Tag: due diligence

Proposed Myrtle Beach Law Should End I-73 Funding

A proposed ordinance by the City of Myrtle Beach regarding collection and distribution of Hospitality Tax should end the I-73 funding agreement between the county and SCDOT that was approved late last year.

In the proposed ordinance, the city declares the 1.5% countywide hospitality tax passed by Horry County in early 1997 to have ended in 2017 when the county voted to extend the law beyond its original sunset provision.

The 1.5% countywide tax was used to pay off Ride I bonds. The last payment on Ride I bonds was made in January 2017, according to county sources.

With that final payment, it appears that the 1.5% countywide tax is no longer allowed by state law. It appears the county did not receive proper legal advice on its ability to remove the sunset provision and continue collecting 1.5% countywide.

Current state law allows counties to impose only a 1% countywide hospitality tax. Any more to be collected within municipalities must be approved by the municipality by resolution, which obviously is not going to happen in Myrtle Beach.

Myrtle Beach appears to believe it can collect the entire 2% local hospitality tax allowed by state law for its own use.

However, if the county moves forward to impose a 1% countywide hospitality tax, Myrtle Beach will probably end up with only the same 1% hospitality tax revenue it currently receives. Some legal wrangling between the two governments can be expected before this issue is finally resolved.,

While that legal wrangling is going on and until the county imposes the proper 1% countywide hospitality tax, the county will not be collecting enough funds to fully fund the up to $25 million that is stated in the Financial Participation Agreement it signed with SCDOT on December 13, 2018.

In addition, county council must understand the complete uses it can make of hospitality tax revenue and how much funding it can put toward things like public safety, existing roads and infrastructure, recreation facilities and storm water mitigation.

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Horry County’s Flawed I-73 Agreement

The Financial Participation Agreement between Horry County and the South Carolina Department of Transportation, approved by Horry County Council November 28, 2018, appears to have many flaws not discussed before a resolution was passed allowing Horry County Administrator Chris Eldridge to sign the agreement.

Generally the agreement provides that Horry County will provide up to $25 million per year from Hospitality Fee revenues to fund the construction of I-73 within Horry County (the Project) and SCDOT will oversee the project from design through construction.

The written agreement states, “SCDOT shall provide an Annual Work Plan to the county on the activities proposed by March 31 that the county shall approve prior to June 30 before commencing work in the succeeding fiscal year.”

I find the use of the word “shall” interesting here in that it means a strong assertion or intention of something happening. Are we to take it to mean the county intends to approve the work plan prior to each June 30th? Does this mean county council really has much of a choice in the decision?

At least a half dozen times during the over one hour discussion about the project and the agreement county council members were told by then council chairman Mark Lazarus and/or county staff members, predominantly administrator Chris Eldridge and attorney Arrigo Carotti, that no money could be spent on the project without prior approval from county council.

To support those statements, Carotti quoted to council the first sentence of Section III (D) of the agreement which reads, “SCDOT shall not enter into a construction contract without the County’s prior approval based on considerations that the contract provide a meaningful connection to the proposed I-73 corridor in part or in its entirety.”

What Carotti did not quote were the next two sentences of Section III (D) which read, “The County’s prior approval shall not be required to enter into contract agreements for improvements to SC-22, provided the cost thereof does not exceed the estimates provided in the Annual Work Plan. Nor shall the County’s prior approval be required for any right-of-way acquisition agreement or consultant agreement for work of the Project provided the cost thereof does not exceed the estimates provided in the Annual Work Plan.”

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Economic Incentives and the Kingman Airline Services Deal

The recent announcement by Horry County officials that Kingman Airline Services will be expanding its business to Myrtle Beach International Airport is one in which enthusiasm must be tempered.

The announcement was accompanied by sparkling pronouncements from such dignitaries as Gov. Nikki Haley, Horry County Council Chairman Mark Lazarus, Myrtle Beach Mayor John Rhodes and the like.

Local media was quick to pick up on this announcement to shout ‘180 jobs coming to Horry County’ without the qualifying ‘we hope’ that this type of deal requires.

We’ve heard this type of fanfare before – do you hear AvCraft and PTR Industries among others? I do.

It’s only four short years since we heard the last “It’s a great day in Horry County” when the last AvCraft deal was announced by many of these same players.

The initial reaction I heard from several callers who contacted me was, “Is this AvCraft 2.0?”

On the surface it sounds a lot like it. A small Arizona company plans to open an aviation maintenance and repair facility (MRO) at Myrtle Beach International.

It promises to provide 180 new jobs to the area over a five year period. For that promise, Horry County and the Myrtle Beach Air Force Base Redevelopment Authority is providing a total of $250,000 in incentives (read cash payments).

According to sources familiar with the deal, the payment of the $250,000 will be phased over the five year period of the agreement and will depend on Kingman meeting targeted employment levels along the way.

Kingman will be leasing one of the former AvCraft hangars from Horry County Department of Airports. I do not know the rental amount. However, I have been assured by several county officials familiar with the discussions that the rent will be in line with market value and more than AvCraft paid.

In addition, Horry County will be spending an estimated $100,000 to repair the fire suppression system in the hangar and to repair the hangar doors.

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Final AvCraft Chapter?

The Horry County Transportation Committee voted earlier this week to write off $113,687 in unpaid rent from AvCraft Technical Services that the county will never collect anyway.

AvCraft filed for bankruptcy in March 2015 after an 11 year history of failing to make good on its promises to Horry County.

This should be the final chapter in the saga of local and state politicians, especially Horry County Council, looking at AvCraft through rose colored glasses in the name of economic development.

Since arriving to much hoopla in 2004, AvCraft was consistent in only two areas – it consistently failed to meet job goal promises and it consistently requested and received rent reductions on the three hangars at Myrtle Beach International it rented from the Horry County Department of Airports.

After eight years of failing to meet goals, Horry County Council tried one last time in January 2012 to help AvCraft save itself with the recommendation of the Myrtle Beach Regional Economic Development Corporation.

One of the main items in that agreement was a $1.25 million reduction in rent on the county hangars over a five year period. This came after three earlier rent reductions, agreed to by the county, failed to make AvCraft profitable.

The following four comments made after the 2012 incentive package was approved demonstrate how far from reality politicians and their economic development arms exist from reality:

“I am thankful for the company’s commitment to Horry County and proud of our economic development team for this terrific announcement.” – Rep. Tom Rice.

“It’s another great day in South Carolina, and we are going to celebrate AvCraft’s decision to expand and create 150 new jobs in Horry County.” – Gov. Nikki Haley.

“AvCraft is a tremendous asset to our community, and this project is just the beginning for aviation-related businesses locating and expanding in the Myrtle Beach region.” – Doug Wendel, MBREDC board chairman at the time.

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