Controversial policy blurs legal line prohibiting elected officials from individually disbursing revenue
By RON AIKEN
On May 28, 2015, tempers were running high among members of Richland County Council.
At a special called meeting to give the FY 2015-16 budget a second reading, several members became frustrated over a series of motions by then-Councilman Kelvin Washington to direct nearly $1 million worth of hospitality-tax dollars to various Lower Richland groups over and above the amounts recommended by the independent Hospitality Tax Advisory Committee.
Fed up with arguments over a motion sponsored by Washington to increase the hospitality-tax award to the Lower Richland Sweet Potato Festival from the recommended $75,000 to $480,000, then-Councilman Damon Jeter made a substitute motion “out of the blue,” according to Councilman Jim Manning, to keep the award at $75,000 and take the remaining hospitality-tax revenue left — $349,500 — and divide it up evenly between Council members to allocate individually.
Seizing on the idea, Manning quickly followed with a substitute motion of his own to “un-appropriate” a previous award of $60,500 to the Kingville Historical Foundation and add it to Jeter’s amount, bringing the total pot to $410,000. Manning’s motion passed easily by a 7-3 vote (only Seth Rose, Greg Pearce and Washington were against), and by third reading on June 22, 2015, Council members had “found” another $90,000 for a total of $500,000, bringing the amount each member could allocate to $45,454.
“There was no discussion beforehand, it was just something that came up out of a desire to spread money out evenly rather than the helter-skelter way we’d been doing it,” Council vice chairman Bill Malinowski said of the motion to change the way excess hospitality-tax funds were handled.
“It was like three-card monte; we’d be at third reading and motions start coming up to make changes to move money over here and over there, large amounts. It was an unfair process and all it took was a couple people to agree to it and there wouldn’t be the time needed to discuss it then. People were definitely taking advantage of it.”
“This (motion) seemed like the fairest way, to divide it up by 11 and let people hand it out like they want.”
Though intended in theory to prevent hospitality-tax shenanigans, in practice the policy has led to more egregious abuses of hospitality-tax funds than ever before (11 indictments and counting), blurred the legal line that strictly prohibits elected officials from individually disbursing revenue and created an unregulated patronage system devoid of both accountability and transparency that to-date has put more than $4.1 million in the hands of County Council members to bestow — or deny –with impunity, with amounts that have grown so large that a single County Council member can decide the fate of an event, charity or individual.
“I voted against this motion because I was concerned it would put a system in place lacking in transparency and accountability,” Rose said.
“In retrospect, my fears were correct.”
“We were trying to shut off the valve of wasteful money,” Pearce said. “We wanted a way to cap the amount of dollars certain Council members would find ways to allocate.
“We created something else entirely.”
What they created, Government watchdog John Crangle of the South Carolina Progressive Network said, was a monster.
“(This policy) is a criminal conspiracy to evade the law,” Crangle said. “Not only is it unwise but it’s probably illegal and should be stopped.”
That’s not likely to happen anytime soon. The initial $45,454 skyrocketed to $164,395 per Council member in FY 2016-17 and $164,850 per member for FY 2017-18, according to documents obtained by Quorum through Freedom of Information Act requests.
“The valve has been turned on,” a Council member who did not wish to be identified told Quorum. “Good luck shutting it off.”
LOOKING THE OTHER WAY
The Richland County hospitality tax was passed in July 2003 and instituted a 2-percent tax on the gross proceeds of sales of prepared or modified food and beverages within unincorporated areas of the county.
The taxes collected go toward, among other expenses such as debt service and County promotions, maintaining a robust grant program meant to stimulate activities and events that draw tourists from out of Richland County.
In FY 2015-16, the tax generated just over $6 million. In FY 2016-17, the number grew to $8 million, while for FY 2017-18 the revenue generated was $11 million.
Despite the substantial increase in revenues generated, thanks to Council’s policy the amount of scrutiny afforded their disbursement has only not only decreased since 2015, Pearce said, it has for all practical purposes disappeared.
“There isn’t any peer oversight on that money,” Pearce said. “At least no strong oversight.”
Though the 2015 policy technically is legal because each member’s allocations have to be approved by a full vote of council, by council members’ own admission their selections undergo no scrutiny whatsoever from fellow members thanks to an informal “gentleman’s agreement” that ensures no accountability, while the lack of any public posting of the individual allocations ensures no transparency.
“There’s a cursory approval process where you turn in your appropriations because by law you cannot appropriate money,” Pearce said. “But that’s it. There’s a gentleman’s agreement that you don’t challenge (other members’ allocations) because that’s what we were against in the first place.”
Other members aren’t quite so frank, though they admit the realities of peer oversight leave much to be desired.
“Under the new way, you have to put in individual amounts and it still has to be approved by full council,” Malinowski said. “You still have to put into an agenda how you want to spend it, the amount and group.”
Any irregularities — such as Council member Norman Jackson’s allocating $15,454 in hospitality-tax money to the Pinewood Lake Park Foundation in 2015 when it was not eligible to receive funding due to non-compliance with reporting requirements for one, and the aforementioned allocation of $75,000 in 2016 that led directly to 11 criminal indictments by a state grand jury against SCALE, Inc. CEO Patricia Ford for another — are not Council’s responsibility to find or correct, members who spoke to Quorum said.
“The grant people are supposed to decide if a group is eligible,” Malinowski said. “Those things can’t be blamed on Council, that’s staff’s responsibility. We vote on what a Council member does, we have to believe they’re eligible. It’s sort of like giving testimony. You’re supposed to be honest.”
Manning said Council members don’t have the time or resources to discover fraud.
“Our safeguard is supposed to be the grants office,” Manning said. “At the end of the day and the money goes out, they’re the ones who are supposed to be looking out.”
In the County’s own three-year audit of the Hospitality-Tax released earlier this year, the report’s major finding was that the grants office was to blame for $776,000 in hospitality-tax funds either being unaccounted for or improperly reported since 2013.
“Staff failed to implement a system of internal controls that were proactive in monitoring the expenditures of the organization(s),” the audit stated. Its major recommendation was that “that staff install a set of rules to better monitor compliance.”
Such improvements, if made, have yet to bear fruit. Despite years of irregularities and red flags it was Quorum, not County staff, that discovered SCALE’s fraudulent financial reporting last year
that led to the Attorney General’s investigation; it was Quorum, not County staff, that exposed the fact that SCALE, Inc. CEO Ford was still being paid thousands in hospitality-tax funds two months after her indictment in March; and it was Quorum, not County staff, that reported Jackson’s attempt in June to award an indicted SCALE $8,000 more in hospitality-tax funds this year and directly led the South Carolina Secretary of State’s office successfully to seek an injunction to prevent it.
“You allocate your money, and as long as the grant lady (Natasha Dozier) certifies it as going to a ‘legitimate organization,’ which I don’t know what definition she uses, the money gets appropriated,” Pearce said.
How such mistakes continue to plague the program and the grants office without County Administrator Gerald Seals taking corrective action mystifies Manning.
“When you have a full-time grants person, I don’t know how something goes so off track,” Manning said. “To me, we’re elected into a part-time government position and we hire staff to do the work of the County.
“That’s what I depend on staff for. If they’re not doing it, there’s no excuse. A Council member can’t put pressure on staff to do the (investigative) work. I can’t say why our
Administrator (Seals) hasn’t done anything to get some of that (improperly distributed) money back.
“I don’t understand what our staff does.”
As per his standing policy, Seals refuses to communicate with Quorum and ignores all requests for comment.
One area where Seals and the County may not be able to maintain silence, Crangle said, is in a court of law.
“I think someone could file a lawsuit and ask a judge for a declaratory judgment and remedy,” Crangle said. “It’s fair to ask whether the ‘gentleman’s agreement’ scheme in use is compatible with the law or not?
“If the court says not, that the County is in violation, then you can ask court to remedy it, to enjoin council from using gentleman’s agreements and require them to use collective judgment.”
Crangle said maintaining such a thin adherence to state laws meant to prevent the exertion of undue influence by elected officials is hardly satisfactory conduct by an elected body.
“Council should do what the law intends,” Crangle said. “Our country is built on the idea that collective wisdom and experience is better than an individual’s judgment.
“They are deliberately violating the law if they do not inspect the allocations and debate the merits of the expenditures in open session.”
A PURPOSEFUL OBSCURITY
From the beginning, transparency about individual Council members’ allocations has been lacking. Nowhere on the County’s website can the public find out how much or to whom their District representative has given for the past two years, nowhere can the public see how much individual groups received from various members and nowhere can the public track the individual allocations over time.
In only one instance can any single year’s total be found online at all, and only then with some difficulty.
In FY 2015-16, the first year of the new policy, each Council member fully allocated his/her $45,454 by the third reading of the budget on June 22, 2015. Because of this, the information exists in the agenda packet for that meeting.
To locate it, however, one has to go to County Council’s page on the County website, click “Agenda, Minutes & Actions, Prior Years,” click “2015” and then know to click on the agenda (NOT ‘minutes’) for “June 22, 2015 – Budget -3rd Reading (Continued).”
In that 39-page document, the relevant items begin on page 11 and continue through page 21.
The following year, FY 2016-17, the amount of money available to distribute to Council members tripled, from $500,000 to $1.8 million ($164,395 each), and yet Richland County has made no document available to the public online with the full allocations from that year.
Through Freedom of Information Act requests, however, Quorum has obtained the complete reconciliation of member spending and can share it for the first time publicly here. Additionally, Quorum obtained a list of total amounts received by each organization in FY 2016-17 that you can view in an Excel spreadsheet format here.
Though third reading for the FY 2017-18 budget has come and gone, a relaxed approach to selecting allocations on the part of Council members has meant that not every Council member has yet turned in a list of expenditures and many who have have kept funds back to distribute at their leisure throughout the year. Because of this, Quorum has not been able to compile a complete list of expenditures. However, through careful combing of months worth of agenda packets, minutes and fragmented Freedom of Information Act Request responses, Quorum can publish the most up-to-date list possible for individual Council expenditures for FY 2017-18 here.
For council members such as Manning, there is nothing to be gained from the secrecy employed by staff in refusing to publish the award amounts.
“All I know is when someone doesn’t make information available that should be, you’re hiding something,” Manning said. “If everything’s on the up-and-up, why wouldn’t they say ‘Here it is, take a look?
“It makes me believe you’re up to no good.”
For Crangle, scrutinizing the amounts awarded, to whom the money was given and even the number of entities receiving funds all tell important stories.
“Did a councilman give to 15 different groups or two?,” Crangle said. “If it’s a smaller number, it makes you look harder and could suggest inappropriate relationships or kickbacks.”
The most number of organizations awarded by a single member is 27, by Dickerson in FY 2016-17.
The smallest number is one, this year, by Norman Jackson who gave his entire allotment ($164,000) to the Pinewood Lake Park Foundation whose executive director, Liewendelyn Hart, is under S.C. Attorney General and FBI investigation. Last year, Jackson gave his entire allotment to just two entities: SCALE, Inc., and the Pinewood Lake Park Foundation.
“The only way to tell who is doing what and ask important questions is to make the information available,” Crangle said. “It’s never a good idea to hide public business from the public.
“Unless you’ve got something to hide.”
Reach Aiken at (803) 200-8809. Email him at email@example.com. Follow him on Twitter @RonAiken and @QuorumColumbia and like Quorum on Facebook.