Time to End the County’s Hospitality Fee Lunacy

By Paul Gable

Events occurring over the last week served to magnify the need for the county and the cities to get past the lunacy that has developed over the county’s efforts to continue collecting a countywide Hospitality Fee that is in all likelihood now illegal.

Myrtle Beach initially filed a lawsuit against the county “for itself and “similarly situated plaintiffs” on March 21, 2019 stating its claims against the county’s continued collection of the hospitality fee and requesting a temporary restraining order on the county’s continued collection of the fee while the case was being litigated.

After District Court Judge Seals issued a temporary restraining order on the county’s continued collection of a 1.5% hospitality fee within the City of Myrtle Beach and “similarly situated plaintiffs”, on June 21, 2019, the cities expected the county to stop collecting the fee within their jurisdictions.

Last Tuesday, the county dashed those expectations by sending out an email announcing it would only stop collecting the fee within Myrtle Beach and would continue to collect it in the other cities in the county as well as the unincorporated areas.

This led to outrage from North Myrtle Beach officials who called the county’s continued collection of the fee within their city “illegal.” In addition, Myrtle Beach filed a new motion requesting the county be required to show cause that it was not in contempt of the judge’s order.

With the angry rhetoric flying, a special meeting of county council was called for June 29, 2019 at which council was expected to vote on a recommendation to suspend collection of the fee within the cities until the lawsuit was settled.

Instead, council convened, immediately went into executive session where, according to sources with knowledge of the discussion, county attorney Arrigo Carotti and attorney Henrietta Golding, representing the county in the case, urged council to “stay the course” and continue collecting the fee in the other cities until ordered not to by the Court. In addition, the attorneys reportedly told council the judge had used the wrong standard of review in making his ruling. Golding filed a request for reconsideration of the ruling and was prepared to take the issue to the S. C. Supreme Court where, she told council, she expected the restraining order would be overturned.

Council went back into open session and announced it would take no action based on the recommendations of its attorneys, meaning the county would go forward with its intended collection of the fee in municipalities other than Myrtle Beach and in the unincorporated areas of the county.

On June 30, 2019, former council chairman Mark Lazarus began a string of emails between himself, two council members and the attorneys with an email to Golding saying collections of the fee should be suspended until an appeal is ruled on, that Myrtle Beach was to blame for causing the mess and he stood by the county position that the hospitality fee was completely legal.

Council member Johnny Vaught was quick to respond saying he concurred with Lazarus, a position that is typical of Vaught. Council member Harold Worley responded with the opinion it was time to “move on” since I-73 funding is “dead and off the table.”

It was Lazarus who caused the mess, as he calls it, by removing a sunset provision from the county ordinance that established the 1.5% countywide hospitality fee specifically to pay for the short term solution road projects listed in the 1996 Road Improvement and Development Effort (RIDE) report to Gov. David Beasley.

County Ordinance 105-96 established the Hospitality Fee specifically to provide the county’s funding portion of what became known as the RIDE I projects. The fee would begin to be collected on 1/1/97.

There can be no doubt as to the specificity of purpose of the ordinance as there was a two part sunset provision. The first part said the fee would terminate on 8/1/97 if the state failed to appropriate its share of RIDE I funding. The second part said, if state funding was appropriated (it was) the ordinance would terminate on 1/1/17.

The county amended the ordinance in 2004 to provide that council could extend the sunset provision by no more than five years if such action was necessary to pay off RIDE I bonds. The county again amended the ordinance in 2016, to sunset on 1/1/2022 because bonds were not completely paid off in the initial 20 year period.

An amendment passed by county council in 2017 is what instigated the lawsuit. This amendment was passed at Lazarus’ acknowledged urging, removing the sunset provision completely in order to provide funding for I-73 construction in Horry County.

As the city of Myrtle Beach stated in its complaint, consent of the cities was needed to collect the hospitality fee countywide. The county challenges this based on the wording of the resolutions passed by each city urging the county to pass the ordinances necessary to provide funding for the projects identified in the RIDE report. I-73 was never listed among those projects.

The city waited until RIDE I bonds were paid off in February 2019 before filing its lawsuit in March 2019. In the lawsuit, the city says the sunset provision extension and removal were not legal because the cities never approved any of the amendments. It seeks approximately $60 million be returned by the county in what it claims are illegally collected fees since 1/1/2017.

Interestingly, an email by Horry County Attorney Arrigo Carotti, contained in the above mentioned email string, may actually provide a solution to the entire mess.

In his email, Carotti states, “If the City would waive that claim (for $60 million), I, for one, would recommend giving up the future revenue (from hospitality fees collected in the cities), and believe Council already is at that point.”

According to sources familiar with the meeting, Carotti did not make such a recommendation during the June 29th executive session. He waited until emails began flying around on June 30th to voice it.

It should not be too difficult to get Myrtle Beach to waive that claim since, if it is ultimately found the hospitality fee was collected illegally by the county since 1/1/97. The illegally collected revenue would not be returned to the respective cities in which it was collected. Instead it would be due to the many millions of residents and visitors who paid the fee at the time of purchase of goods and services to which the fee is applied.

It should not be difficult for county council to agree to give up future revenue of the fee collected in the cities because its intended purpose, funding of I-73, was never mentioned as one of the projects in the original ordinance and removing the sunset provision for a purpose not mentioned in the ordinance would seem to be illegal.

The county and the cities were quite specific in 1996 that the hospitality fee was being established for the specific purpose of providing revenue for the county’s portion of the RIDE I debt for the road projects listed in the report to the governor.

The email chain and those participating in it demonstrate the need for change in the county staff. Why did Carotti wait to voice his recommendation until 24 hours after the special council meeting? This is at least poor staff work.

Lazarus is continuing to attempt to be a player in county politics and continuing to attempt to find a way to keep I-73 funding alive despite the realities of the lawsuit and despite being turned out of office by county voters a year ago.

Vaught continues to ‘carry the water’ for anything Lazarus proposes and at least some on county staff continue to participate.

Vaught, Worley and Lazarus are those pushing the candidacy of Steve Gosnell for permanent administrator even though this entire issue, mess as Lazarus calls it, has been mishandled by county staff on Gosnell’s watch.

To date county council and staff have looked like a bunch of idiots in the manner in which they have addressed the lawsuit. They have avoided attempting to find a solution so the county and cities can move on all the while accruing ever increasing billable attorney hours.

Change is needed. Change must come. And we cannot allow the few who have attempted to take the lead on this issue to continue to push their private agendas at the expense of the county and its citizens as a whole.

Link to the email chain: https://myrtlebeachsc.com/leaked-weekend-emails-reveal-lazarus-carrottis-and-countys-dilemma/



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