With some of the highest industrial and commercial property tax rates in the Southeast, South Carolina counties have come to rely heavily on fee in lieu of tax (FILOT) agreements to compete for economic development opportunities.
Addressing an imbalance
While often complex in execution, the idea behind FILOTs is straightforward:
County property tax rates range as high as 10.5% in South Carolina. Therefore, businesses that pledge to invest at least $2.5 million in job-creating, economy-stimulating projects can slash those property tax rates by a quarter.
FILOT agreements are such an important tool for Greenville County in recruiting investment that it’s a rare month when there aren’t at least a half dozen agreements for county council to consider.
Greenville County Deputy Administrator John Hansley says such agreements have attracted new businesses to the area and help Greenville and other counties across the state compete. He adds that the state General Assembly realized counties were at a competitive disadvantage with surrounding states and created FILOT agreements to help address the imbalance.
“It did keep us somewhat competitive with surrounding states,” he says.
Companies have five years from signing a FILOT to deliver on their end of the deal and are required to report progress to the state Department of Revenue. But do some of them come up short?
Hansley says it’s rare — so rare that he can’t remember the last time it happened and the county had to “claw back” lost tax revenues.
But some say this is an unnecessarily complicated solution to a simple problem.
A simpler solution
Spartanburg County Councilman David Britt is chairman of his council’s economic development committee and has worked on recruiting businesses to the Upstate since the early 1990s. He says without FILOTs, Spartanburg County would not have secured anything near the $21 billion in investments since then.
Britt says he’s lobbied state lawmakers for years to bring property taxes in line with neighboring states where they go as low as 4%, but to no avail. FILOT helps level the playing field, he says.
“If they would do that then no county in South Carolina would have to use these incentives, and I think we would see an explosion in investments across the state,” Britt says.”
Britt is not alone in thinking the state’s property tax structure needs an overhaul.
According to a study prepared by the Massachusetts-based Lincoln Institute of Land Policy funded by the South Carolina Chamber Foundation and South Carolina Realtors, the state’s property tax structure is “complex, inequitable and uncompetitive.”
“We need to come to grips with it,” Britt says. “If I had a New Year’s wish, it would be that the legislature set 4% for everything.”
Snapshot of South Carolina property tax rates
- Residential property is assessed at 4%
- Commercial property and residential property that is not used as a primary residence is taxed at 6%
- Industrial property is taxed at 10.5%