Mayor Gettys: School district lawsuit against Rock Hill a ‘tactic to bully the city’
Mayor John Gettys responded Monday night to a recent lawsuit against the City of Rock Hill, filed by a school district that Gettys said has lost focus on its mission.
“We are disappointed with the current dispute and made every reasonable effort to work with the school district, as we always have done in the past,” Gettys said as part of a city statement read at the end of Monday night’s city council meeting.
The Rock Hill School District filed a lawsuit against the city on Friday. The district asked the court to: award damages estimated at $10 million for inflated utility costs charged by the city; rescind a 2020 agreement that diverted tax money from the school district for redevelopment; and return funds the district would’ve received if that agreement had not been in place.
The suit takes aim at whether the city should be allowed to charge the rates it does for electricity, a question that could impact the more than 40,000 power customers who rely on the city for service.
Gettys said the city and school district have a long history of cooperation to benefit their common taxpayers. Gettys also said children in the community should be the primary mission and focus of each decision made.
“The leadership of the school district has clearly lost its focus with regards to this mission,” Gettys said.
Electric bill charges
The suit alleges Rock Hill shouldn’t be allowed to charge electric rates because the city doesn’t own electric facilities, and that the city can charge amounts unchecked by state regulation.
The suit claims the city became a member of the Piedmont Municipal Power Agency in 1979 as a group of municipalities wanting to purchase an interest in Catawba Nuclear Station, which needed funding. The joint agency PMPA allowed municipalities to purchase electricity wholesale from then Duke Power and sell it to their own customers.
But the 2004 establishment of the state Public Service Commission to oversee utilities changed the rules, the suit claims. According to the suit, because Rock Hill never bought or sold its own facilities to generate power it shouldn’t be authorized to sell electricity at profit. The suit also states the city should have to operate under rules and regulations of the public service commission, but doesn’t.
“Essentially, the city has turned the re-sale of electricity it purchases at wholesale prices into a profit center with no one looking over its shoulder,” the suit claims.
The current setup doesn’t place caps on how much the city can charge for electricity, according to the suit. The suit claims Rock Hill has a monopoly on electric service within its limits and in a typical year makes about $23 million in profit for city operations.
“The city uses cover from PMPA to price electrical rates at whatever rates it desires to generate income and profit,” reads the suit filing, “which allows it to keep real property taxes artificially low, likely for political reasons.”
School district charges
The filing claims the school district is the second largest utility customer for the city, behind only the city itself. The suit claims prior to the 2020 agreement, the city “surreptitiously” added meters on school properties that generated higher bills for the district. The 2020 agreement provided the city would consolidate meters to one per facility, according to the suit.
The lawsuit alleges the city stated in negotiations to come up with new utility rates as part of that 2020 agreement that it was bound by Duke Energy rates it had to pass along to customers. The district now claims the city defrauded the school district by claiming the city was charging Duke rates rather than setting rates and making “considerable profit” through markup.
The district states it paid more than $10 million for electricity from Feb. 1, 2020 to Friday’s the filing date. The suit claims the district doesn’t believe those charges were based on wholesale rates the city gets from Duke, and that other district facilities outside Rock Hill pay “far lower rates” for electricity they receive directly from utility companies regulated by the state.
The district wants the city to recalculate rates as the wholesale amount Rock Hill gets, plus costs.
“The district will not underwrite the city’s operations by serving as a profit center for the city any longer,” reads the filing.
TIF district funding
The lawsuit takes issue with an amendment to an intergovernmental agreement between the city and district signed in early 2020. It relates to the Red River Development Plan, Downtown Redevelopment Plan, Manchester Village Redevelopment Plan and Textile Corridor Redevelopment Plan.
Tax increment financing (TIF) law dating back to 1984 allows public bodies to agree to pay debt for redevelopment infrastructure in certain areas from expected future tax revenue. A subsidy for redevelopment, the idea is TIF districts will spur new growth in blighted or otherwise less desirable areas which eventually will generate more tax money for the public bodies that forego some of it on the front end.
That redevelopment of downtown Rock Hill? Here’s how much public money it will take.
The suit claims the school district signed the 2020 agreement with the city to expand the footprint of a TIF district set up in 2014 and combine downtown and textile corridor districts into a single one with up to $85 million authorized in future TIF bonds. The district agreed to let the city to use bond proceeds for redevelopment projects, including all millage that would’ve been collected by the school district in that area.
The suit states speculative future income the district would receive starting in 2040 is an “insufficient and inadequate consideration” to support the 2020 agreement. The suit also alleges the city breached the 2020 agreement related to the electric rates, zoning of former Edgewood School property and space for district use within Knowledge Park.
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Apartment rezoning
The district alleges the city agreed to rezone the former Edgewood school property to allow for apartments, per the 2020 agreement. The district had the property under contract for sale and development as apartments. In late 2020 the city rezoned the property to a master planned listing rather than a typical multi-family (apartment) one and the city didn’t disclose that decision would devalue the property, according to the suit.
The school district didn’t realize the change until earlier this year, the suit states. The move reduced the number of apartments allowed from 264 to 216. The suit states the district went under contract to sell the Edgewood Apartments property in April 2020 for almost $1.5 million but due to the zoning change that sale never happened.
The district had to lower the asking price and still hasn’t been able to sell the property, according to the suit.
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Apartments are a concern for the city right now. Just last month city council members expressed frustration over a project they say is needed to add hundreds of new residences and commercial properties in the Mt. Holly and Albright roads area, near Saluda Street. The problem is the 400 included apartments.
City council members said it’s unlikely any new apartment projects will be approved in the foreseeable future due to a recent state law change that allows apartment property owners to get around paying property taxes.
Council members said it will take a state law change or property-specific agreements with developers before the city would be comfortable allowing more apartments.
Rock Hill leaders OK with apartments, balk at SC law that allows break on property taxes
Knowledge Park school space
The school district alleges the 2020 agreement allowed for educational space in Knowledge Park for school programs. The district envisioned high school programs to allow experience in commercial settings. The district states in the suit no space has been provided nor programs offered.
The suit states the city might provide space only if the district pays for it, which the district contends wasn’t part of the 2020 agreement. The district asked for a listing of companies within Knowledge Park in effort to accommodate the space requirement or educational opportunities instead of actual space, according to the suit, but hasn’t received one.
Rock Hill city response
Gettys made the city’s statement Monday night but said future responses from the city will come through the court system. Gettys called the school board suit an “aggressive, confrontational tactic to bully the city” into providing better terms than what both parties agreed to previously.
“This dispute stems from agreement related to critical textile corridor revitalization project which has been a resounding success for the people of Rock Hill,” Gettys said. “The city has met all obligations required under this agreement with the school district.”
An agreement that has resulted, Gettys said in the statement, in more than $6 million in cost savings to the school district since 2020.
