Everything You Need to Know about Special Purpose Districts in South Carolina

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Have you ever wondered about the special purpose districts that operate behind the scenes in South Carolina? In this episode, we sit down with C.D. Rhodes to shine a light on these little-known but vitally important entities. From fire protection to water and sewer services, special purpose districts play a crucial role in our communities – but their origins and operations remain a mystery to most. Join us as we explore the history and complex challenges facing these districts today, and discover how they shape the future of local governance in our state.

Links:

C. D. Rhodes Episode on Home Rule

Transcript

Katy Smith:

What is a special purpose district and what’s so special about it?

Depending on where you live, you may rely on a special purpose district for the water that comes out of your tap, the flush of your toilet, or the fire station that keeps your family and property safe.

Special purpose districts are jurisdictions created by statute to perform specialized services such as water, sewer, fire safety, or transportation.

There are hundreds of them across the state of South Carolina, and Greenville County has the most at close to 30.

I’m Katy Smith with Greater Good Greenville and on this episode of Simple Civics: Greenville County, I talk with C.D. Rhodes, a partner with the law firm Pope Flynn and an expert on the topic of special purpose districts.

He represents local governments across the state and focuses on public finance, advising them on their powers and how they can go about exercising them.

One note before you listen, special purpose districts are creatures of history and the state constitution.

And you may find it helpful to listen to the episode before this in which C.D. and I talk about Home Rule in South Carolina.

Okay, on to the special episode on special purpose districts.

C.D., special purpose districts undergird so much of our lives in South Carolina, but it is a term that I bet many South Carolinians have never even heard before.

So let’s start with the basics. What is a special purpose district?

C.D. Rhodes:

Special purpose districts are, they’re not unique to South Carolina.

Lots of states all across the country have them.

They are kind of at their core, they are political subdivisions of the state.

So just like a county and a city is a form or each are forms of political subdivisions, special purpose districts are as well.

They are autonomous political subdivisions. So municipalities have the ability to govern themselves. Counties have the ability to govern themselves.

So do special purpose districts.

The big difference between SPDs, which is what a lot of folks call them, and cities and counties is that cities and counties provide kind of broad suites of services and have broad police powers.

Special purpose districts are, the reason that they are special is because they do typically often one thing at the most, maybe two or three things.

And those things, of course, are services that they provide.

So you have a really broad array of the types of services in South Carolina that SPDs provide.

You have, you know, my home county, Clarendon County, South Carolina has the Clarendon Hospital District, which is a special purpose district.

Lots of them are fire districts, lots of fire districts all over the state.

They do parks and recreation. They do water and sewer.

There’s some weird kind of beautification districts that really don’t do much of anything.

There are parking districts, really anything other than typically providing police services.

There’s usually a special purpose district out there that does it.

But that’s all they do. They focus on that one particular thing.

Katy Smith:

Well, they do sound very special. Why do they exist?

C.D. Rhodes:

So that, to answer that question, you got to delve back into South Carolina history just a little bit.

And it really goes back to, believe it or not, our current constitution, which is our 1895 constitution.

And it restructured state government. And one of the things that it did was it severely limited the things that counties could do.

Counties were, under that original constitution, they were allowed to do kind of, in and of themselves, things that they had they could do without involving the state legislature. They could do about seven things. They could bury paupers, they could build roads, they could do a very very limited number of things but they couldn’t provide a lot of what we consider to to be municipal-level services.

They were not authorized to provide fire service. They were not authorized to provide any utility services at all.

And so you had, obviously, the municipalities could do all of those things, and they did them within their boundaries.

Keep in mind, we’re talking about, you know, the 20s, 30s, and 40s.

So the municipalities are, by and large, they’re very, very small.

And you have, in different parts of the state, you have different things going on that are leading to increased population densities in unincorporated parts of counties.

In the upstate, you had the textile mills. And those textile mills were… they operated often as kind of their own little municipality.

They built their own utility systems. They operated their own police forces.

They had their own fire departments.

And when those areas around those textile mills got big enough, there was a need to kind of take all of those functions away from the mills themselves and to push them over into a municipal-type form of government.

So you have a lot of special purpose districts in the upstate that were created around those old mill villages.

And you see that all across Greenville County.

In part of the state I’m from, Clarendon County, and a lot of the more were rural counties, you had communities that sprung up around a cotton gin or something that caused some level of population density.

And in those cases, it wasn’t some big mill that sought out the creation of these special purpose districts, but it would be a bunch of farmers that get together and decide they need fire service and they want a tax to provide it.

And so they go and they talk to their local delegation and they ask them to enact a state law that creates these little fire districts or they want water or they want sewer service. They want to get off septic tanks.

And so they have their local delegation enact a bill that creates these little water and sewer districts all over the state.

And so, you know, you have…

Every county in the state has a special purpose district, to my knowledge.

Some are very, very big. Some are very, very small.

But they were created to do the things in unincorporated areas that counties were not allowed under our Constitution to do until Home Rule was enacted in 1973, which is when the Home Rule amendments to our Constitution were finally enacted.

And that ended the creation of special purpose districts and pushed all of those powers to provide all those municipal level services, pushed them back down to the counties because it had become a raging mess by that point in time.

Katy Smith:

That was the clearest explanation I have ever heard and so helpful.

And I want to make it specific for those of you, especially those of you who are newcomers to Greenville, which I know we have many who listen.

So if you’re picturing Greenville County, I want to remind you all that we have six municipalities in Greenville County. Everyone remember we have Greer, Traveler’s Rest, the city of Greenville, Mauldin, Simpsonville, Fountain Inn.

Most of the land within Greenville County is unincorporated.

But as C.D. mentioned, there were mill towns, mill areas like in Parker, Berea, all along the Textile Crescent.

And the county, that’s so interesting to think that the county really didn’t have the power to do anything then. So they organized themselves to provide that.

Fascinating. Very helpful. Even though we now have counties and those districts preceded the counties, these districts still have really important jobs.

How are they funded then to do those jobs today?

C.D. Rhodes:

Yeah, that’s a great question. And it is, so they’re really funded through two mechanisms, and it’s really the two mechanisms that all local governments are funded by.

You have those that are funded from tax revenue and those that are funded from fee revenue.

So by and large, and there are exceptions to this, but if you are a district that provides a lot of the kind of, the typical municipal services that a city would provide you for your property taxes, fire service is the big one, then you’re probably funded through taxes.

And so just like a city or a county, you’re putting millage on the tax bill every year.

Everybody pays their property taxes and the special purpose district gets a sliver of that and that’s how they fund their services.

Those that provide services that you would typically pay a fee for, which are by and large is going to be your water and sewer districts.

Most of those now, a lot of them, originally they were funded from taxes, but that was back when they were created in the 30s or the 40s or the 50s.

Now, the vast majority of those have shifted over to being funded from utility fees, just like any other utility system.

So you pay for the service that you receive.

There are shades of gray in there. There are some that put on fire fees.

And so that might be a component of their revenue stream.

There are some that may put on, and Greenville County until recently was one of these.

You had a lot of the fire and sewer districts that would put on, they had certainly taxes that funded a lot of their sewer operations.

And then they might also put a capital improvement fee on the tax bill.

So they weren’t sending bills to folks on a monthly basis.

They were kind of getting that big lump sum every year as folks paid their taxes.

So there’s lots of shade gray in there, but that’s generally the rule.

It’s either taxes or it’s fees.

And it’s divided up the same way that a municipality would typically divide up its kind of services and its revenue streams.

Katy Smith:

So it’s interesting to think for any of you, when you get your tax bill, you’re going to have a couple different things on it.

I mean, for me, I’m a resident of the city of Greenville, which is within Greenville County. So I’m also a resident of Greenville County.

I sit within the arena special purpose district, which is the Bon Secours Wellness Arena.

Of course, there’s school district taxes on there. So depending on where you live, you could be touched by a couple different forms of government, which might show up on your bill.

C.D. Rhodes:

That’s absolutely right. I mean, you could very well, you know, there are spots in Greenville County where you could be in the county.

There are places where you could be, you know, maybe very close to the city of Greenville, maybe even a handful of spots here and there where you could have overlaps between a fire district and the city of Greenville for lots of various reasons.

You are, although it’s not on your tax bill, you may well be in the boundaries of Metropolitan Sewer Subdistrict, which does all the sewer collection services in Greenville County.

If that’s the case, you’re absolutely within the boundaries of Renewable Water Resources, which is also a sewer district, but they do all the trunk and treatment of wastewater in Greenville County.

You could be in the Arena District.

There’s absolutely this kind of overlapping kind of web of service providers.

And Greenville County is absolutely not unique.

There are lots and lots of situations just like that.

And those situations are growing.

As cities grow, as counties become more dense, as rural areas develop, it’s becoming an issue all over the state as all of these different entities who once kind of operated their own little fiefdoms are now having to figure out how to deal with each other.

And it’s creating a lot of interesting scenarios.

Katy Smith:

I mean, I can imagine that it would create like looking at how Greenville County has grown and many people, the lines are totally blurred between municipality and county for many people.

What kind of scenarios are you seeing as people wrestle with this?

C.D. Rhodes:

You know, there’s a lot of state law that is… it was enacted back really between home rule.

So 1973 to today to deal with a lot of these interactions.

But there have not been very many changes in state law over the last decade as we’ve started to see folks begin to bump up against each other.

So, you know, one of the big issues right now across the state are disputes between special purpose districts and cities annexing into their territory.

And for the most part, under state law, cities have the unilateral right to annex into the territory of a special purpose district and to decide that they want to provide whatever services the special purpose district is providing instead of the SPD doing it.

And so they can kind of displace the SPD is the term that’s typically used.

When that happens, there may need to be an exchange of some money.

There are some state laws around exactly how that works.

But it’s a real threat to a lot of special purpose districts across the state.

There are certainly those out there that are at risk of being annexed out of existence or even worse, annexed to the point where the area they’re serving is so small that it just doesn’t generate enough money to pay firefighters or buy fire trucks or operate a sewer plant or whatever the issue is.

That is a very, very common scenario, and it happens in urban counties.

It happens in rural counties.

It’s happening all over the place right now. You know, one of the other interesting kind of wrinkles to that is there’s some federal law that gives not just special purpose districts, but any municipality protection for their boundaries if they are indebted to the federal government, usually to the USDA, United States Department of Agriculture, which has lending programs for fire departments and for utility systems by and large.

And those have been a really important lending tool for years for more kind of rural utilities or rural districts to be able to meet capital needs.

Really low rates, there’s lots of advantageous reasons.

But if you have that debt, then it kind of turns that paradigm on its head and all of a sudden your service territory cannot be curtailed by annexation under federal law, which of course trumps state law.

So you have lots of special purpose districts who are going out now and obtaining debt, certainly to finance capital needs.

But one of the kind of ancillary benefits of that is it gives you that boundary protection.

That’s happening all over the state as well.

So that’s really probably the most kind of urgent issue or emergent issue that’s going on right now.

And then of course, kind of overlaying all of that is the oversight that counties have over special purpose districts.

Special purpose districts are kind of locked in time.

You know, when home rule was enacted, they were given the power to continue to operate in their current form. And that generally can’t really be infringed.

But part of the home rule amendments and part of, as I mentioned earlier, pushing a lot of that power from the state legislature down to county councils was to give county councils the ability to merge special purpose districts, merge or consolidate, to expand their boundaries, to reduce their boundaries.

And that’s kind of a unilateral right.

The SPD really doesn’t have a lot of, they certainly petition county councils to do that kind of stuff all the time, but county councils can do it on their own without going to the SPD for permission.

And so you have, you know, cities and SPDs kind of butting heads in lots of places.

And then you have the counties kind of sitting over top of all of this saying, do we want to get involved? Do we not want to get involved?

And it creates some really interesting politics.

Katy Smith:

Since SPDs are creatures rooted in South Carolina history, now that things have changed so much how do SPDs themselves change if desired?

C.D. Rhodes:

Certain aspects of SPDs can be changed, and others are a little bit more kind of locked in time.

SPDs, when they are created by the General Assembly, they were created with a suite of powers, so fire service, sewer service, some with multiple.

And that, after the Home Rule amendments, the legislature, through the constitutional amendments of Home Rule, really gave away their ability to enact what we call special legislation.

So legislation that’s particular to one county.

And typically, special purpose districts exist in one county.

And so any, you know, they have this pre-existing act that was maybe enacted in the 50s or the 60s.

Maybe it was amended a couple of times. But as of March 7th, 1973, when the Home Rule amendments to the Constitution were enacted, the legislature gave away its ability to go back and amend all of those old enabling acts.

And so they sit there and they just kind of continue forward into the future in perpetuity with no ability to really adjust them on a district-by-district basis.

The General Assembly can come in and adjust the powers of SPDs by general law, so law that applies across the state.

There are some good examples of that. They have enacted legislation that says if you’re a water provider, you can also provide sewer service.

That’s a general law. It applies to every SPD across the state that provides water service.

But they can’t go in and amend the individualized enabling acts for these SPDs.

So the powers really can’t be changed, at least not by law.

What counties can do, what they certainly do, is change the boundaries of special purpose districts.

So they come in and enlarge them as needed.

That happens all the time as you have some new area that needs fire service, sewer service, whatever it is.

They can diminish their boundaries.

Sometimes that happens voluntarily. Sometimes it happens because of these disputes between SPDs and towns or two SPDs.

And then they can consolidate them.

And the interesting thing about consolidation is the consolidated entity has all of the powers of the other two entities combined.

So if you consolidate a fire district and a sewer district, then your new entity has the power to do fire and sewer.

So you can’t get rid of them, but you can, counties do have the ability to kind of manipulate them.

And I don’t mean that in any pejorative sense, just to change kind of how they look on the ground.

And then there are other ways, there’s other general state laws that allow them to change.

So many of the boards are appointed and there’s lots of ways that, lots of means of appointment out there. And then some are elected.

And so there are statutory mechanisms to shift from an appointed board to an elected board. And there are lots of districts that have done that.

There are certainly ways you can change your millage rates.

Often they have millage caps. So a maximum millage that they can levy, oftentimes that was set back in the 50s or the 60s when it was created.

So those are out of date now. So you can do referendums to increase your millage cap from 15 mils to 25 mils.

So there are general laws that allow them to kind of tweak themselves.

But those core functions are locked in and really can’t be played around with too much.

And that creates some weird results here and there when you start having different districts interact with each other.

Katy Smith:

Well, you have done a great job of covering a lot of history and political science in a short period of time.

What do you see as the future of SPDs in South Carolina or South Carolina law as it relates to them?

C.D. Rhodes:

SPDs are not going anywhere. They are here to stay unless we decide to come back and enact an entirely new constitution.

Katy Smith:

That sounds fun.

C.D. Rhodes:

Yeah, exactly. They are sticking around. And they serve incredibly important roles.

I represent a lot of SPDs. And one of the reasons I really enjoy representing them is they are so good at what they do.

If you are a fire district, then that’s what you wake up in the morning and go to bed at night thinking about is how to be the best fire district that you can be.

You are laser-focused on fire service. And man, they really are.

If you’re a sewer district, all these things are, they’re not scintillating topics for the average person on the street.

But these people go to work and go home every day.

And that’s all they’ve done is focus on this one issue. So they do a really, by and large, they do an incredibly good job at the things that they do.

And they provide services that are absolutely vital. And they often provide them in parts of the state where, you know, if we were kind of starting fresh today.

A county would be hard-pressed to find ways to fund rural fire service to the level that a lot of these districts are providing it or rural water service or rural sewer service.

So they’re doing really absolutely essential functions, oftentimes in parts of the state that would otherwise be ignored. So they’re not going anywhere.

But as we move forward, there are certainly some challenges.

Bumping up against cities is a big one.

Meeting their current funding needs is a huge challenge.

They have all of these restrictions. Cities and counties are already very restricted as far as the taxes they can levy.

And SPDs have limits on top of those. And a lot of them are bumping the peg on the services that they can provide with the money that they receive.

And as that changes, fire districts are a great example.

A lot of these fire districts were historically volunteer.

And so they have, at any given time, they might have 25, 35, 45 volunteers that they can rely on. and it was the thing you did.

You left high school and then you went to the academy and you were a volunteer firefighter in your town or in your community.

That’s falling by the wayside. Those volunteers don’t exist anymore.

Now they all are really having to shift over to paid staff.

How do you fund that? You were paying these guys 50 bucks or 25 bucks for responding to a call.

Now you have an employee that you’re paying…

$35,000, $45,000, $50,000 a year. How do you fund that with the kind of antiquated funding mechanisms that they currently have?

So they are certainly here to stay.

But as we move forward, we’re going to have to find ways or continue to find ways to adequately fund them.

We can continue to do what we’ve been doing, which is going to the voters every time things get incredibly tight and asking them to improve higher millages, that is limited success.

At some point, I think the General Assembly is going to have to step in and find ways to allow them to adequately fund themselves so they can still do all the very important things that they’ve always done.

Katy Smith:

That’s a really helpful perspective. And I will add that we are so interested in getting people engaged in civics that, you know, hopefully, you’re going to public meetings and you’re paying attention.

But please remember that a special purpose district is another one of those bodies that you should pay attention to. You can go to the meetings because they’re public.

You might decide to serve on a special purpose district board or commission, by running for office, which it is in a lot of cases, or seeking an appointment.

C.D. Rhodes:

Many of the boards are aging out.

You have folks who have been on these boards and have really made it part of their life’s work for 20, 30, 40, 50 years in some cases.

And there’s certainly a lack of folks, you know, kind of in their 20s and 30s who have shown an interest in getting involved in some of this kind of nuts and bolts local government. But the need is great.

Katy Smith:

Yeah, that’s great. Well, C.D., thanks so much for your time today and for helping educate people and make better decisions across the state.

C.D. Rhodes:

Glad to do it.

Catherine Puckett: Simple Civics: Greenville County is a project of Greater Good Greenville. Greater Good Greenville was catalyzed by the merger of the Nonprofit Alliance and the Greenville Partnership for Philanthropy. You can learn more on our website at greatergoodgreenville.org. This is a production of Podcast Studio X.

Image via Gutschow Photography from Getty Images Pro on Canva.

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