Opinion ID: 1290225
Heading Depth: 1
Heading Rank: 1

Heading: Impairment of Contract Rights

Text: Article 1, Section 4 of the South Carolina Constitution prohibits the enactment of any law which impairs the obligation of contract rights. Wolper asserts that the City has a contractual obligation to its general obligation bondholders to retire the general obligation bonds with the proceeds of ad valorem taxes. The redevelopment bonds are to be repaid from a special fund created by pooling the added increments of tax revenues which result from the increased property values in the redevelopment area. Wolper argues that the rights of the general obligation bondholders are impaired by the redevelopment bonds, since the increased revenue diverted for the repayment of the redevelopment bonds would have been available for the retirement of the general obligation bonds. Before a tax increment redevelopment bond issue may be undertaken, there must be a finding that the property values in the targeted area are either static or in decline. S.C. Code Ann. Section 31-6-80(g) (iii)(Supp. 1984). The tax value of the property in the redevelopment area is frozen at a rate determined at the initiation of the bond issue. As redevelopment occurs, and property taxes in the area increase, the incremental increase in property tax is diverted to a special fund from which the redevelopment bonds will be retired. The frozen base portion of tax revenue on the redeveloped property is paid into the general fund for retirement of existing general obligation debt. Thus the same base is available for retirement of general obligation bonds during the redevelopment project as was available before the redevelopment bonds were issued. The tax revenues from the redevelopment area would not have increased at all in the absence of the redevelopment project. The incremental increases which are diverted to the special fund have not affected the base ad valorem revenue, and consequently no impairment of contract rights has occurred.