Richland Penny Sign 2016

Image by Chris Trainor

Richland County has temporarily halted transportation penny tax funding to several controversial programs following a March 7 opinion from the state Supreme Court.

County Council adopted a measure on March 9 that freezes penny tax funding for the Small Local Business Enterprise program, a pair of public relations firms and a mentor-mentee program. That funding will stop until the county can coordinate with the state Department of Revenue on the proper use of penny tax money.

In its recent decision, the state Supreme Court ordered the county to put standards in place to ensure that penny spending goes directly to transportation projects, or to properly administering such projects.

The county and the state Department of Revenue issued a joint statement March 9 saying officials from both entities “are working together to implement the Supreme Court’s decision, establish guidelines and ensure all expenditures are compliant with the [state] Transportation Act retroactively and in the future.”

The Transportation Penny was approved by Richland County voters in a contentious 2012 referendum. The penny tax is set to collect more than $1 billion in the next two decades, to be used for various road and pedestrian projects and the COMET bus system.

However, questions about the penny tax began to bubble up in 2015, when the Department of Revenue began to look into its spending. Rick Reames, who was director of DOR at the time and has since moved on to the private sector, said the department’s probe into the penny “uncovered millions of dollars of potential fraud, waste and abuse.”

The matter has been tied up in court since 2016, with the county and DOR having fired lawsuits back and forth at one another, leading to the recent S.C. Supreme Court opinion.

Some of the questionable expenditures are laid out in the opinion. Many deal with what the DOR — and the court — view as excessive administrative spending unrelated to any specific project.

For example, the court notes that DOR found the county was paying two public relations firms $25,000 a month each to provide “public information services” and also reimbursing them “for expenses such as brochures, mailings, business cards, website maintenance, catering, mileage and computer and cell phone allowances.”

The opinion reads, “It was unclear exactly what work these firms performed, since a fully operational public information office already existed within the County and because no documentation existed to detail what specific services were provided, the number of hours spent on these projects, or how much each service cost.”

The opinion also mentions more than $550,000 in penny funds used to start the Small Local Business Enterprise program, and penny funds used for a “vague and duplicative” mentor-mentee program, among other spending.

The opinion notes that DOR, at one point, issued the county a five-page written guide on how it could develop guidelines to ensure that “administrative” costs are being paid appropriately within the penny program. However, the county reportedly said it was unnecessary to put in any additional cost-allocation standards, and contended its recordkeeping procedures were adequate.

“A proper expenditure of Penny Tax funds must be tethered to a specific transportation-related capital project or the administration of a specific transportation project,” the opinion reads, and goes on to say, “the County shall be subject to guidelines for determining whether expenses are properly allocable to a specific transportation project, or the direct administration of a specific transportation project.”

Meanwhile, the county claimed in a March 9 release that, of the more than $240 million in penny funds expended thus far, DOR and the Supreme Court have questioned less than 1 percent. The statement further says the county “will fully comply with the Court’s helpful instruction” related to what it calls “erroneous expenses.”

District 5 Councilman Seth Rose points out to Free Times that he made several motions two years ago — including one that would have halted penny funds being used for the SLBE program — that would have reformed the penny tax. However, those motions were not approved by his fellow council members.

“These motions would have addressed the findings in the recent Supreme Court ruling had they been passed by council back in 2016,” Rose says. “Moving forward, I hope accountability in accordance with state law can finally be accomplished for the penny program.”

The Columbia Chamber, an advocate for business in the Midlands, has taken a position on the matter, with CEO Carl Blackstone saying the Supreme Court’s decision could help right the ship for the embattled penny tax, an initiative the Chamber supported.

“The Columbia Chamber was one of the first to endorse the penny program as a means to promote growth. The penny program can only succeed if the public trusts that the project is managed responsibly and with integrity,” Blackstone says. “The Supreme Court ruling gives Richland County Council the opportunity to hit the reset button and put in place accountability measures that will provide the necessary oversight for the duration of the program.”