Realtors support proposed tax break
jfaber@islandpacket.com
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BLUFFTON -- Those buying homes in Beaufort County and throughout the state could get a break on property taxes if the South Carolina House has its way.
Currently, state law mandates that property values are to jump from the assessed value to the market value for tax purposes when the property is bought or extensively renovated.
A bill that passed the state House unanimously Wednesday would delay that increase until each county does its next five-year reassessment. Beaufort County's next reassessment is in 2009.
The bill faces another vote in the House before moving to the Senate.
The bill's sponsor, Rep. Bill Cotty, R-Columbia, says thousands of real estate contracts in South Carolina have fallen through as an unintended consequence of the property tax law approved two years ago.
Local Realtors applaud the new bill. Because assessed values are typically well below market values, home buyers can face taxes that are double what the previous owner paid, said Linda Palmer, president of the Hilton Head Area Association of Realtors and a Realtor with Keller Williams Realty.
"It's a very good thing," she said. "We totally support it." Tom Jackson, broker-in-charge at Gateway Realty, agreed the bill could spur home sales.
"It's not a major thing (causing slow sales)," Jackson said, "but every little thing helps when you're in a slower market."
The market-value adjustment has been particularly tough on commercial property owners.
Although the commercial market has been slow for just a few months -- as opposed to the two years for the residential market -- the adjustment has caused inequity among businesses, said Tom DeMint, a partner with commercial real estate firm Sperry Van Ness.
For instance, under the current law, a hotel that sells for a few million more than it did five years ago means the new operator immediately has hundreds of thousands of dollars more per year in taxes increasing operating expenses, DeMint said.
"It's had an impact, particularly with the run up in prices over the past five to six years," he said.
Hilton Head Island Town Manager Steve Riley called last year's property tax reform -- which put in place the market-value adjustment to help offset a 15 percent cap in assessed property value per assessment -- a bad law.
The proposed change is a mixed blessing, he said. It could cost the town revenue, but it could also increase the number of real estate sales in a down market, Riley said.
The town gets about 17 percent of its budget from property taxes and 3 percent from its real estate transfer fee, which is one-quarter of 1 percent of every real estate sale on the island.
Scott Dadson, Beaufort city manager, said the change would be bad for the city's revenues, although he wouldn't speculate as to how bad.
Calling it "simple math," Dadson said it was obvious that if the adjustment happens after a reassessment -- as opposed to at the time of sale -- revenues would decrease.
State Rep. Richard Chalk, R-Hilton Head, voted for the bill, saying it's probably a good idea despite some questions.
"The downturn in home sales has been more a function of the general economy and the market forces than it has been change in our tax law," he said.
Chalk, like DeMint, said the market-value adjustment is tough on commercial properties and can cause those prices to remain lower because the properties don't have the same ability to generate revenue when the higher taxes kick in.
Beaufort County officials could not be reached for comment Wednesday.
The Associated Press contributed to this report.