It's only the tip of the iceberg

The State Newspaper ran a very interesting Op-Ed piece today by Bettis Rainsford:

Tax revenues are down all across the state, but many counties and school districts - particularly those in our rural areas -have been particularly hard hit because of the loss of manufacturing plants and the ad valorum tax revenue these plants produced. Worse, the migration of new manufacturing investments to other countries means that many counties and school districts will not be able to attract the kind of capital investment they need in to generate sufficient tax revenue to provide minimally adequate services for their citizens.

There is one type of capital investment, however, that is going to be made and that should be used to assist all counties across our state: electrical generating facilities. The growing demand for electrical power throughout the United States will mean that electric utility companies will be building massive new generating facilities in the years to come.

Most of these new facilities are expected to be extremely large, requiring the investment of billions of dollars, and they will be located in only a few counties. Under current law, they pay extremely large property taxes to the counties in which they are located, resulting in huge financial windfalls for those counties. In the case of one proposed $10 billion investment, the windfall could amount to many tens of millions of dollars in annual tax revenue.

Because these plants will create relatively few jobs and require a negligible amount of local services, the host counties will experience very little increase in the cost of their local governments. Thus, the huge increase in revenue will almost all fall to the bottom line, providing enormous resources for these fortunate counties.

These electrical generating plants are a part of a regulated industry; electrical consumers have no choice from whom they purchase their electrical power. For stockholder-owned utility companies, rates are set by the S.C. Public Service Commission based upon the total costs of the utility, including taxes. Thus, all of the utility's electrical consumers are, in effect, being forced to pay the taxes that will go entirely to the county in which the generating plant happens to be located.

To understand the magnitude of this issue, one needs to recognize that $25 billion or more will be spent on new generating facilities in South Carolina over the next 15 years. Already SCANA and Santee Cooper are in the beginning stages of a $10 billion investment. Duke Power has an $11 billion project in the works. Other utilities may soon follow. If the taxes from these investments were shared on a per capita basis with all of the counties and school districts rather than being kept by just the few counties where the plants will be located, the vast majority of our counties and school districts would recognize significant increases in revenue.

For example, using very conservative assumptions, Allendale schools and local governments might receive more than $700,000; Marlboro might receive as much as $2 million annually; and Darlington, $4.5 million. Larger counties would benefit too: Richland, Charleston and Greenville would each receive more than $20 million annually.

I believe that our state Legislature should move to correct the inequity that exists in current law. There is no justification for allowing a few counties and school districts to realize such huge windfalls at the expense of electrical consumers from all of the other counties, particularly when so many are struggling just to make ends meet. Bills already have been filed in the Senate and the House to amend current law to provide that the huge tax revenue to be paid on new electrical generating facilities be shared equitably among all of the local governments and school districts. I urge all South Carolinians to study this matter and to ask their representatives in the General Assembly to support this legislation.

Mr. Rainsford, a co-founder of the textile giant Delta Woodside Industries, is president of the Rainsford Development Corp. in Edgefield.

I would argue though, why limit yourself to only new power generating facilities - why  not offer a 5 year window and then transition all power generating facilities into this scheme.

But this is only the tip of the iceberg when it comes to fundamental tax reform that needs to go on in this state, but more on those reforms as time goes by.