that puts an undue burden onto our commercial taxpayers. So this is a goal of using a county tool to alleviate some of that tax burden, if you develop the types of property that we think the city and the county want to see.”
The goal, according to Richland County Council member Chip Jackson, is to “eliminate the barriers that our crazy tax laws create.”
The deal also could spur projects in rural areas because developers would have money to spend on road and water line improvements, Richland County Councilman Joe Walker III said.
Columbia City Councilman Daniel Rickenmann, who voted against the tax break, said he thinks the intention is good but worries Columbia is being too hasty signing on to the deal.
“A lot of the burden is going to shift to those people who are already paying,” he said.
Ryan Coleman, economic development director for Columbia, said the city and county want to encourage projects that contain multiple uses, like market rate multi-family housing, hotels or office space coupled with retail or restaurants.
“We’re seeing a lot more of those in other cities than what we see in Columbia,” said Matt Kennell, chief executive of City Center Partnership, a group that promotes Columbia’s Main Street District. “That’s probably what we’re lacking are those mid- to large-scale mixed-used projects.”
Coleman said incentives are capped based on how much they spend on improvements around the project, such as streetscaping and turn lanes.
“There are folks out there interested in the Columbia market and want to do business here,” Coleman said. “We have a very real property tax issue that needs to be dealt with and we’re just trying to mitigate that.”
To receive the incentive around Columbia, a developer needs approval from both city and county councils. The breaks end in 2022.
“At the end of the day, the developer will have to come in and show the value their project provides to the community,” Coleman said.
The arrangement should clarify rules for investment in Columbia and Richland County instead of developers having to negotiate their own tax breaks, former Columbia Mayor Bob Coble said. The tax breaks also should encourage a wave of new projects to fill pent-up demand in the city.
“It’s a huge deal,” Coble said. “It’s one of the most important city-county agreements we’ve ever had.”
Kennell said the tax breaks could push forward projects that have stalled.
One such project is a proposed commercial project on the former Kline Steel site at Huger and Gervais streets that has been discussed for years but not completed.
“There are virtually no tax revenues coming from those sites now,” he said. “To me, it’s a win-win.”
The BullStreet District at the S.C. Mental Health complex could be another benefactor, Kennell said, or if Richland County were ever to move its courthouse complex, it could spur redevelopment of that property.
“Anywhere there’s a significant amount of land,” he said.
Patrick Palmer, principal of commercial real estate firm NAI Columbia, said clients have sought new construction but found little in recent years because of the area’s high taxes.
If a new building has to charge $5 or more per square foot to cover property taxes, they are less likely to find tenants, Palmer said.
A better tax environment could bring a surge of stores to make up for lost time.
“There’s demand for a lot more retail,” Palmer said.
Based on 2019 tax revenues to the city, Coleman said the four student housing projects together are generating $415,000 per year at the 50 percent tax rate.
Station at Five Points alone brought in $94,000, compared to the maybe $10,000 annually it was generating as a former Greyhound bus station.
This does not include the water and sewer revenue or fees the city has brought in from these projects.
With the incentives, Richland County taxes for big projects would be closer to those in neighboring Lexington County, Coleman said.
There is no cap on the number of projects that could apply for the incentive, Coleman said, because each project requires individual approval. The councils could decide to stop signing off on them before the end of the two-year period if they think the program has served its purpose before then.
“There is such a thing as hitting the saturation point,” Coleman said.