Horry County Council’s Hospitality Fee Slush Fund

April 24, 2017 5:21 AMViews: 5480

By Paul Gable

Horry County Council is within one ordinance reading of establishing a permanent slush fund for pet projects using 60% of Hospitality Fee collections countywide as the revenue source.

A 2.5% hospitality fee tax is collected on prepared foods and drinks, admissions and lodging throughout the county.

Forty percent of the revenue (1% of the total 2.5% tax) is returned to the original jurisdiction (incorporated areas or the county for unincorporated area collections) in which the tax is collected. The remaining 60 percent of the revenue (1.5% of the total 2.5% tax) goes to Horry County specifically to pay off bonds issued for Ride I road projects.

Some of those bonds will be paid off in 2017 with the remaining bonds projected to be paid off in 2019. When the Hospitality Fee legislation was passed over 20 years ago, county council established a sunset provision for the 1.5% portion pledged for bonds.

In other words, 60 percent of the Hospitality Fee was supposed to go away when those Ride I bonds were paid off.

But, once a tax is created, government hates to see it destroyed.

Therefore, county council is moving rapidly to remove the sunset clause and allow the full 2.5% tax to be collected ad infinitum. According to county administrator Chris Eldridge, this tax currently collects approximately $38 million in revenue to the county annually.

To put that amount into perspective, $38 million is approximately 25 percent of the county’s general fund budget for Fiscal Year 2018, which begins July 1, 2017.

The revenue from this tax would not go directly into the general fund. According to state law, it must be spent on tourism related projects.

But, there is little in Horry County that cannot be deemed ‘tourism related” and a little creative accounting by the government, something governments in general are very good at, could open this tax revenue to expenditures on all types of projects.

One of the projects specifically mentioned during last week’s second reading discussion of the ordinance was I-73. Proceeds from the tax extension could be used to complete I-73 in Horry County (extending the current SC 22 from Aynor to the county line). This would be funded completely with the locally generated Hospitality Fee.

It was also speculated, the money the county spends on this extension could be used by South Carolina as a state match for possible federal funds to extend I-73 from the Horry County line to an interchange with I-95 in Dillon.

This would mean that Horry County funded interstate highway construction almost entirely with local funds within the county while providing the state matching funds for work on the highway outside the county.

Part of the discussion last week centered on the estimate that tourists pay approximately 75% of the Hospitality Fees collected in Horry County. At least this estimate is down from the 90% estimates we were hearing in 1996.

However, close analysis of Hospitality Fee collections in January vs. July of any year brings the quick conclusion that, at best, this split between what is collected from tourists to what is collected from locals, with this tax, is much nearer 50-50. And, Horry County citizens pay this tax 365 days per year.

There are many reasons extending this tax beyond its original sunset date is not a good idea. One major negative is there are no dedicated projects the money is to be spent on meaning it will become a giant slush fund to benefit those with the largest political influence.

However, even more importantly, the citizens of Horry County were promised this tax would end when the Ride I bonds were retired.

Now, county council proposes to break that promise.

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