By Paul Gable
As Horry County and the municipal councils prepare to vote on a proposed settlement agreement for the Hospitality Fee lawsuit Monday night, many questions remain about what really has taken place behind closed doors since the lawsuit was filed last March.
According to sources familiar with the settlement agreement, the basic proposal approved in a resolution by Horry County Council at its April 2, 2019 regular meeting and publicly rejected by Myrtle Beach Mayor Brenda Bethune within a few days thereafter is the agreement that will be voted on Monday night?
The basic terms of that proposal as it was offered in April and will be considered Monday night are as follows: a) Horry County will continue to collect a 1.5% Hospitality Fee countywide; b) one-third of that fee (0.5%) will go toward funding I-73; c) the remaining two-thirds (1%) will be remitted to the respective taxing jurisdictions (unincorporated county or city) in which it was collected; d) Revenues from the 1.5% countywide hospitality fee collected between the date bonds for Ride I projects were paid off (sometime in February 2019) and June 30, 2019 will be remitted in a lump sum to the respective taxing jurisdiction in which those revenues were collected.
Horry County Council Chairman Johnny Gardner sent a letter to each of the city mayors proposing that settlement on April 3, 2019.
The county was prohibited from collecting the 1.5% countywide hospitality fee within the city jurisdictions after June 30, 2019 by judge’s order. The sum collected within city jurisdictions between February 2019 and June 30, 2019 (currently held in escrow) and subject to lump sum payments back to the cities is approximately $19 million.
Why is a proposed settlement that was publicly and totally rejected by Bethune in April 2019 suddenly the terms for settlement? (See Gardner’s letter to the mayors and Bethune’s rejection letter at the links below)
The mayor’s main points of contention have not changed in the agreement to be voted on for approval Monday night: a) continued collection of the countywide hospitality fee is illegal; b) the city cannot delegate to the county the authority to control the disposition of revenues which are properly within the city’s authority to collect and manage and c) no benefit to city residents from that arrangement.
What has changed?
The city attorneys would have received several hundred thousand dollars in legal fees if the lawsuit had been settled in April. In the interim, those attorneys, led by a relative of former S. C. Supreme Court Chief Justice Jean Toal, have constructed a justification that this lawsuit is a class action by the cities in Horry County against the County. As a result of the alleged class action status, the attorneys are claiming right to approximately $7 million in legal fees from the settlement.
Additionally, Horry County Council voted unanimously last month to cancel a Financial Participation Agreement with the South Carolina Department of Transportation for funding the I-73 project.
At the time of the cancellation, Horry County was the only governmental body ‘on the hook’ for funding I-73 construction. No money was committed by the federal government, No money was committed by the state government and No money was committed by the city governments for construction of the project.
There is no good reason for Horry County Council to approve the settlement agreement. According to sources familiar with discussions, council members Dennis DiSabato, Cam Crawford and Gary Loftus are leading the charge for approval. Is that because they are hoping for reelection contributions from those who will directly benefit from taxpayer funds committed to I-73?
There is no reason attorneys should receive a multi-million dollar windfall from taxpayer funds that should go toward projects that would benefit those taxpayers. And any council member whose vote counts toward that result should never be reelected to office.
There is no reason to again get involved with any type of funding for the I-73 project while the federal and state governments remain uncommitted to funding the project. (The approximate $15 million per year that the settlement agreement would commit to I-73 isn’t nearly enough to build the road). The county killed that funding last month and it should remain dead unless and until the federal and state governments step us with serious funding to the tune of approximately a combined $1 billion.
Legislative delegation members Reps. Alan Clemmons, Heather Ammons Crawford and Russel Fry show up for every local photo op for I-73 but haven’t delivered one dime from state funds toward its construction.
The cities within the county have subsequently passed legislation establishing the maximum allowable hospitality (2%) and accommodations (3%) taxes in accordance with current state law. Horry County should do the same and the former hospitality fee should be allowed to sunset as it was supposed to do after the Ride I projects bonds were paid off and the I-73 project remain cancelled.
Below is the text of the Bethune letter to Gardner Refusing Hospitality Fee Settlement Proposal in April 2019 as it appeared on the City Facebook page:
“Thank you for your letter of April 3. As you are aware, the Myrtle Beach City Council has expressed its willingness to commit support for the I-73 project. However, since the proposed funding source is the subject of litigation, we are unable to engage in negotiations under the terms described in your letter and related attachments.
“As you are aware from the lawsuit the City of Myrtle Beach has instituted against the County, it is our position that the continued collection of the Hospitality Fee inside the City’s corporate boundary is not lawful. Given that position, we do not see how that fee can be considered as the basis for a compromise or agreement among the parties in dispute.
“The Myrtle Beach City Council is required to manage the City’s business affairs for the benefit of its constituents. Accordingly, we cannot delegate to the County the authority to control the disposition of revenues which are properly within the City’s authority to receive and the City Council’s authority to manage. Our belief is that each jurisdiction is best suited to determine the use of its own revenues.
“In addition, the County’s proposal is both unfair to our constituents and legally questionable. City residents and businesses already pay property taxes for County Police and Fire Departments which largely serve the unincorporated areas. The County’s proposal essentially double tax city residents by collecting a service fee within our jurisdiction to pay for services that city property owners already support through their taxes. Even if the fee were legal, we see no benefit to our constituents from that arrangement.
“As expressed publicly, the City of Myrtle Beach is willing to engage in discussions, but as prudent elected officials, we again decline to discuss issues that are under active litigation without such discussions being conducted as settlement discussions under Rule 408 of the South Carolina Rules of Evidence.
“The City of Myrtle Beach is committed to the collection and proper use of valid, statutorily authorized taxes. The City also has expressed interest in supporting funding for I-73. However, for the reasons cited here, City Council declines to consider the proposal outlined in your letter. Our door remains open to discussions consistent with the elements of negotiation outlined above.
“Mayor Brenda Bethune”