Differing opinions may lead to different tax allocations, unravel I-73 funding

I-73’s future lies in Columbia.

Horry County Council on Tuesday unanimously voted to cancel a contract with the S.C. Department of Transportation (DOT) for the initial phase of the proposed interstate. The decision followed months of legal wrangling between the county and Grand Strand cities, and county leaders ultimately said they couldn’t move forward without a commitment from the municipalities to help them pay for the road. They also said they expect state lawmakers to address the issue.

“It’s time that the delegation step up to fix this problem,” Horry County Councilman Harold Worley said. “They can save I-73.”  

But what would the state’s involvement look like? That answer could become clearer soon. 

In recent months, local officials have been in discussions with state Rep. Alan Clemmons, R-Myrtle Beach, about a bill that would allow the county to continue collecting its hospitality fee countywide. The 1.5% fee has been traditionally collected on all restaurant meals, hotel stays and admission tickets sold in Horry. It’s also the funding source that county officials planned to use to fulfill their 2018 contract with the S.C. Department of Transportation to begin building I-73. 

But county officials haven’t been able to collect the fee inside municipal borders for months. That’s because Myrtle Beach leaders sued the county in March, saying that the county was illegally collecting the fee inside city limits. City officials were upset because the county wanted to use some of the fee money to pay for public safety services in addition to building the interstate. The hospitality fee was created in the 1990s to pay for roads such as S.C. 31 and S.C. 22.

North Myrtle Beach and Surfside Beach officials also objected to the county’s plan, and a judge ultimately ruled that the county could not collect a fee inside the city limits while the lawsuit is pending. 

Enter the delegation.

A draft of Clemmons’ bill obtained by the Herald appears tailored to Horry County’s situation. The proposal would allow the county to collect the 1.5% “ legacy hospitality fee," but the money would be used for "interstate highway infrastructure, interstate highway interchanges, and roads of interstate connectivity that are built or improved for the purpose of affording efficient and direct interstate highway access,” according to the draft copy. 

If approved, the bill would allow a county to resume collections even if there was a lapse. The draft bill also states that the cities could work with the county on projects funded by the fee.

House members could prefile their bills for the upcoming legislative session starting Wednesday. A bill had not been uploaded to the state legislature's website by press deadlines and Clemmons declined to comment on his plans. 

Some county officials are concerned about state involvement. During Tuesday night's council meeting, council members Dennis DiSabato and Cam Crawford said local governments should address the hospitality fee issue.

“I do not agree with letting the state legislature lead on local issues," DiSabato said. "We should be acting as leaders.” 

Other county officials, however, remain optimistic about the potential legislation. They see it as the best option for getting I-73 built.

Horry County Council Chairman Johnny Gardner said another contract could be negotiated with the DOT. 

“If the money is there, they'll enter a new contract with us," Gardner said, adding that the process had dragged on long enough. “What's the harm in killing it now? Because it's going to have to be remodeled anyway.”

The contract would have to be restructured because the funding pledged in the 2018 DOT agreement doesn’t line up with the amount allocated for I-73 that was discussed in a proposed settlement between the county and the cities.

Records obtained by the Herald show a 1.5% hospitality fee was projected to bring in $43.7 million per year. The proposal called for pledging more than $14.5 million of that money to I-73 and providing the city of Myrtle Beach with $12.8 million (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. 

That proposal emerged after 10 hours of mediation on Oct. 31. County officials said they had a tentative agreement that each council would consider for approval. However, since that time county officials have objected to two parts of the proposed settlement: they worried the cities' attorney fees would claim more than $6 million in public money and they are concerned the cities will simply tack on the 1.5% hospitality fee to the 1% hospitality taxes some municipalities created this year to replace the county's fee. 

That means taxpayers would be taxed 1% more for hotels and restaurant meals than they would have before this saga began.

It’s unclear how Tuesday’s vote and the potential legislation could impact the settlement talks between the county and the cities.

“County council’s vote may change the funding mechanism for I-73 as it currently stands, but that does not necessarily eliminate I-73 from our future,” City of North Myrtle Beach spokesman Pat Dowling said via email. Dowling noted that Gardner had mentioned a new contract could be drawn up.

“The recommended mediated agreement in principal appears to still be moving forward and ultimately North Myrtle Beach will be among the many jurisdictions in Horry County that will vote it up or down,” Dowling said. “There is always hope until there is no hope.”

City of Myrtle Beach spokesman Mark Kruea could not be reached for comment. 

Other local leaders have expressed disappointment in the county’s decision to cancel the DOT contract. 

“All I can say is that it is an awful shame,” U.S. Rep. Tom Rice, R-Myrtle Beach, said in a news release. “Completion of I-73 would lead to thousands of more jobs in the Grand Strand and Pee Dee. It would bring more industry and higher pay. I-73 will do more to lift the people of Horry County, Marion County, Dillon County and Marlboro County than anything else.  I fight for I-73 every day. Senators Lindsey Graham and Tim Scott are fighting for I-73. Governor McMaster is fighting for I-73. We have all asked our local leaders to resolve their differences. And at this critical time our local leaders are willing to turn their back on it.  It is an awful shame.” 

State Rep. Russell Fry, R-Surfside Beach, said he understands why the county made that decision, but he wishes the council had asked the DOT for more time to see if a compromise with the cities could be reached.

“It’s a little bit premature to do that given that they had extended it several times,” he said. “It’s my hope that cooler heads will prevail and leaders in this county will focus on the desires of the overwhelming majority of residents that want I-73.”

For the DOT, the contract — and specifically the hospitality fee revenue — was a key part of a federal grant application the agency 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. 

A DOT spokesman could not be reached for comment.

Contact Charles D. Perry at 843-488-7236


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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