[EdTalks] SC School Funding 101 Part 3: FILOTs and Tax Abatements

Fee in Lieu of Taxes agreements, or FILOTs, have been a hot-button issue in Greenville County, but what are they, and how do they impact our public schools? This episode of Simple Civics Ed Talks breaks down the complex connection between FILOTs and school funding in Greenville County, revealing how decisions made by our County Council directly affect the resources available for local teachers and students. We explore the central question: are these economic incentives worth the millions in lost revenue for Greenville County Schools?

Join Catherine Schumacher of Public Education Partners and guest Derek Lewis, Executive Director of Greenville First Steps and a former Greenville County Schools trustee, as they unpack this critical topic. This discussion is the finale of our three-part series on how South Carolina schools are funded, and we're diving deep into the local consequences of tax abatement programs. We explain in simple terms what are tax abatement programs, including both FILOTs and TIFs (Tax Increment Financing), and clarify the crucial difference between a FILOT and a TIF—specifically, who has the power to approve these deals. While the school district gets a vote on TIFs, FILOTs are negotiated solely by the county, which has led to significant tension and unpredictable budgets. Research shows these programs cost South Carolina schools around $400 million annually, with Greenville County Schools alone losing an estimated $30 million per year—enough to build a new school each year to combat overcrowding.

We provide a detailed look at the recent Greenville County Council school budget debate, where a proposal to claw back promised FILOT funds from schools and fire districts sparked a robust civic debate. This incident highlights the core challenge for our school district: the desperate need for predictable funding. The conversation also explores whether Greenville, a rapidly growing community, still needs to offer major tax incentives to attract large industries, or if those resources could be better used to support small businesses. Ultimately, this episode explains why the topic of FILOTs and school funding in Greenville County is about more than just numbers; it's about ensuring our community can hire great teachers, build necessary schools, and provide the education our children deserve.

Episode Resources:

• Greenville County Budget Basics

• Guide to SC School Tax Abatements

• Learn more about Greenville First Steps

• Learn more about Public Education Partners

Introduction

Catherine Schumacher: Here in Greenville County, FILOTs, or fee in lieu of taxes, have been in the news lately, and with budget season just around the corner, are certainly going to be once again. But what are FILOTs, and how are they connected to the funding of our local schools?

I'm Catherine Schumacher of Public Education Partners, and on this episode of Simple Civics Ed Talks, we wrap up our three-part series on school funding in South Carolina and Greenville by discussing FILOTs and other tax abatement programs, and how decisions made by our county council impact resources available for the teachers and students of Greenville County Schools. I'm joined by Derek Lewis, Executive Director of Greenville First Steps and a former Greenville County Schools trustee.

Catherine Schumacher: Welcome, everybody, to the final episode of our three-part series on Simple Civics Ed Talks, focused on how our public schools are funded here in South Carolina with a particular focus on, as I like to say, how school funding is really weird. So I'm here with Derek Lewis, of course, my partner in this conversation, and we're going to dig into a topic that flies under the radar, but has some pretty big consequences for how our schools are funded.

And those are what are called tax abatement programs, especially FILOTs, which stands for fees in lieu of taxes. And we're going to really talk particularly about Greenville County schools and some recent conversations and developments and debates about that topic here. So, Derek, why don't you walk people through what a FILO is and why we have them?

What are Tax Abatement Programs (FILOTs and TIFs)?

Derek Lewis: All right. So tax abatement is basically when the government agrees to reduce or eliminate some taxes, usually on property, in exchange for some service. And so usually it's an incentive. So we're trying to get a new business to come in. We're trying to develop an area of the community that's blighted. Tax abatement is how we can offer those.

There's FILOTs and TIFs. And it's really not a huge difference between the two, except that FILOTs are when we basically create something that's a fee in lieu of taxes. And generally what we're saying is that instead of paying the standard property tax, which is going to increase as you make improvements on the property, we're going to create a set number and you're going to pay that amount for a long period of time. And so it is 30 years or some...

Catherine Schumacher: Number of decades.

Derek Lewis: Yeah. So it basically incentivizes the developer. If you'll go in there and put in sidewalks and you'll do all this stuff, then your property is going to increase in value and we're not going to immediately come back to you to get that increase. TIFs do the same thing but from a public investment. A good example of a FILO would be if we're bringing in a new manufacturer like an Isuzu plant or Michelin.

Catherine Schumacher: Yeah, a new big facility, a big facility.

Derek Lewis: Yeah, so we're saying you're going to create 300 new jobs that's worth it to us to maybe control your property taxes in exchange for you bringing this new industry. And an example of a TIF that people might benefit from is all the work done at Main Street around the Peace Center. So that was an area that needed some investment. We needed both private philanthropy and philanthropy to come in.

And so the TIF basically said, OK, so if you'll help us beautify and improve Main Street, we won't punish you by charging you more taxes because it's now worth more. The big difference between a FILO and a TIF is that FILOTs are typically negotiated by the county and no one else.

The Key Difference Between FILOTs and TIFs: Who Has Control?

Catherine Schumacher: Right.

Derek Lewis: And so remember from our earlier episodes that your property taxes for a business go to the county, they go to the art museum, they go to the school district, they go to the fire districts. So the county says in a FILO, this is the amount we're going to collect from you. And then the county decides who's getting shorted on that. And it may be a lot or it may be proportionate. It may be whatever the county decides.

In a TIF, all the parties have to agree to it. And so when the TIFs are passed, the school board actually has to say, we're agreeing to take this amount of money. So really, that's the big difference is who's making that agreement with the developer or the industry.

Catherine Schumacher: Yeah, and the district, the trustees get a vote. And so when a TIF happens, there's a vote. And when a FILO happens, there isn't really. And so that's, I think, one of the challenges with the FILOTs.

The catch is that in lieu of fees over time might be less than what the property taxes would be once that full redevelopment happens. But there's not a lot of revenue being generated by a lot of these sites now. So you're trading off the short term and long term benefits.

Derek Lewis: Yeah. I think a really good example of a TIF that we've recently done is looking at Lawrence Road and the Lawrence Road corridor. And where the, now I feel like a local because I'm going to say where the old Sam's Club used to be, where the old Best Buy used to be.

Catherine Schumacher: And now it's just empty lots with concrete.

Derek Lewis: And that empty lot isn't generating a lot of taxes. And so for the community to see that developed into a housing unit or something that could generate taxes in the long term, that's going to be a huge benefit. And it's a lot more than what we're collecting now. But there's that gap of 20 or 30 years where we're not going to see an increase.

And I think that's one of the things that the board wrestled with a lot in the school district was, should we be trying to get every increase immediately or are we okay with, this is for the greater good of the community and so we're going to do this thing and realize that it may be 20 years before we see some financial return on that investment?

The Financial Cost of FILOTs to Greenville County Schools

Catherine Schumacher: The challenge is that the control over FILO dollars in particular is not held at the district. That is the county or the municipal area that is doing the FILO. And so I think that's been where the tension has happened. And the research, we've done some research that shows that FILOTs and other tax abatement programs are costing South Carolina schools about $400 million each year.

Now, some of that gets pulled back because the county council says, all right, Greenville County Schools, you can have X million of dollars, but it's about $30 million in lost revenue in Greenville County schools annually. And that's, again, a lot of money.

Derek Lewis: It could be a new school every year that we build to help handle overcrowding in our district.

Catherine Schumacher: Right, right. Again, with no control. And so the reason that FILOTs have been in the news recently and will certainly be in the news again soon as we get into our new budget cycle. So how this played out last spring, Derek, give a quick a tick-tock, not actual TikTok, but a TikTok as they did this or what happened when, what happened last spring in the conversation about FILOTs for the fiscal 26 budget cycle?

The Greenville County Council FILO Debate: A Case Study in Budgeting Conflict

Derek Lewis: Yeah. And full transparency. So I experienced this one as a spectator, not as a board member because I have rotated off the board. But my understanding was that the school district had created its budget and had a pretty good idea of what it was going to spend. And it had an idea of where those dollars were going to come from.

Catherine Schumacher: Including from FILOTs.

Derek Lewis: Including from FILOTs fees. And then the county needed to balance their budget, and there was a shortfall. And my understanding was the direction to the county administrator was, we'll find that money somewhere. And the original proposal was, well, we'll take it from these FILO dollars that were promised to emergency services, to school districts, to the other entities.

Catherine Schumacher: Other municipalities, other cities, because these other FILO money, the fees get paid out. It's not just school district. I think that and that was an important part of the conversation, too. It's some of the fire districts, other municipalities in the county. So it isn't just a school district conversation.

Derek Lewis: And so those dollars were dollars that those municipalities had already included in their next year budget. They were waiting on the county to approve its budget to get everything finalized. And then I think they were surprised that now on the table was the idea that we would have those dollars clawed back.

Catherine Schumacher: Right.

Derek Lewis: And so I think the community, from what I could tell, the community was as equally concerned about schools losing money as they were about fire stations losing money.

Catherine Schumacher: Because in some cases it was almost the whole fire station budget. It was significant.

Derek Lewis: So I think the county rightly, I think, stepped back and said, okay, well, we'll keep you whole for the current FILO deals that we have, but going forward, if we make future FILO deals, then the county may not distribute that money in the same way.

Catherine Schumacher: And to give credit, and I think we've now spent, I don't know how many minutes talking about school funding. And I think for we have a lot of new county council members. And I think they've really been learning about how this works, too. And so I know everyone, I know that the trustees of the school district appreciated putting the pause button on changes and recognizing that the work had already been done to create a balanced budget, didn't require a tax increase.

And so having to figure that out because County Council wanted to pay for roads, which is really something we need to do. We need to figure out how to do it. They had promised several of them that they wanted to do a millage, they wanted to do a tax cut for it. Again, that balance of how do you balance what political needs and funding needs. It's a really complicated process. So I think one of the good outcomes of a robust civic debate, which everyone who paid attention, it was a robust civic debate last spring, is that it's an opportunity for learning. It's an opportunity for folks to wrap their heads around how complex it is. And I think that's really great.

Economic Growth vs. School Needs: Are Tax Incentives Still Necessary?

Derek Lewis: So, yeah, and I think one thing, Catherine, that I think is also important is you hear a lot about the benefits of FILOTs, the benefits of TIFs and bringing in development. And one of the arguments against them is just the question of, do we really need to incentivize more development in Greenville County at this point?

And so I do think there is I think it is a great time in this county to have a conversation about growth and managed growth. And do we need more industry here to be incentivized to come here? Or have we created a community that industry would have come here anyway? And are we basically making trades? One of the other arguments I heard, which I thought was really interesting when I was on the school board, was we offer these huge incentives to large industries to come that may hire 300 employees. But if you collectively looked at all the florists or all the bankers, they are hiring more employees than that. But we don't offer the same incentives to small businesses.

Catherine Schumacher: Right.

Derek Lewis: And so should we be looking at maybe FILOTs or TIFs for incentivizing small business creation rather than large industry creation?

Catherine Schumacher: Yeah. And the other topic that's been coming up a lot is impact fees. That's something that we'll be hearing, which would put more of an onus on folks that are coming in and building some of these subdivisions, some of the things that are pressuring the system and different ways of looking at it. And again, there's a robust debate and discussion about what are the impacts of that? Would it slow things down? Would that be a bad thing? I think all of that, all of that is legitimate conversation.

I think that what's interesting about FILOTs and TIFs and other tax abatement strategies, they're all part of this very complex system. And we've now spent three episodes of this podcast talking about a really complex system. What we would really want folks to do is to continue to, again, pay attention. The budget process is going to be getting, is going to get started. We could have initial presentations of budgets from different entities really soon. And so I think how those all play with each other, particularly coming from the county and then trickling down to different entities like Greenville County Schools to the fire districts, all of that is really, really important.

The Core Issue: Why Predictable Funding is Crucial for Schools

Derek Lewis: Yeah. And I think finance is a really difficult thing to deal with. And I think there's state finance and federal finances and there's local county finances and local municipalities. To me as a school board member, the thing I really just wanted was just some stability.

Catherine Schumacher: Yeah.

Derek Lewis: And just let me predictably know.

Catherine Schumacher: Predictability.

Derek Lewis: How much money am I going to get per child next year? And then we can look at that budget and say, okay, with this amount of money, this is what we can make work. And if we have less, we'll make less work. You don't know. And then you create a budget in March, and then you find out in April that now you're short $15 million. And so I think that's the part that I think causes the greatest anxiety in the public is you never know what it is because somebody else is making a decision with other public dollars that affects you.

And it's that stability that's going to help us hire great teachers, build the schools that we need to grow into the future, and make sure that our kids are getting the education that they deserve and that our community deserves.

Catherine Schumacher: When you and I talked about doing Ed Talks, we knew we wanted to lift up happy stories. We wanted to talk about the great work that teachers are doing. We wanted to point out wonderful programs and community partners that are supporting the educational journey from kids from birth to employment. And so, but having these conversations too, where we're digging into some more chewy content, I think is really important.

And we know that Simple Civics listeners are up for that. We know how people use these podcasts as resource guides to understand things. And so, again, we're going to use the show notes to drop some additional resources in there. And I really encourage you all to check those out. Again, there's going to be a new explainer from the League of Women Voters that's going to be coming online that we're excited to share with you. We've done some white papers and studies at public education partners that talk about the impact of things like Act 388 and FILOTs on school funding in particular. And then I think these are topics that we really want to touch to.

Derek Lewis: Thanks for doing this with me.

Catherine Schumacher: No, absolutely. And thank you all, listeners. Thanks. Thanks so much for hanging out with us and listening to this series. We really appreciate it. And we look forward to talking to you next time. Simple Civics Ed Talks is a joint project of Greater Good Greenville, Greenville First Steps, and Public Education Partners Greenville County.