Myrtle Beach Mayor Brenda Bethune rejected Horry County Council’s offer to split hospitality tax revenues with the city, calling the county’s plan “unfair to our constituents and legally questionable.”
Bethune released her written response to Horry County Council Chairman Johnny Gardner at the city’s Wednesday budget retreat. In the letter, Bethune said city leaders did not want the county collecting hospitality taxes inside the city limits.
“The continued collection of the Hospitality Fee inside the City’s corporate boundary is not lawful,” Bethune wrote, nothing that the city is already suing the county over its hospitality tax collections. “Given that position, we do not see how that fee can be considered as the basis for a compromise.”
The dispute centers on the 1.5 percent hospitality fee that the county collects on all prepared foods, hotel admissions and attraction tickets sold in Horry.
County leaders want that 1.5 percent levy to continue being collected countywide. They hope to use up to $18 million of that money to pay for constructing the county’s portion of I-73, a proposed interstate that would connect with I-95. County officials have also expressed an interest in spending some of those dollars on public safety improvements.
But weeks ago, Myrtle Beach officials started the process of cutting Horry County out as the collecting arm of the fees and taxes. North Myrtle Beach and Surfside Beach followed.
With the action of the three cities, county leaders doubt they can fulfill a commitment to the state Department of Transportation (DOT) for I-73. They could terminate that DOT contract as early as Tuesday.
Although both Myrtle Beach and Horry County leaders have publicly expressed a willingness to talk about sharing tax revenues, those conversations stalled two weeks ago when the city voted to keep any negotiations confidential. County officials balked at that suggestion, saying the tax talks should take place in public.
Gardner also emailed a tax plan to local mayors last week.
The proposal called for dedicating $18 million of the hospitality tax revenues to I-73. The county’s plan would allow area leaders to borrow about $275 million over 30 years for the road’s construction, according to county projections.
Once that $18 million is set aside for I-73, county officials recommend dividing the remaining $24.5 million between the county and the municipalities. Under that system, the county would receive $9.8 million and $14.7 million would go to the cities. Any revenues collected above those projections would go to the community where the money was collected.
Although county leaders touted the proposal as equitable, Bethune disagreed. She also took issue with the county’s refusal to negotiate in secret, saying confidentiality is needed because of the city’s lawsuit against the county.
“We are unable to engage in negotiations under the terms described in your letter,” she wrote.
Bethune went on say that each jurisdiction should decide how to manage its own hospitality tax revenues. The mayor even raised a concern that has long been discussed by local politicians — dual taxation.
Horry is the only one of South Carolina’s 46 counties with both a countywide police force and a sheriff’s office. But county police primarily serve the unincorporated areas of the county, not the cities. That means city residents pay property taxes for two police departments even though they are served by one.
However, Bethune’s letter isn’t entirely accurate. She states that city residents pay for both county police and fire service. The county’s fire department is funded by a separate tax that is collected in the unincorporated areas of Horry. City residents don’t pay those property taxes.
But the mayor's point about the police department is correct and she stated that city officials don’t want to see hospitality tax dollars also go towards the county’s police service.
“The County’s proposal [is] essentially double tax city residents by collecting a service fee within our jurisdiction to pay for services that city property owners already support through their taxes,” she wrote. “Even if the fee were legal, we see no benefit to our constituents from that arrangement.”
The county’s hospitality fee is a relic. It was created when state lawmakers passed legislation in 1997 allowing for the county to collect the fee from city businesses and use those dollars for tourism through a wide range of projects ranging from advertising to public safety and roadways.
State law no longer allows a county to establish that kind of hospitality fee.
County officials originally developed the fee to cover the bonds on major road projects, including S.C. 22 and S.C. 31. Those debts have been paid, but the tax is still being collected. That’s what led county officials to consider using some of those dollars for I-73.
At the city’s budget retreat Wednesday, Bethune said Myrtle Beach leaders are willing to commit to spending accommodations and hospitality taxes on the construction of I-73, just not the way Horry County officials want them to.
The lawsuit was filed by the city, she said, to try to stop the county from collecting the “illegal fee” in the municipalities in perpetuity.
It’s unclear how Surfside and North Myrtle Beach leaders will respond to the county’s tax proposal.
Surfside Beach Mayor Bob Childs said town officials are awaiting advice from a Columbia attorney. The lawyer was hired last week.
After a closed-door discussion Wednesday, the North Myrtle Beach City Council agreed to respond to Gardner’s proposal. Mayor Marilyn Hatley said the city is willing to negotiate with the county, and added that City Attorney Chris Noury and City Manager Mike Mahaney would be responsible for drafting the letter.
The mayor said the city believes that it would still get more revenue under its recently-passed tax ordinance than the new county proposal.
“We have taken the entire Horry County budget we have gone through it page by page,” Hatley said. “We have looked at the amount of taxes that we send to the county. We’ve looked at the amount that we receive back in services. We’re taking all of that into consideration.”
But the city is not releasing details about what will go in the letter to Gardner.
“I am not going to get in to talking about what’s going into that letter out of respect to the chairman and to the mayors of the other cities,” Hatley said. “Once we get it drafted and we give them the opportunity to look at it first, I think that’s the most respectful way to handle this.”
Gardner said Wednesday afternoon that he had not received Bethune's letter and wanted to read it and any others before responding.
“Everybody seems to have a letter but me,” he said.
He did say he plans to discuss the hospitality tax when county council meets next week.
"Obviously I will read anything they send us and I will share it with council," Gardner said. "However, I believe I, as well as council, was clear at our last meeting that we are not going to negotiate public funds in private."