Hospitality Fee Lawsuit – What Does Myrtle Beach Really Want

By Paul Gable

With the City of Myrtle Beach announcing last week it plans to appeal the judge’s order on a settlement of the hospitality fee lawsuit it brought against Horry County, it appears the city has taken the stance of ‘my way or the highway’ on the lawsuit issue.

Everything has been settled and agreed to between the parties in the lawsuit except for the disbursement of approximately $19 million the county collected in the various city jurisdictions in the county between March and August 2019.

Horry County asked the judge to order that money be returned to the city’s in which it was collected. The judge agreed.

Myrtle Beach requested one half of those funds be returned to the cities and one-half established as a fund from which it may pay out refunds to individuals who paid the hospitality fee between the above months with any unclaimed amount going to the South Carolina Bar Association’s fund for legal services for low income residents.

Under the county plan, Myrtle Beach would receive $11,170,800 of the approximately $19 million total. This money could be spent on infrastructure and public safety services associated with tourism, according to state law.

Under the city plan, Myrtle Beach would receive $5,585,400. Why would the city want to receive less money and why would it appeal a judge’s order that awarded it more?

The dispute over the settlement money split is about interpretation of Rule 23 of the South Carolina Rules of Civil Procedure, which deals with class action lawsuits.

Myrtle Beach issued the following statement as an explanation, “This appeal is necessary to finally determine the rights of the other members of the class — those who paid the Hospitality Fee to Horry County during the period when it was in dispute — regarding distribution of the portion of the $19 million common fund that was not otherwise resolved by the settlement agreement.

Myrtle Beach Mayor Brenda Bethune and City Manager John Pedersen have both added the city’s attorneys said the appeal is necessary in order to shield the city from any potential liability related to a suit that may be brought by a potential claimant.

I have spoken to two attorneys not involved in the lawsuit who said the city is already shielded from any claim by the trial judge’s order. In addition, neither believe this is a class action suit.

In reviewing the court record of the lawsuit to date, I cannot find any order that certified the lawsuit as a class action.

The City of Myrtle Beach is the lead plaintiff in the lawsuit joined by the other cities in Horry County. None of these are potentially injured parties from paying hospitality fees. Cities don’t pay these fees. They are paid by local citizens and tourists who purchase the goods and services to which these fees are charged.

In addition, to be a party to a class action lawsuit in South Carolina, state law mandates that the potential claimant must prove at least $100 in damages. This would require anyone claiming damages to provide proof of at least $6,666.67 in expenditures applicable to hospitality fee charges between March 2019 and August 2019. To say this would be very few people, if any, is probably an overstatement.

It was not a Myrtle Beach city ordinance that established the hospitality fee. The city was not involved in either the collection or remittance of the county portion of the hospitality fee, which was the portion in dispute.

The hospitality fee was established by county ordinance in 1996. It provides for a total of two and one-half percent of purchases. One and one-half percent collected countywide was designated to pay off bonds that funded construction of SC 22 and SC 31 as well as improvements to other roads in the county. One percent went for allowable uses in the jurisdiction in which collected. The hospitality fee was supposed to terminate when the bonds were paid off, which finally occurred in February 2019.

However, in 2017, then Horry County Council Chairman Mark Lazarus convinced county council to eliminate the sunset clause in the original ordinance and extend the hospitality fee ad infinitum. He proposed using the approximately $43 million per year the fee raises from the 1.5% countywide collections to fund construction of Interstate 73 rather than using it to improve and expand existing infrastructure and public safety services in the unincorporated areas as the law allows and which would have helped the local citizens.

Myrtle Beach filed the lawsuit one month after the bonds were paid off. At the time Bethune said the money collected inside Myrtle Beach should be used for the citizens and tourists to the city.

In April 2019, Horry County Council Chairman Johnny Gardner offered a settlement which did exactly that and which has since formed the framework for the settlement that the judge approved recently.

While claiming to want money to improve infrastructure in Myrtle Beach, Bethune, Pedersen and city council rejected Gardner’s proposal and now want to appeal the judge’s settlement, both of which accomplish the original stated goals of city officials.

What are the real goals of Myrtle Beach officials? Once again, they appear to be hidden from public scrutiny.


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