The City of Charleston was awarded $20.7 million in federal relief money as part of the $1.9 billion stimulus package passed by Congress last month, checking off the amount council needed to roll back last year’s two-mill property tax increase. But, it’s unclear if the funds can actually be used in that manner without the city being heavily penalized.
At Charleston City Council’s March 23 meeting, Councilman Harry Griffin called for a vote that would have committed city leaders to restoring property taxes to previous levels, sparking a long discussion on how the city is allowed to use the federal stimulus money.
“I hope we will get, once all the information comes in from the feds, all that ‘roll up your sleeves’ and ‘go back to work’ and see how all of this works,” said Councilman Keith Waring, who represents part of West Ashley. “As I understand, all the information isn’t in from the feds yet.”
The federal bill expressly forbids a state or territory from using the funds to directly or indirectly offset tax reductions during the covered period; however, the verbiage is silent for metropolitan cities, a category that includes Charleston.
“They had some guidance on this, and they mentioned the way they laid out the restriction — it was for everyone, not just states and territories,” said Charleston’s chief financial officer, Amy Wharton. “So we just don’t know … That’s why we need to hang back and see what they actually meant by that.”
Due to the vague requirements and restrictions, numerous lawsuits have been filed and questions have been raised by various judicial authorities across the country, seeking clarification on how the funds can be used, delaying a decision by council to officially restore the cuts.
Attorneys general from 13 different states signed onto a lawsuit seeking to strike the verbiage from the bill entirely, and lawmakers, specifically Republican lawmakers, have drafted and signed onto letters asking for further clarity on the meaning of the measure.
“I can understand there needs to be more discussion done with the ad hoc committee,” Griffin said during the March 23 meeting. “The fact of the matter was that we said if we got federal funding, we would roll back the taxes. I understand we can’t apply federal funding to a tax increase, but we can find $3.2 million in expenses that we could apply that funding to.”
But, Wharton said federal officials could see such use as improper due to the language including indirect use of funds to restore tax increases.
“The ‘indirect’ language is included primarily I think because they wanted to make sure the state would use the money on programs the bill was intended to fund, and not to be used for tax relief,” added City of Charleston Corporation Counsel Susan Herdina. “But, it is a question that is burning, and I think we are going to get some good direction on it hopefully soon.”
The City of Charleston must periodically report detailed accounts of fund use, regardless of what that use is. Disallowed use of funds will result in the city being made to pay all dispersed funds back to the federal government.
“We can’t vote on something we don’t have all the information on,” said Councilman Peter Shahid, who represents part of West Ashley. “That would be imprudent on our part. For us to address budget issues on matters we don’t have full answers on would be irresponsible. We don’t have all the answers that are out there yet. For us to make any decisions on that, we would not be in good stewardship of the public. So we need to wait.”
“I certainly felt like it was a work in progress — that we didn’t have all the information,” Charleston Mayor John Tecklenburg said. “We have to resolve those issues.”
In the meantime, city leaders are looking at a wide variety of potential uses they could pull the trigger on once given the green light.
“We have some expenses we could also utilize those funds for as well, so that’s great news,” Wharton said. “We are scheduling a meeting for the ad hoc budget committee in April. Hopefully we will have some better information from the federal government by then, and maybe we can come back with some recommendations for council by May.”
Potential cuts the council is eyeing for restoration include overtime reductions ($1,005,828), transferring out the drainage fund ($450,000), a 10% reduction in discretionary operation spending ($408,313) and transferring out affordable housing funds ($250,000). The full list totals $2,664,296 in cuts that could be overturned with the federal stimulus money.
Council members hope the outcome of legal battles could help shed light on allowable use of awarded funds. They plan to discuss the issue further at future committee meetings, and bring recommendations to the city’s April 13 council meeting.