Proposed Tax Increment Financing District (TIF) on Johns Island

Charleston County Council unanimously voted to deny the proposed $85 million Tax Increment Financing District for the Kiawah River Plantation Development.

Kiawah River Plantation, L.P. is a local real estate development group seeking to develop the Mullet Hall Plantation site on rural John’s Island with 1,285 residential units, a 450-room hotel, 80,000 square feet of commercial space and various recreation amenities including a golf course and docks. This proposed resort community will be called Kiawah River Plantation (KRP).

In order to fund infrastructure for the project, the developer requested a subsidy from Charleston County taxpayers in the form of Tax Increment Financing (TIF). They asked Charleston County Council to create a district that would require Charleston County to issue bonds to reimburse the developer for infrastructure costs in the amount of $84.5 million.

TIF is a public financing method used to subsidize development and its related infrastructure by borrowing against anticipated future tax revenues. In most states, TIF structures are used to help revitalize blighted urban areas in cities like Chicago, San Antonio, Cleveland and even Charleston. In other words, TIF districts are typically created in metropolitan areas when redevelopment that is beneficial to the public would not occur without public investment.

In the case of the KRP project, the subsidy required Charleston County to issue $84.5 million in bonds to reimburse the developer for constructing infrastructure such as roads, parks and a sewer facility for the development. In theory, tax revenues from the resulting development would be used to pay back the bonds over a 45-year period. These tax dollars would be diverted from Charleston County, Charleston County School District, Charleston County Parks & Recreation and St. Johns Fire District for the 45-year period.

A taxpayer subsidy for a project of this nature is unprecedented in Charleston County history. The Coastal Conservation League, alongside county leaders and residents, opposed this proposal for taxpayer-funded resort development for three simple reasons:

1. The proposal inappropriately shielded a private business from the free market risks associated with its investment. Under the proposal, the developer would have recouped its infrastructure costs and have no responsibility for repayment of the bonds. It is a subsidy. In essence, the developer would be taking out a loan to develop the project and the loan would then be paid off by Charleston County taxpayers.

2. The proposal set a dangerous precedent. By stretching the definition of an appropriate environment for use of a TIF district to its outermost limit, the developer would have set a landmark precedent that every other real estate firm would seek to duplicate in our rural, Lowcountry areas.

3. The proposal would have allowed county residents to opt out of contributing to public education. The developer contended that the project will have few, if any, public school students living in Kiawah River Plantation over the next 45 years. Accordingly, their proposal called for applying 100 percent of the property tax revenue that would typically go to public education toward repayment of the bonds. In this scenario, the public education system would have been treated like a toll road, in that only those who use it must pay for it.

We are grateful that Charleston County Council heeded these concerns with this proposal and voted unanimously to deny the TIF for Kiawah River Plantation.

For more information, read the Johns Island Conservancy TIF Report.