Tax revenues afford opportunities and temptations. The 2012 Transportation Penny Program, also known as the Penny Tax, is a 1 percent sales tax to fund road projects. This 22-year tax is expected to raise more than $1 billion and is currently generating approximately $5 million in revenues per month for Richland County.
In 2015, the S.C. Department of Revenue’s audit of the program uncovered millions of dollars of potential fraud, waste, and abuse. Richland County and DOR’s entry into the legal arena resulted in a South Carolina Supreme Court opinion addressing the specter of problematic payments including $554,000 to establish the Small Local Business Enterprise program; $25,000 monthly disbursements to each of two public relations firms; and significant monies for “vague and duplicative” mentoring. As the 2018 opinion allows, “Following the audit, DOR informed the County that it had uncovered (1) evidence of public corruption; (2) evidence of criminal violations of state tax laws, and (3) unlawful expenditures of Penny Tax revenues by County Council.”
Associate Justice John Kittredge also noted that DOR forwarded these findings to SLED for investigation. An attorney involved in the litigation opined, “The Supreme Court slammed the county!”
Rick Reames, III, the director of DOR when the lawsuit was filed, says, “Richland County spent an inordinate amount of time and money fighting transparency and accountability. I am hopeful that in light of the S.C. Supreme Court’s decisive action and the election of some new council members, the county will now take measures to restore the public’s confidence by bringing the program into compliance with state law.”
The proposed road work costs far more than budgeted. Just the Atlas Road portion alone is expected to be $26 million over budget. Richland County Councilwoman Allison Terracio says, “We are at a crossroad. We cannot spend money we don’t have, and the outsized overages — like Atlas Road — are alarming. We should do the projects that make the most sense.”
Richland County Councilwoman Chakisse Newton says, “We need a better process to evaluate the projects. When you are in a hole, the very first rule is to stop digging. We must absolutely adjust the scope.”
Between 2014 and Nov. 3, 2019, an association of three private companies known as the Program Development Team was contracted to receive $6 million a year to manage the Penny Tax program.
The firm of Cherry Bekaert audited the records of the PDT and identified significant deficiencies in the financial records. The county council’s October meeting resulted in freezing future payments to the PDT with Councilman Joe Walker, III, expressing his concern regarding the PDT contract. “This entire contract has been incredibly concerning since day one. We are relegated to now throwing Band-Aids on bullet wounds.”
Chakisse confirms Joe’s insights, saying that the contract with the PDT was written very favorably for the PDT. “The contract is unbelievable to me — I’m constantly stunned.” Regarding the program as a whole, she adds, “Now these chickens are coming home to roost, and we are responsible for problems that were years in the making.”
Joe voices the concerns of many in saying, “The program has been flawed from inception beginning with the referendum itself failing in 2010, only to reappear on the ballot in 2012, and miraculously passing thanks in no small part to an abundance of absentee ballots appearing in favor.” He further explains that the Special Purchasing Ordinance was created that allowed the then-county council to directly involve themselves in the selection and procurement of their favored team against the advice of the county attorney and in direct contrast to state procurement law.
Joe believes that Richland County is now paying the price for that. “The South Carolina Supreme Court and the State Department of Revenue have indicated as much,” he says. “What this boils down to is a council overstepping its role. Richland County should have never been anything more than a disbursement agent in this program, approving project lists and budgets annually from the city of Columbia and SCDOT, respectively, based on the location of the projects, and then simply writing checks.”
Joe thinks that the county should have been limited to resurfacing its own roads and paving dirt roads, tasks which fit squarely in its basic role as a municipal fiduciary. “This is the result of a power grab,” he says. “The management of a billion dollar program was too much to pass up. The mentality in leadership has to change. We cannot approach our posts asking what can I get out of this, but more of what can I pour into this.”
Several Midlands leaders are acutely aware of the state of affairs. Mike Brenan, president for the South Carolina Region of BB&T, was the chairman of the Columbia Chamber of Commerce when the TPP passed. He was promised very clear accountability and transparency. Mike says that the promised oversight has not been forthcoming. “The result is mismanagement, waste and favoritism.”
According to Carl Blackstone, president and CEO of the Columbia Chamber, “The original intent of the Penny Tax Fund was to generate money to improve transportation infrastructure and the deteriorating road system. Since 2016, we have asked for transparency as to how these funds are being spent. With the frequency that Richland County continues to make news headlines regarding alleged improprieties and questionable spending practices, it is difficult to trust that funds paid by the public are used for their intended purpose. Complete transparency and proper accountability are owed to the citizens of Richland County to ensure the program lives up to its promises.”
Richland Rep. Kirkman Finlay, III, says, “The Penny Sales Tax is an agency that does not believe it is constrained by cost or expedience in its decisions, and it’s beginning to show as we are now years behind and millions of dollars over budget with very little to show for it.”
Several members of the Richland County Council did not respond to our contacts for their insights.
The enabling legislation for the Penny Tax will continue taxing the public for 22 years from its inception — a full generation. Concerned parties are asking how this is affecting the desirability of prospective businesses as well as the financial integrity of Richland County.