Various Special Tax Districts – Response to 2015 Flood

In October 2015 South Carolina sustained torrential rains that resulted in the breach of dams across the State, including approximately twenty dams in Richland County alone. These dams were predominately built by developers in the middle of the last century to create small lakes around which they could develop and sell attractive homesites. After the dams breached, the homeowners found that their formerly serene lakeside properties were now adjacent to very large mud pits and property values understandably dropped significantly. Appeals to FEMA, the State, and other local sources to repair these dams were not met with a welcome reception. Although they may have been sympathetic, in the competition for scarce resources, restoring the property values of lakefront homes in a few dozen private communities was not at the top of the list for any public agency at any level. Once it became apparent to the residents living around these erstwhile lakes that no one was coming to save them, they began to assess their options, which rapidly dwindled to (A) do nothing, or (B) self-help. Most were not willing to watch their biggest investment lose half of its value, but the question arose as to how to help themselves out of their situation?

The Home Rule amendments to the South Carolina Constitution and related implementing acts prohibited the creation of new single-county special purpose districts by the General Assembly, but in turn provided counties with their own tools to meet the specific local needs that were once met by the creation of special purpose districts. The Home Rule acts granted counties significant “new” general powers as well as the specific power to create special taxing districts in a limited portion of a county to provide a limited service paid from a special tax or assessment. Counties may create special taxing districts comprising the entire unincorporated area of the county on their own motion, but for smaller areas within the county two methods are available, both of which require direct citizen participation. Our firm advised these homeowner groups to use a method of creating taxing districts under a provision of the law that allows for the creation of a special tax district upon receipt of a petition of 15% of the electors of the proposed special tax district and subsequent referendum of the electors in the proposed district. The ballot question specifies the boundaries, the nature of the services to be provided, and maximum level of taxes or user service charges, and an ordinance of county council affirms the creation of the tax district.

In the case of the homeowners left high and dry after the 2015 flood, five communities in Richland County pursued the 15% petition and referendum method, and worked with Pope Flynn attorneys and county officials to establish and administer their respective special taxing districts. Once established and operating, the districts obtained federal loans from the U.S. Small Business Administration to finance dam reconstruction. Three years later most are back to lake-front living. It could have easily been otherwise.