The S.C. Department of Transportation may be forced to withdraw its request for a $348 million federal grant for I-73 because of uncertainty about how much local tax money will be available for that project.
A circuit court judge on Friday rejected the county’s request to temporarily bar local cities from overhauling the hospitality fee structure that has been in place for more than 20 years. The decision came just days after county council asked the DOT to allow the county to delay approving $12.4 million worth of I-73-related projects because county officials don’t know if they will have the money to pay for them. The DOT agreed to change the deadline in its contract with the county from June 30 until Oct. 1, but not without reservations.
“We have advised Horry County staff that we do have concerns about the status of the agreement and the delays in resolving the issue one way or another,” Secretary of Transportation Christy Hall said in an email. “Although we have signed the amendment revising the date as requested by Horry County, we have also expressed our concern that by delaying action until October, there is the risk that SCDOT may be forced to rescind the grant application if USDOT moves forward with grant awards prior to October.”
County council voted for the DOT contract late last year. The first work plan proposed by the state includes road design and right-of-way acquisitions for I-73. The plan also calls for a $410,000 study of S.C. 22, which flooded after Hurricane Florence. The study would look at the cost of raising that road above flood conditions.
In South Carolina, the proposed interstate's design is split into two segments. The southern section leg links S.C. 22 with I-95 near Dillon, while the northern leg continues to S.C. 38 at the state line near Hamlet, North Carolina. County officials have said that by ponying up some hospitality money for the interstate, the federal government could match those contributions. They had planned to use hospitality fee revenues to pay for the I-73 projects in the state DOT contract.
Earlier this week, U.S. Rep. Tom Rice, R-Myrtle Beach, criticized the city and the county for allowing their feud to potentially cost the I-73 project millions. The grant application was the only one state officials submitted for this federal program.
“That is our match money,” Rice said of the hospitality fee revenues. “The county made that commitment. DOT relied on it when they made the federal grant [application]. If we don’t keep it, then we’re wasting our time. It’s such an awful shame that this is happening right now when we’re at the doorstep of getting some federal money.”
Judge William Seals’ order on Friday proved to be another setback for the county and its DOT contract.
Seals ruled that the county cannot continue collecting the 1.5 percent hospitality fee on all prepared foods, hotel admissions and attraction tickets in the incorporated areas while the litigation is pending. The judge agreed with the cities’ attorney that the county needs the municipalities’ permission to collect fees inside their borders.
The order doesn't end the case, but it means the city can proceed with its plans while the dispute goes through the court system.
The decision is the latest chapter in a saga that began earlier this year when Myrtle Beach leaders decided they no longer wanted the county collecting the hospitality fee inside city limits. North Myrtle Beach and Surfside Beach leaders agreed with Myrtle Beach, which sued the county in March.
The cities maintain the hospitality tax agreement they supported in the 1990s expired in 2017 and the county never obtained their permission to extend it. They have also objected to county officials’ suggestion that some of the money be used for improving public safety services in the county.
City officials insist they support I-73, but they don’t want to continue the existing hospitality fee system. Earlier this year, the cities approved new fee structures that did not require them to share similar revenues with the county.
County officials argued that the existing fee system brings in over $12 million more per year than the cities' proposal. That's because the state law that the 1.5 percent fee was created under has changed and the current statute won’t allow the cities to collect as much if they create their own fees. County leaders presented a plan to share hospitality fee revenues to the cities, but city officials rejected their proposal.
“What we proposed gets the cities more money than the way they want to do it,” county councilman Gary Loftus said. “And [it] still funds I-73.”
Although the cities’ new hospitality fee structure is scheduled to take effect July 1, that might not happen.
City spokesman Mark Kruea said the city’s financial staff has not recommended an implementation date yet. He did say the city reacted positively to Seals’ decision.
“The City of Myrtle Beach is pleased by the judge's ruling today in the Hospitality Fee case and will proceed accordingly,” he said in a prepared statement. “The court recognized the merits of the city's argument.”