By Paul Gable
Voters in North Myrtle Beach have a choice on Tuesday when they go to the polls to vote on whether or not to approve a Tourism Development Fee in the city.
Interestingly, the choice is not between voting the TDF up or down, although that will be decided. The real choice is how voters want to pay for infrastructure and other improvement needs in the city and who should be doing the paying.
From recent discussions at the North Myrtle Beach City Council budget retreat, it appears some type of revenue increase is in the offing for North Myrtle Beach residents.
According to information I have received, the North Myrtle Beach City Council discussed a property tax increase of 2-3 mills during their budget retreat earlier in the week.
A property tax increase would be paid only by the property owners in the city. The TDF would be paid by everybody, tourists included, who makes purchases in the city.
The TDF has the added advantage of providing revenue for targeted marketing of the North Myrtle Beach brand (cleaner, safer, family oriented) to tourists who are the lifeblood of the economy in the city.
I attended a meeting of the Tidewater HOA recently where the North Myrtle Beach City Manager made a presentation on the TDF.
Part of the presentation showed pictures demonstrating the need for more parking facilities in the city, an infrastructure improvement that increased revenue to the city will fund, according to statements by council. In addition, road improvements and continued staffing of public safety personnel were discussed as needs.
Another part of the presentation compared revenue increases available from the TDF versus the possibilities from something called the Municipal Tax Reform Act, which is only at best a vague hope to at worst a pipe dream in the minds of city council.
The Municipal Tax Reform Act is a bill that has been stuck in committee in the S.C. Senate for over a year and has no hope of passage in this legislative year or the near future. (You can see more on this in other articles I have written about the referendum.)
Projected revenues from the Municipal Tax Reform Act are meaningless, so I was confused as to why they were even discussed in a meeting about the TDF.
North Myrtle Beach has made excellent use of revenues from various ‘tourism related’ taxes and fees it already receives. It can be argued that the revenue from those sources is a major reason property taxes are so low in the city.
For example, in FY 2017, the city received a total of $9,957,369 in revenue from accommodations and hospitality taxes collected in the city. A total of $1,787,670 (18%) was transferred to the NMB Chamber of Commerce for tourism marketing, as required by state law. The remaining $8,169,699 (82%) was transferred to the city and split among the general fund, service fund, Aquatic Center and other city departments. This 82% was used to fund city goods and services in lieu of property tax increases.
It is estimated the city would receive an additional approximately $1.7 million per year from TDF revenues from the second year on, of which $1,360,000 would be used for infrastructure and $340,000 would be used for property tax rebates on owner-occupied properties. (The first year collections must all go to a marketing organization for out of area tourism marketing.)
However, a budget proviso already passed through the S.C. House Ways and Means Committee, the major budget writing committee in the General Assembly, and expected to be attached to the state budget for FY 2019, which begins July 1, 2018, will allow city’s with a TDF in place to transfer a major percentage to virtually all (percentage to be decided) of the accommodations tax revenue that presently goes to the NMB Chamber to be redirected to the city. Budget provisos only apply for one year at a time, but have a way of becoming automatically included in succeeding budgets.
This means, the NMB city council can expect a major portion of the $1,787,670 transferred last fiscal year to the NMB Chamber to be available for use for city goods and services beginning July 1, 2018 if the TDF referendum passes Tuesday.
According to City Manager Mike Matheney, one mill of property tax brings $375,000 in revenue to the city.
If just 75% of the accommodations tax revenue currently going to the Chamber, a percentage that is reasonable for the proviso according to state legislators, is redirected to the city, it would be the equivalent revenue of 3.6 mills in property tax. From the second year of TDF revenues onward, an increase to city budget coffers of the equivalent of 7.2 mills of property tax could be reasonably expected.
Passing the TDF would eliminate the need for an increase in property taxes currently being discussed by NMB city council and provide significant extra revenue to the city to help offset the need for property tax increases for years to come.
The choice for NMB voters seems clear – passing the TDF means no property tax increases, rejecting it denies a significant revenue increase to the city and makes the probability of future property tax increases a near certainty.