Can a South Carolina county use a special tax district to pay for private road maintenance?

Official title

Opinion addressing a county’s ability to fund road construction and maintenance by creating a special tax district.

Requester

Requested by Mr. Gary Mixon, Sumter County Administrator.

Plain-English summary

The Sumter County Administrator followed up on an earlier opinion with a practical question: can the County create a special tax district to maintain roads, and can the County's own Public Works Department do the work and then get reimbursed by the special tax district for personnel, materials, and FEMA-approved equipment costs?

The office gave a layered answer. Yes, a county can create a special tax district to fund road construction and maintenance. The state constitution lets counties tax different areas at different rates tied to the services provided (art. VIII, § 7), and § 4-9-30(5)(a) specifically lists roads and other public works among the purposes a special tax district can fund. The statute also sets out how the district gets formed, by referendum when at least fifteen percent of the electors in the proposed district petition the county council, or by a petition signed by at least seventy-five percent of the resident freeholders who own at least seventy-five percent of the property. If the County meets those requirements, it can form the district.

But there is a hard limit. The roads the County wanted to fund were private roads, with no indication they would be dedicated to public use. The taxes a special tax district collects are public funds, even though they come from only some residents and are earmarked for a specific purpose, and public funds have to be spent on a public purpose. Maintaining private roads is not a public purpose, so the office concluded the County cannot levy and collect this tax to construct or maintain private roads. The constitution reinforces the point: any tax must state the public purpose its proceeds serve (art. X, § 5).

On the reimbursement question, the office said yes, if the roads are public. A 2015 opinion had established that a special tax district formed under § 4-9-30(5)(a) is part of the county that creates it, not a separate political subdivision. Because the district is part of the County, the County's Public Works Department can perform the construction and maintenance on public roads and be reimbursed by the district.

What this means for you

County administrators and councils: The opinion confirms a county can stand up a special tax district to fund roads if it follows the referendum or freeholder-petition procedures in § 4-9-30. The catch is that the money is public funds and can only go toward public roads, not private ones.

Residents petitioning for road work: If the roads in your area are private, this opinion indicates a special tax district cannot be used to fund their upkeep with tax dollars unless the roads are dedicated to public use. Public roads are a different story.

County public works departments: The opinion supports your department performing construction and maintenance on public roads funded by a special tax district and being reimbursed by that district, because the district is treated as part of the county rather than a separate entity.

Common questions

Can my county tax a neighborhood to maintain its private roads?
Not according to this opinion. Special tax district taxes are public funds that must serve a public purpose, and maintaining private roads is not a public purpose. The roads would need to be public (dedicated to public use).

How does a county create a special tax district for roads?
Under § 4-9-30, either by referendum when at least fifteen percent of the electors in the proposed district petition the county council, or by a petition signed by at least seventy-five percent of the resident freeholders owning at least seventy-five percent of the property.

Can the county's own public works crews do the road work?
Yes, for public roads. The opinion concludes the county public works department may perform the work and be reimbursed by the special tax district, because the district is part of the county.

Are special tax district taxes really "public funds" if only some residents pay them?
Yes. The opinion explains that collecting taxes from only certain property owners for a specific purpose does not change their character as public funds subject to the public-purpose requirement.

Background and statutory framework

South Carolina's constitution authorizes counties to tax different areas at different rates related to the services provided (art. VIII, § 7) and requires that any tax distinctly state the public purpose its proceeds serve (art. X, § 5). Section 4-9-30(5)(a) lets counties create special tax districts for a long list of public works, expressly including roads, and sets out the formation procedures (a fifteen-percent-elector referendum petition or a seventy-five-percent-freeholder petition).

The office relied on prior opinions for two propositions. First, taxes collected through a special tax district are public funds that must be used for public purposes, drawing on a 1978 opinion that quoted the Virginia Supreme Court's definition of public funds in Beckner v. Commonwealth and on the office's April 30, 2024 opinion that public funds generally may not maintain private roads. Second, a 2015 opinion established that a special tax district under § 4-9-30(5)(a) is part of the county, not a separate political subdivision, which is why the county's own public works department can do the work and be reimbursed.

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/opinion-addressing-a-county-s-ability-to-fund-road-construction-and-maintenance-by-creating-a-special-tax-district/
• Original PDF: https://www.scag.gov/media/jjxp4fgk/03638669.pdf

Original opinion text

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Alan Wilson
attorney General

July 16, 2024
Gary M. Mixon

Sumter County Administrator
1 3 East Canal Street
Sumter, South Carolina 29150
Dear Mr. Mixon:

We received your letter requesting an attorney general’s opinion as to the creation of a special tax
district to provide maintenance on private roads as a follow-up to our April 30, 2024 opinion.
Moreover, you inquire as to whether “the Sumter County Public Works Department can perform
the work requested by the special tax district administrators and then the special tax district
reimburse Sumter County for the actual cost of the personnel and material and FEMA-approved
costs for equipment used to perform the work.”
Law/Analvsis

According to the South Carolina Constitution, counties have “the power to tax different areas at

different rates of taxation related to the nature and level of governmental services provided.” S.C.
Const, art. VIII, § 7 (2009). Moreover, section 4-9-30(5)(a) of the South Carolina Code (2021)
permits counties to create special tax districts for

appropriations for general public works, including roads, drainage, street
lighting, and other public works; water treatment and distribution; sewage

collection

and

treatment;

courts

and

criminal

justice

administration;

correctional institutions; public health; social services; transportation; planning;
economic development; recreation; public safety, including police and fire
protection, disaster preparedness, regulatory code enforcement; hospital and

medical care; sanitation, including solid waste collection and disposal;
elections; libraries; and to provide for the regulation and enforcement of the
above.

(emphasis added). As such, Sumter County (the “County”) may create a special tax district for the
purpose of constructing and maintaining roads. Section 4-9-30(a) specifies how these special tax
districts may be created including by referendum when at least fifteen percent of the electors in
the proposed special tax district petition the county council or by petition if signed by at least
seventy-five percent of the resident freeholders owning at least seventy-five percent to the property

in the special tax district. Thus, presuming the County meets these requirements, it may form a
special tax district to fund roads.
Rembert C. Dennis Building

» post office Box 11549 . Columbia, SC 29211-1549

Telephone ^03-734-3970

Facsimile 803-253-6283

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July 16, 2024

Nonetheless, according to your letter, the roads the County wishes to fund through the
implementation of a special tax district are private roads. Moreover, there is no indication in your
letter that these roads will be dedicated to public use. As we explained in our prior opinion to you,

“public funds generally, may not be used to maintain private roads as that would not serve a public
purpose.” Op. Att’v Gen., 2024 WL 2034557 (S.C.A.G. Apr. 30, 2024); see also S.C. Const, art.

X, § 5 (“Any tax which shall be levied shall distinctly state the public purpose to which the
proceeds of the tax shall be applied.”). The taxes collected pursuant to a special tax district are
public funds even though they are collected from only a portion of the residents of a county and
used for a specific purpose. As we explained in a prior opinion,

in the absence of a statutory definition, the terms ‘public funds’ and ‘revenue’
are interchangeable, and ‘[t]he fact that the State has taken possession of
moneys pursuant to law is sufficient to constitute them State funds . . . .’ 63
Am.Jur.2d 391, 394, In confronting an identical situation, the Supreme Court

of Virginia observed that ‘[t]he phrase ‘public money’, in the absence of a

statute defining it, must be construed according to its usual meaning and
common acceptance .... Public funds are those moneys belonging to the State
or to any city, county, or political subdivision of the State,

or more

specifically, taxes, customs, and moneys raised by the operation of law for the
support of the government or for the discharge of its obligations.’ Beckner v.
Commonwealth, 174 Va. 454, 5 S.E.2d 525, 527 (1939).

Op. Att’v Gen., 1978 WL 34963 (S.C.A.G. June 27, 1978). As such, collecting taxes. from certain
property owners for a particular purpose does not negate the fact they are public funds and must
be used for public purposes. Therefore, if the County takes the steps necessary to create a special

tax district, we advise the county to use the revenue generated as a result of its creation solely for
public purposes.

You also inquire as to whether it is possible for the Sumter County Public Works Department to
perform road construction and maintenance and be reimbursed by the special tax district. In a 2015
opinion, we determined special tax districts formed pursuant to section 4-9-30(5)(a) are part of the
county in which they are created and not their own separate political subdivision. Op. Att’v Gen.,
2015 WL 1870567 (S.C.A.G. Apr. 9, 2015). Consequently, we believe the County’s public works
department may perform the construction and maintenance for roads funded by a special tax
district.
Conclusion

While we believe the County may, following the proper procedures, create a special tax district
for purposes of funding roads within the district, we do not believe such a tax can be levied and
collected for the construction and maintenance of private roads. However, if these roads are public

rather than private roads, because the special tax district is part of the County, we believe the

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July 16, 2024

County’s public works department could construct and maintain the roads and be reimbursed by

the special tax district.

Sincerely,

3

Cydncx'Milling

Assistant Attorney General

REVIEWED AND APPROVED BY:

Robert D. Cook
Solicitor General