What was misspent from the Richland County penny tax? Here’s what SC officials said

For half a decade now, Richland County fought with South Carolina’s tax collection agency over whether the county, in fact, misspent tens of millions of dollars meant for a $1 billion road improvement and public transit program.

The two sides seemed to find little agreement over what each believed were legal uses of the penny-on-the-dollar sales tax that Richland County voters narrowly approved in 2012. State revenue officials asserted the tax dollars could only be spent on capital expenses related to the transportation projects, while county leaders argued some of the tax could be spent on related program expenses, including management and day-to-day business expenses.

Their disagreement led to two competing lawsuits, rooted in the question of whether and how much money Richland County would have to repay into its transportation penny tax fund.

Now, after a years-long legal battle, the county and the state Department of Revenue have come to a settlement agreement, ending their lawsuits against one another and agreeing that Richland County will repay some $15 million to the penny tax fund, going back toward road improvement projects.

The $15 million is far less than some earlier estimates of what the county might owe, based on the Department of Revenue’s earlier assessments of how money appeared to be misspent. From the language of the settlement agreement, it’s not clear how Richland County and the revenue department winnowed down the repayment amount, including which expenses they apparently agreed were allowable and which were not. For months, Richland County Council had discussed the ongoing legal negotiations behind closed doors.

Here are some of the expenses the Department of Revenue had said the county should not have paid for using penny tax dollars, dating back to initial concerns raised by revenue officials in 2015 and an ensuing program audit that scrutinized spending from 2013 to 2018. A report on the audit was produced in October 2019, the details of which were reported by The State and other news outlets.

Public relations

The transportation penny program spent $993,868 on public relations that should not have been paid by the penny sales tax, revenue officials said in their 2019 audit report.

The spending included paying two public relations firms $25,000 a month each, plus an additional $648,292 paid to yet another firm for public relations services related to dirt road paving efforts, according to the audit report.

The public relations spending was one of the first issues raised in an initial letter of concern from the Department of Revenue in 2015, when officials pointed out that all along, the county had its own public information department.

Management fees

Before transferring the management of the transportation penny program to the county’s own employees, the county paid $30 million over five years to a consortium of three private companies to manage the massive road improvement program. But some $20 million of those management costs should not have been paid by the penny sales tax, state revenue officials asserted.

The PDT created 29 management positions that were funded by the program. And the consortium also received an additional payment for each project of up to 11%.

Coffee, cars and office supplies

Some $1.8 million in business start-up costs for the program management team should not have come out of the penny sales tax revenues, the Department of Revenue said in its audit.

Items the management team paid for that the county should repay to the penny tax fund included “routine office expenses (such as) coffee supplies, cups, lids, postage, tables, chairs, software, napkins, engineering supplies, office supplies, plumbing/toilet services, plants, cars (GMC Acadia and Chevy Silverado), insurance, Google Apps for Business, a Nikon Camera, an icemaker, an office lease and a protection plan for refrigerator/microwave,” according to the 2019 audit report.

Other items

According the audit, other “miscellaneous” costs born by the county road tax include the costs of computers and phones, garbage services, HVAC repair, and even a subscription to The State newspaper for the management team. Those costs added up to another $1 million that should have been repaid to the penny tax fund, according to the audit.

Audits

Speaking of audits, the county used $71,275 of penny tax money to pay for independent audits of the roads program by the Cherry Bekaert and Elliot Davis firms, according to the revenue department. Revenue officials called those expenses “a normal cost of doing business” and not a capital cost related to the road improvements.

Bristow Marchant contributed reporting.