Professors Offer Views on Economic Impact of Annexation in Spartanburg

This opinion article was originally published in the April 6, 2003 edition of the Spartanburg Herald-Journal.

By Converse economics professors Dr. Woodrow Hughes Jr. and W. Thomas Maynard.

We should state from the outset that the views expressed by the authors of this article are those of the authors, both of whom are residents of the city, and are not those of Converse College.

Our research has indicated that approximately 23 percent of the area within the city limits of Spartanburg is not subject to property taxation. This results in the city losing, according to our estimates, approximately $700,000 per year in tax revenues. When faced with the slowdown in the overall economy and the increased level of unemployment in the community, the city of Spartanburg has expressed concern over methods to replace these revenues and to enhance the revenues that are received.

One method that has been mentioned is to charge tax-exempt entities a fee in lieu of taxes. The rationale is that not only do these entities not pay taxes, but they also use the services of the city. Thus, the fee would help to compensate for the services provided by the city.

But this approach seems to neglect the contributions these institutions make to the community. Converse College accounts for more than 200 full-time jobs and, according to our estimates, was responsible for approximately $32 million in economic benefits to the local community in 2001. We recognize the benefits and costs of having such tax-exempt institutions in a community, but we are not in favor of fees in lieu of taxes.

A second alternative is to raise property taxes or to levy new taxes. Raising taxes could lead to further erosion of the tax base, however, as current businesses in the city decide to vote with their feet and relocate outside the city or in a different city or county. The city also could have difficulty attracting new residents and businesses to Spartanburg.

A third alternative is to work with Spartanburg County to consolidate certain services. A walk down this path began in 1988, for example, when the county agreed to maintain the parks that existed within the city limits of Spartanburg at that time. Consolidation of services could lead to some cost savings as duplication of some services is eliminated. While potential cost savings exist, we believe that this is only a partial answer to the shortfall in funding for the city.

A fourth alternative, and one we believe that shows the most promise, is annexation. The surrounding areas of the city have grown during the past few decades as former city residents have moved out of the city and as newcomers to the area decide to live outside the city limits.

We acknowledge that annexation would require the additional provision of services by the city. There are, however, at least two aspects that we believe would offset the cost of increased services. First, annexation would result in a larger tax base for the city, which, everything else being the same, would lead to greater revenues. Second, when combined with consolidation, some cost savings would be realized.

This last alternative may cause some county residents to say, “O