Myrtle Beach hospitality fee

Myrtle Beach will be collecting the new hospitality tax as of July 1 while other Horry County cities have questions. Photo by Janet Morgan/janet.morgan@myhorrynews.com

Local governments would spend more than $14.5 million each year on I-73 if they finalize the hospitality fee settlement they tentatively agreed to last week, according to records obtained by myhorrynews.com.

Officials have been tight-lipped about the proposed settlement since officials from Horry County and Grand Strand cities spent 10 hours in mediation on Oct. 31, but a document distributed to county and municipal leaders this week shows a breakdown of how the two sides plan to split a projected $43.7 million revenue stream.

Horry County Council Chairman Johnny Gardner declined to reveal any specifics about the proposal, but he said he supports it. He noted that all the details will eventually be made public if the agreement is approved.

"[When] anybody reads that, I'll be glad to sit down with them and point out all the good stuff that's in there," he said. "But it is a good agreement. Now if it changes materially or substantially between now and then, then we'll have to reevaluate." 

Under the proposed deal, the city of Myrtle Beach would receive $12.8 million per year in hospitality fees (the city collects the most fee revenue of any local government). Horry County would get $8.5 million. North Myrtle Beach ($5.3 million), Surfside Beach ($1.1 million), Conway ($1.1 million), Aynor ($133,272), Loris ($160,288), and Atlantic Beach ($46,463) would each receive a share as well. 

The money would come from the county’s hospitality fee, a 1.5 % levy traditionally collected on all restaurant meals, hotel stays and admission tickets sold countywide.

Businesses charge the fee to customers, then remit that money back to the county. Historically, the fee has been used to pay for road projects such as S.C. 31 and S.C. 22.

But Myrtle Beach officials became upset with county leadership after the county announced plans to spend some of the money on I-73 and a portion of it on the county’s public safety departments. City officials objected to the county collecting money in the city’s borders and using it to pay for county services. So Myrtle Beach sued the county in March. Other area municipalities soon joined that fight, and a judge ruled that the county could not collect the hospitality fee inside municipal limits while the lawsuit was pending.

County leaders have been particularly concerned about the hospitality fee case because they signed a contract with the S.C. Department of Transportation (DOT) in late 2018 to pay for work on I-73. 

County officials had planned to use hospitality fee revenues to pay for $12.4 million worth of projects in the first year of the DOT contract as well as tens of millions more in subsequent years.

The contract is also a critical part of a federal grant application the DOT submitted for I-73 funding. DOT Secretary Christy Hall has warned that the state could be forced to withdraw its request for the $348 million grant because of uncertainty about how much local tax money would be available for the I-73 project. 

County leaders insist they don’t have enough money to pay the DOT for work on the proposed interstate without additional city funding. On Aug. 28, county council voted cancel the DOT contract in 90 days unless the county reached an agreement with local municipalities to jointly fund the road.

Last month, Gov. Henry McMaster met with leaders from the county and the cities to see if there was a way to broker a deal for I-73. That led to last week’s mediation.

Under the proposed settlement, the county would be able to collect the 1.5% fee both inside and outside the municipal limits. 

Fees from each jurisdiction would go toward I-73. That would amount to nearly $14.6 million for the road initially, but officials expect those revenues would grow over time, meaning local governments would also see more money for their coffers.

Few details have been released about the settlement because of a confidentiality agreement between the parties. County officials said they want local governments to approve the agreement this month, then a judge could sign off on the proposal in December. Gardner said he hopes the county can return to collecting the hospitality fee inside the municipalities by Feb. 1.  

County councilman Johnny Vaught said both sides’ ultimate goal is to preserve a funding stream for I-73. If the long-debated terms are agreed upon, that goal would be accomplished. 

“We could basically drive on,” he said.

But there’s no guarantee the governments will approve the agreement. 

During Tuesday night’s county council meeting, councilman Harold Worley called the proposal a “bad deal” and said he wouldn’t support it. 

Worley is concerned about a request from the cities that the case be certified as a class action, a type of litigation that involves a plaintiff representing a larger group. Attorney fees are customarily one-third of a settlement.

In the hospitality fee lawsuit, the treasurer’s office is holding more than $18.5 million that county officials have said would likely go to the cities under the proposed deal. That money was collected between the time the road debt was paid off and a judge's ruling that the county had to stop collecting the fee in the city limits.

Worley said he wouldn’t support an agreement that would lead to $6-7 million of taxpayer money going to legal fees. During Tuesday's meeting, he described the arrangement as a deal that could “rape the taxpayers.”

A day later, his position had not changed.

“I’ve just got to do the right thing,” Worley said.

If the county simply puts off the matter until January, he said, state lawmakers would address the issue in Columbia.

“They will fix the problem,” he said.

So far, the city of Myrtle Beach has been billed nearly $758,000 for its lawyers’ work on the hospitality fee case, city spokesman Mark Kruea said. Kruea said he didn’t have any information about Worley’s figures because he was not involved in the mediation between the county and the cities last week.

“I don’t have knowledge of that,” he said. “That’s a fairly standard attorney’s fee though, I think. Our argument along the way has been that the county collected the money unlawfully.”

If the two sides can’t reach a settlement, the S.C. Supreme Court has agreed to hear the case.

Contact Charles D. Perry at 843-488-7236

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I'm the editor of myhorrynews.com and the Carolina Forest Chronicle, a weekly newspaper in Horry County, South Carolina. I cover county government, the justice system and agriculture. Know of a story that needs to be covered? Call me at 843-488-7236.

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