Thu. Jul 29th, 2021

The S.C. Supreme Court has rejected two fees Greenville County imposed on car and land owners as unconstitutional, cutting off a significant revenue source and pointing to a precedent that could impact local governments across the state.

In the decision issued June 30, the court reversed an appellate ruling which upheld a road maintenance fee and telecommunications fee, saying they were in fact taxes and therefore violate state law.

Unlike a user fee, a local government must receive permission from the state General Assembly to implement new taxes that are not property value based levies, which Greenville County did not do, according to the ruling.

The ruling comes the day after Greenville County Council finalized its budget for the fiscal year beginning July 1. The initial impact to the county’s budget comes to about $7 million per year, which includes the telecommunication fee started in 2018 and the increase to the road maintenance fee from $15 to $25 the same year, said Bob Mihalic, Greenville County spokesman.

Justice John Kittredge suggested the decision could have far-reaching consequences throughout South Carolina. 

“Local governments, for obvious reasons, want to avoid calling a tax a tax,” he wrote. “I believe today’s decision sends a clear message that the courts will not uphold taxes masquerading as ‘service or user fees.”



The lawsuit, which claimed the fees violated state law, was filed by Greenville County state Reps. Mike Burns and Garry Smith, and state Sen. Dwight Loftis. 

Smith told the Post and Courier that local governments disguising taxes as fees has become a persistent problem in the state, one that he hopes this decision will curb.

“When it looks like a duck and it quacks like a duck, it’s a duck,” he said. “When it looks like a tax and quacks like a tax, it’s a tax.”

Burns said he was concerned that the flat fees disproportionately impacted low income residents in Greenville County.

Greenville County Council enacted the two ordinances in question in 2017, which were implemented in 2018. One increased a road maintenance fee previously on the books from $15 a year to $25 for every vehicle owner who registered a car in the county. The other charged all county property owners about $15 a year over 10 years to fund an updated public safety telecommunications system.



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The county argued that because vehicle owners in the county use the roads, and a more efficient communications network for first responders could increase property values, both ordinances qualified as user fees.

But in the opinion issued June 30, the Supreme Court said the road maintenance fee singles out a particular group, as many of the drivers who regularly travel on county roads have their vehicles registered elsewhere, disqualifying it as a user fee.

In the case of the communications fee, the Supreme Court ruled Greenville County did not provide sufficient evidence to suggest the system would significantly increase property values, and said their reasoning was overly broad, as any decision made by a local government should be made with improving property values in mind.

“Taxpayers should hope every action taken by local government is calculated to not damage property values,” the ruling states.

Smith said he didn’t take issue with the projects the county was funding through the fees, but with the way that funds were collected.

Greenville County Council Chairman Willis Meadows said the council will have to make some difficult decisions in the coming days. He was unsure how the ruling would impact the budget just enacted or how the county would address the lost revenue.



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Greenville County operates on a two-year budget cycle and was scheduled to finalize its fiscal year 2023 budget at its July 20 meeting. With a loss of millions in revenue that it uses to make repairs to county roads, the council will likely need to adjust its budget for 2023 before it is finalized, he said.

Meadows called it a “landmark” ruling on the issue of governmental agencies that have used fees in place of taxes to raise revenue.

“It’s going to affect not just Greenville County but the whole state,” Meadows said.

Meadows opposed the user fees when the council implemented them in 2018 and later — while the council’s finance committee chairman — sued the council over how it voted to implement the fees.

Smith said he and the other plaintiffs in the case plan to petition the court to reimburse them for attorney fees and to refund Greenville County residents the revenue that was collected through the two fees.



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Follow Conor Hughes on Twitter at @ConorJHughes.