In 2014, Uptown featured a series of articles designed to educate municipal officials on powerful economic development tools and incentives available to encourage redevelopment activity. (To access the series, visit www.masc.sc (keyword: ED tools).
Another tool available to cities is a special property tax assessment commonly referred to as the Bailey Bill (SC Code of Laws Section 4-9-195 and Section 5-21-140).
Enacted in 1992, the Bailey Bill allows local governments to offer a property tax abatement to encourage the rehabilitation of historic properties. For a period of no more than 20 years, the local government can lock in a special property tax assessment based on the property’s fair market value prior to rehabilitation.
This allows the property owner to avoid local property tax payments on the increased value resulting from eligible renovations. The abated value is the difference between the fair market value of the building at the start of renovation and the fair market value of the building after renovation.
| | Residential | Commercial |
|---|---|---|
| Increased Value Due to Renovations | $50,000 | $150,000 |
| Assessment Ratio | 4% | 6% |
| Avoided Annual Assessment | $2,000 | $9,000 |
| Combined City/County Millage Rate | 0.200 | 0.200 |
| Avoided Annual Tax Payment | $400 | $1,800 |
| Avoided Annual Tax Payment 20 Years | $8,000 | $36,000 |
The amount can be significant, especially when combined with other available incentives. It can serve as an effective catalyst to spur the rehabilitation of historic buildings.
To use the special assessment and maximize benefits, prior preparation and intergovernmental cooperation are essential. The first step is adopting an ordinance that, at a minimum, defines
- What historic structures qualify for the special assessment
- How much money needs to be invested to qualify
- What is a qualified rehabilitation expenditure
- Who certifies compliance of the rehabilitation project
- How long the special assessment will be offered
It is ideal for the city and county to adopt identical ordinances, allowing property owners to maximize benefits by abating a portion of both city and county taxes. This requires considerable discussion, negotiation and coordination between the two local governments.
Two examples of a city and county cooperating on the special assessment are the City of Columbia and Richland County and the City of Beaufort and Beaufort County. Read about these projects at http://l.masc.sc/1HMJwmk.