Tag: hospitality fee

Clemmons Attempts to Dictate I-73 Funding to Local Governments

Rep. Alan Clemmons chaired a sub-committee meeting Wednesday at the state house for a hospitality fee bill that attempts to dictate what local governments must do with regard to spending hospitality fee revenue.

After the meeting, Clemmons attempted to put a positive spin on the meeting by telling a local television reporter, “They say that when both parties aren’t happy then you’ve usually reached a fair middle ground.”

I’m not sure who “they” are, but that thinking doesn’t apply in this case. The reason nobody from the cities or county representatives at the meeting voiced anything positive about the bill is this really is a terrible bill.

Clemmons is one of the sponsors of the bill joined by Russell Fry, Heather Ammons Crawford and Tim McGinnis. It is notable here that the four can’t even get the entire Horry County delegation signed on as co-sponsors.

Clemmons has tried to spin the bill as a settlement for the lawsuit between Myrtle Beach and Horry County.

It is not.

The real purpose of the bill is to attempt to force local governments in Horry County to do what the ‘failing four’ can’t get done at the state level – Fund Interstate 73. The entire focus in Columbia is to get as much funding for I-73 from hospitality fee revenue as possible while ignoring the many more immediate, local government needs that the revenue could be used toward.

Initially this bill tried to dictate that all the hospitality fee revenue be used for I-73 construction. An amendment was approved Wednesday that would give the cities approximately one-half of the revenue to use for improvement of tourist related infrastructure and to fund other tourist related needs. The county would get zero for local needs.

The formula established in the amendment would provide approximately $20 million annually to I-73 construction costs within Horry County. Note – Horry County is being asked to be the only county in the history of interstate highway construction to completely fund construction costs of the portion of the interstate highway within its borders through locally generated tax revenue.

Future state and federal funding, if ever appropriated, is projected to be spent in Marion, Dillon and Marlboro counties, not Horry.

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Myrtle Beach Council Back at Work But No Hospitality Fee Settlement

Myrtle Beach Mayor Brenda Bethune announced that the city council is ‘back at work’ at the first council meeting of the New Year earlier this month.

Unfortunately, the New Year did not appear to bring any changes to city government.

Myrtle Beach and Horry County governments each issued statements yesterday acknowledging unsuccessful mediation attempts with regard to the hospitality fee lawsuit with both saying litigation of the lawsuit will move forward.

Among the issues at odds was specific wording Myrtle Beach wanted included in the agreement that would allow its attorneys to be paid up to as much as $7 million from the approximate $19 million fund from hospitality fees collected in city jurisdictions between February 2019 and the end of June 2019.

The county has specifically rejected the concept of allowing attorneys to be paid a percentage of the fund commensurate with a class action settlement especially since attorney fees are not a valid use of hospitality fee revenues.

Another point of contention is a footnote by attorneys representing the city that they intend to file a motion seeking a ruling to end collection of the hospitality fee within the entirety of Horry County.

What that footnote does is end any hope that some sort of settlement would provide funding for the Interstate 73 project.

If Myrtle Beach actually wanted to participate in funding for I-73, it would have accepted the county’s public offer from April 2019, which provided essentially the same split of hospitality fees that is now on the table.

However, Myrtle Beach Mayor Brenda Bethune was quite specific in her rejection letter of the county’s offer last spring. In it, Bethune stated that the city’s position that collection of hospitality fees by the county within city limits is unlawful. Myrtle Beach has not shifted from that position.

Since hospitality fee revenue was the source for funding I-73, Myrtle Beach did not want any of the revenue collected within its limits to be used for the project. The city stated several times over the last 10 months that it supports the building of I-73 but it failed to put its money where its mouth is.

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Proposed Hospitality Fee Lawsuit Settlement Taking Money from Taxpayers

The proposed agreement that county and city councils will be voting on to settle the hospitality fee lawsuit between the county and the cities will see money that should go to the benefit of the taxpayers instead going to pay attorney fees.

This is the first lawsuit settlement negotiation that I can remember where the injured parties, the taxpayers, were not even represented in the room.

In the case of the cities through three negotiation sessions, no elected officials from any of the cities, those elected to represent the citizens, could be bothered to be present. Several elected county council members attended each session.

The absence of city elected officials, especially mayors Brenda Bethune of Myrtle Beach, Marilyn Hatley of North Myrtle Beach and Bob Childs of Surfside Beach, the three cities at the forefront of the lawsuit, resulted in attorneys representing the cities to structure the settlement with no input of those elected to represent the citizens.

According to information received by Grand Strand Daily, the settlement will structure the lawsuit as a class action which will allow the attorneys representing the cities to split 33% of the settlement amount for themselves.

The reported settlement amount is the approximately $19.5 million revenue from the countywide 1.5% countywide hospitality fee collected within the respective city limits of the cities in the county from the time the bonds for the RIDE I program were paid off in February 2019 until June 30, 2019. That means the attorneys will split a cool $6.5 million from the settlement. In addition, those attorneys have already billed the cities a total over $750,000 in legal fees before the settlement is finalized.

County council member Harold Worley stated from the council dais that he would not vote to approve any settlement that gave $7 million taxpayer dollars to attorneys. Worley was speaking as the representative of county council District 1, which includes all of North Myrtle Beach. He believes that money should be spent for infrastructure improvements, public safety and like needs allowed by the hospitality fee law.

The $7 million will come out of the settlement amount for the cities. The county is only on the hook for approximately $350,000 billed by its attorneys.

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Hospitality Fee Mediation Impasse Demands New Direction by Local Governments

After two extended mediation sessions between representatives from Myrtle Beach and Horry County, it is obvious the two sides are at an impasse for any agreement with regard to the ongoing hospitality fee lawsuit.

This may have been the result the city was looking for from the beginning. According to sources familiar with the proceedings, not one elected council member from Myrtle Beach participated in either of the mediation sessions.

Horry County had several elected council members participate in the sessions. It is extremely difficult to come to any solution if those who will ultimately pass the legislation that would be needed to approve and institute the agreement do not participate in the process.

With a view to court decisions to date, Horry County cannot now nor hope in the future to collect a 1.5% countywide hospitality fee as it has since 1997 until challenged in court by Myrtle Beach.

The simple way out of this mess is for both sides to step away from the legal process. Myrtle Beach and the other cities can collect the revenue from the new hospitality and accommodations taxes they passed earlier this year and spend that money as they choose.

Likewise, Horry County could continue to collect either the 1.5% hospitality fee it now receives from the unincorporated areas or choose to pass new ordinances under current state law for hospitality and accommodations taxes. The county could then spend those proceeds on the projects they need locally.

There is one possible perceived obstruction from the walking away process. Included in the initial lawsuit filed by Myrtle Beach is a claim that the countywide collection of the hospitality fee has been illegal since January 1, 2017 and that the county should refund the approximately $60 million collections from that date amount to.

Several considerations seem to make this claim spurious.

Those refunds cannot go to the cities. If taxes are collected illegally the refunds must go back to those who paid them, in other words the consumers.

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Another Hospitality Fee Filing, Another Email, More County Lunacy

The City of Myrtle Beach filed a supplemental memorandum Monday in support of its lawsuit against Horry County’s continued collection of hospitality fees.

Leading the memorandum is an affidavit by North Myrtle Beach City Manager Michael Mahaney providing evidence of the county’s continued collection of the hospitality fee in the City of North Myrtle Beach after June 21, 2019, and supporting a June 26, 2019 motion by Myrtle Beach for the county to show cause why it was not in contempt of a temporary restraining order issued by Judge Seals on June 21, 2019 prohibiting same.

Included in the filing was an email originated by attorney Henrietta Golding who is representing the county in the lawsuit.

The email appears to have evolved out of the string of emails that were the subject of several media stories yesterday. The email that appears to have started the string was sent by former county council chairman Mark Lazarus to Golding.

In her email, Goldings criticizes the judge and the temporary restraining order the judge issued against the county for having “many errors”; states, “This is solely the fault of Myrtle Beach” and appears to discuss the county’s strategy in moving forward by saying the county will try to get a “supersedeas” and saying “if the county took steps to suspend the ordinance (creating the hospitality fee), then probably create legal issues detrimental to the county.”

Golding’s email was sent to Lazarus, county council members Johnny Vaught, Harold Worley, Tyler Servant and Dennis DiSabato, interim administrator Steve Gosnell, county attorney Arrigo Carotti, North Myrtle Beach Mayor Marilyn Hatley, Mahaney and Surfside Beach City Manager Dennis Pieper.

The choice of recipients is confusing as Golding only represents six – the four council members, county administrator and county attorney. Lazarus has no official position with the county since his term ended December 31, 2018. Hatley, Mahaney and Pieper support the position of Myrtle Beach that the county has been illegally collecting the hospitality fees since January 1, 2017 when the original sunset provision of the county hospitality fee ordinance expired.

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Horry County Council’s Hospitality Fee Slush Fund

Horry County Council is within one ordinance reading of establishing a permanent slush fund for pet projects using 60% of Hospitality Fee collections countywide as the revenue source.

A 2.5% hospitality fee tax is collected on prepared foods and drinks, admissions and lodging throughout the county.

Forty percent of the revenue (1% of the total 2.5% tax) is returned to the original jurisdiction (incorporated areas or the county for unincorporated area collections) in which the tax is collected. The remaining 60 percent of the revenue (1.5% of the total 2.5% tax) goes to Horry County specifically to pay off bonds issued for Ride I road projects.

Some of those bonds will be paid off in 2017 with the remaining bonds projected to be paid off in 2019. When the Hospitality Fee legislation was passed over 20 years ago, county council established a sunset provision for the 1.5% portion pledged for bonds.

In other words, 60 percent of the Hospitality Fee was supposed to go away when those Ride I bonds were paid off.

But, once a tax is created, government hates to see it destroyed.

Therefore, county council is moving rapidly to remove the sunset clause and allow the full 2.5% tax to be collected ad infinitum. According to county administrator Chris Eldridge, this tax currently collects approximately $38 million in revenue to the county annually.

To put that amount into perspective, $38 million is approximately 25 percent of the county’s general fund budget for Fiscal Year 2018, which begins July 1, 2017.

The revenue from this tax would not go directly into the general fund. According to state law, it must be spent on tourism related projects.

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