What is a "fee in lieu of tax" agreement?

Hey everyone, I hope May is starting well for you! 

Lately, there's been quite a bit of discussion at County Council Meetings about a specific agreement called "fee in lieu of tax" agreement. You can see a recent article in the Post and Courier about an episode involving one here. There's quite a bit of confusion about these agreements, so today, I want to share a bit with you. 

The Local Governments and Home Rule in South Carolina guide I shared with you in an earlier email has this to share about them on page 15: 

Municipalities and counties may exempt new manufacturing establishments from the property tax for up to five years.

Unlike other local governments, county councils have significant powers and responsibilities in negotiating with firms seeking to locate or expand in the county. Counties may use a fee in lieu of property taxes to encourage the location of industry in the county. If an industry meets criteria set by state law, a county may set a fee based on an assessment rate that is less than the industrial rate of 10.5 percent to as low as 4 percent for a set number of years. The fee does not change over the duration of the agreement.

The county council negotiates fee-in-lieu-of tax agreements and sets up multi-county business or industrial parks, which reduce tax burdens on new firms. Most counties have an Economic Development Commission that works with prospective firms and the county council in these negotiations. Counties can also arrange for infrastructure and public services as part of the incentive package.

These agreements allow the county government to create financial incentives for businesses to locate here, drawing new jobs and investment to the area. There are pros and cons on both sides of the issue. Still, generally, these agreements are viewed as a way to stay competitive with other communities willing to leverage this particular tool to attract businesses. 

You can read more about these programs as well at the South Carolina Department of Revenue: https://dor.sc.gov/tax/fee-in-lieu

If you're interested in a deep dive on the subject, you can check out this document from the Lincoln Institute of Land Policy that goes into great detail about how FILOTs work in South Carolina.

Do you have questions that you want answered? Respond to this email and let me know!

For now, thanks for reading, and talk with you again soon!