North Augusta plan to cover pension bill includes tax hike

For North Augusta City Councilman Ken McDowell, it’s not complicated, but it is maddening: “They lost it. Now we’ve got to pay it back.”

 

They are the South Carolina Retirement System. “We” are taxpayers.

With a $24 billion negative difference between what it has promised to pay retirees and what it actually has, the retirement system is being bailed out by a legislative edict to increase contributions by public employees and their employers.

North Augusta is an employer, and its bill for the first year’s increase of 2 percent is $420,000. Aiken County, a bigger employer with a bigger tax base, had to come up with $773,000. They and all other South Carolina municipalities, counties and school systems will continue to add 1 percent annually through 2022.

The state Treasurer’s Office estimated that by then, employers will be paying nearly 13 percent and employees will be paying nearly 10 percent.

Aiken County, which budgets June 30-July 1, already took money out of its reserves for the pension plan and other things, said County Administrator Clay Killian. North Augusta, which budgets by the calendar year, is working to cover its shortfall of $350,000. The school system, with 3,500 employees and a countywide tax base, also was able to shift funds to cover it.

For North Augusta residents, it probably means the first tax increase in 25 years.

Amid much hand-wringing last week during the first of two late-night budget sessions, Mayor Bob Pettit assigned some homework.

“Think about what level of service we want to provide to our citizens,” the mayor said, and come back with some options.

The next night, he led from the front with a plan of his own: Keep services at their current level by raising the property tax 3 mills – which amounts to $26.20 more tax on a $200,000 house – and raise the accommodations tax by one percent. The preliminary budget already contained an increase in water rates of 25 cents per 1,000 gallons to pay the city’s share of expanding the Horse Creek Valley Water Treatment Plant.

“The budget before us diminishes the level of service we’re providing,” Pettit said, and wouldn’t provide for replacement of vehicles and equipment. “I’d like to improve that level of service.”

Under Pettit’s plan, the hospitality tax hike would bring in $700,000 in new revenue. By law, only half of that can be spent on operations, but it would cover the shortfall, continue to fund capital projects with a half-mill, build tennis courts at Riverview Park and leave $100,000 over for “a new opportunity in Riverside Village,” which council discussed in executive session.

The property tax increase would bring in about $285,000 to replace vehicles and equipment, such as police cars.

Council didn’t vote, because it was in a work session, not a meeting, but Pettit got little argument.

Now city staff is working up a new budget based on Pettit’s plan. They’ll probably have it done by the next meeting, Oct. 2. Then council will go through it before a series of three votes during meetings, including a public hearing.

Meanwhile, council members are bracing for what more than one of them has termed “a beating.”

“I prayed and prayed and prayed,” Pat Carpenter said. “In 24 years I’ve never worried about a budget.”

She said she asked her brother what he thought and he said: “So what, Pat? We haven’t had a tax increase in 25 years.”

A young woman at North Augusta Elementary School, where Carpenter works, told her: “My trust is in you. If that’s what we need to do.”

Still, Carpenter’s pretty sure not everyone will be so kind.

“Some will say it’s Project Jackson,” she said, even though the now renamed Riverfront Village that includes a new baseball stadium for the Augusta GreenJackets, is a separate issue.

The city has seen a boom in luring new businesses, but it takes two years for those property tax revenues to start coming in. Sales tax revenues also are down, by 23 percent, largely because of a state government order to exempt unprepared foods.

The silver lining is that the city’s growth could make subsequent increases in the retirement contribution easier to make.

In a forum Thursday night, Pettit talked about how the city is booming from the river to Exit 5, and Exit 1 won’t be far behind.

The pension system’s woes are usually attributed to bad investment decisions. At one time, it was allowed to invest in bonds alone. When it was opened to stock investing, managers too often bought high — such as right before the tech bubble burst in the 2000s and the real estate crash of 2008.

Those economic downturns led to state budget cuts and reduced the number of workers paying into the system. As the overall population has aged, more retirees than ever are drawing on the system.

State employees’ contributions are going up 0.5 percent to help shrink the deficit. Nearly 200,000 are covered by one of five state pension plans.

Reach James Folker at (706) 823-3338 or james.folker@augustachronicle.com.

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Sun, 12/10/2017 - 19:42

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