Horry County and Myrtle Beach leaders voted to settle the hospitality fee lawsuit Friday, taking a major step toward freeing up millions for local governments grappling with pandemic-strained budgets.
The tentative agreement – the second one reached in six months – will now go to the other cities and towns in the county for their approval.
“We have all been greatly affected by COVID,” Myrtle Beach Mayor Brenda Bethune said during Friday’s special city council meeting. “And the work that has happened this past year to get to this point today is a collaborative effort between the county and the city of Myrtle Beach and we thank them for agreeing to come to the table so that we can all do what is best for everyone concerned.”
The exact terms of the deal have not been released, but the two sides resolved most of their differences from the nearly two-year legal battle in 2020. The county and Grand Strand cities thought they had an agreement worked out, but the S.C. Supreme Court threw out their last settlement proposal in December, forcing the parties back to the negotiating table.
The high court’s rejection of the settlement stunned county officials, who were preparing to send out notices to city businesses reminding them to begin charging the hospitality fee — a 1.5% levy on restaurant meals, hotel stays and admissions tickets — on Jan. 1. They had to scrap all those plans and local governments throughout the county had to recalculate their budgets without the millions tied up in the litigation.
Created in the 1990s, the hospitality fee was collected countywide until a judge forced the county to stop collecting the fee in the municipalities in 2019.
The fee was originally created to pay for road projects such as S.C. 22 and S.C. 31, but county officials continued collecting the fee once the road debt was paid off. They wanted to use that money for building I-73, a proposed interstate that would connect the Grand Strand with I-95. They also hoped to set aside some money for public safety services. That idea frustrated Myrtle Beach officials; they did not want the county collecting a fee inside their borders and using it to pay for county services.
Other local cities sided with Myrtle Beach. That dispute prompted the lawsuit in March of 2019.
But in August, the county and the cities agreed to settle the case. Under the proposed settlement, each city would receive the money collected within its borders minus a 1% administration fee. The county would receive the fees collected in the unincorporated areas. All of the parties agreed to those terms.
The only issue was what should happen with the $19 million that was collected in the cities between when the original road debts were paid off and the moment the court forced the county to stop collecting the fee in municipal borders.
The county had already offered to give that money to the cities, but the two sides disagreed on how it should be distributed.
Under the cities’ proposal, a “common fund” would be established to allow people who had been unlawfully charged the fee to present receipts showing that they were due reimbursement. After six months, the money left over would be divided evenly between the cities and the S.C. Bar Foundation, the charitable arm of the S.C. Bar Association.
The county, however, wanted to provide all of the money to the cities based on where the funds were collected.
Although the two sides agreed to all the terms, they asked the court to render a final decision. In October, a circuit court judge agreed with the county’s position. Myrtle Beach’s attorneys then filed an appeal and asked the S.C. Supreme Court for an expedited review of the case.
That led to the December ruling.
The high court refused to weigh in on the $19 million question. Instead, the court said the two sides could resolve the issue.
“Settlement is a voluntary matter between the parties and can reach far beyond the powers of the courts,” the justices wrote. “Because a settlement agreement creates an enforceable contract, the parties must agree on all of the material terms. … Here, the parties have failed to agree on all the material terms of the settlement, specifically, the residual funds issue.”
Since the high court issued its decision, the focus of the city-county talks has been the distribution of the $19 million.
Although he wouldn’t discuss specific percentages, Horry County Council Chairman Johnny Gardner said the deal would provide some of the $19 million to the Bar Foundation and some money to the cities. The other terms of the deal are essentially the same, including that the county would not receive any of the $19 million.
“The only reason the county wanted to be involved in this [debate over the $19 million] is because the county wanted the money to remain within the cities because the cities are within the county and it’s good for those citizens — because those are Horry County citizens as well — and it’s better to keep the money here,” Gardner said. “That’s all it was about. This does a little bit of that.”
Like city officials, the county council chairman said he’s pleased with the possibility of a resolution.
“What this does is it gets us right back to rocking and rolling the way we were before it all happened,” he said. “That’ll be good for everybody.”
Now that the city and the county have supported the agreement, the county's other municipalities would have to sign off on the terms to finalize the deal.
“It’s been a long time coming,” city councilman Mike Chestnut said. “I look forward to this thing being over with and settled.”
Some city officials said they didn’t agree with all of the terms in the new deal, but they were pleased to be closer to a conclusion.
“This is a compromise,” city councilman Gregg Smith said. “It is not, clearly not what either side aimed for at the beginning. It is a compromise that hopefully will benefit all parties involved and hopefully that all parties can agree to. And I’m happy to come to this conclusion.”
“I may not agree with everything that’s in it, every single term that’s in the agreement, but I wholeheartedly agree that this is a good settlement for everyone,” the mayor said.