Tag: I-73 project

Horry County Council at Precipice of I-73 Decision Wednesday

Horry County Council will decide the fate of its Financial Participation Agreement with the South Carolina Department of Transportation at a specially called meeting Wednesday.

The agreement, which was signed by the county and SCDOT December 13, 2018, commits the county to provide up to $25 million per year for funding the Interstate 73 project.

The county does not have the money and the only sane step for council to take is to cancel the contract before it takes effect and SCDOT begins committing money the county does not have.

County officials planned to use revenue from a countywide 1.5% hospitality fee on prepared food and beverages, accommodations, admissions tickets and rental car fees to provide the $25 million per year.

However, that plan, hatched by former council chairman Mark Lazarus and former county administrator Chris Eldridge was fatally flawed from the beginning.

The countywide hospitality fee was enacted specifically, with the consent of the cities and a hard sunset provision, for the purpose of funding the short term projects listed in the Road Improvement and Development Effort report of October 1997 and approved by then Gov. David Beasley. I-73 was not included with those projects.

County council overstepped its bounds when it removed the sunset provision from hospitality fee legislation in April 2017 at the urging of Lazarus and Eldridge who specifically wanted to use the revenue for construction of I-73 when the RIDE bonds were paid off.

That first blunder was compounded by a second when the Lazarus/Eldridge tandem put a full court press on county council to provide up to $25 million of hospitality fee revenue for I-73 in July 2018 without consulting the cities.

A trifecta of blunders was completed when, one month before he left office, Lazarus effectively bullied council into contractually obligating itself to SCDOT for I-73 funding. This was only weeks after Hurricane Florence again demonstrated to county officials the desperate need for upgrades to roads and other critical county infrastructure already in place.

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I-73 Funding, the County’s Hidden Objective in Hospitality Fee Squabble

Hidden beneath an ever rising pile of complaints, answers, motions, injunctions and exhibits in the City of Myrtle Beach v. Horry County lawsuit regarding the 1.5% countywide hospitality fee is the determination of a core group of county council members, county senior staff and special interests to retain sufficient funding for the construction of Interstate 73 in the county.

This has been the objective since April 2017 when former council chairman Mark Lazarus convinced council to remove the sunset provision from the county’s hospitality fee ordinance. Lazarus’ stated purpose at that time was to provide funding for I-73.

The month after Lazarus failed to retain the Republican nomination for council chairman, he conducted a special meeting of council to dedicate the revenue from the 1.5% countywide hospitality fee to the I-73 project.

At that meeting, council approved two resolutions, 82-18 and 84-18. Resolution 82-18 dedicated up to $25 million of the revenue from the countywide hospitality fee to the I-73 project. Lazarus tried for the entire amount of revenue, approximately $43 million, but was argued down by council member Harold Worley who was holding out for $18 million to be dedicated to public safety and infrastructure needs within the county.

However, under county ordinance, all the revenue from the 1.5% hospitality fee collected by the county is placed into a special road fund. Resolution 84-18 directed county staff to prepare an ordinance amendment to allow that revenue to be spent on roads, public safety and infrastructure.

The ordinance amendment dictated by Resolution 84-18 has never been prepared to this day. County staff, with the unspoken agreement of a majority of council, ignored the will of council expressed in Resolution 84-18 so the revenue from hospitality fees cannot be used for public safety and infrastructure other than roads.

During a budget workshop in late November 2018, Lazarus led council in approving entering into a contract with the South Carolina Department of Transportation, called the I-73 Financial Participation Agreement, for the county to commit up to $25 million per year for funding the project.

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I-73, Indian Wells Controversies Highlight Council Agenda

The agenda for Tuesday night’s regular meeting of Horry County Council has only two items of consequence on it.

Under Old and New Business, council will discuss the Financial Participation Agreement with the South Carolina Department of Transportation for the I-73 project.

The agreement has been in effect since December 2018 when it was signed by former administrator Chris Eldridge for the county after receiving council approval to do so. However, the real date for its beginning is the start of the new fiscal year on July 1, 2019.

Generally the agreement provides that Horry County will provide up to $25 million per year from Hospitality Fee revenues to fund the construction of I-73 within Horry County (the Project) and SCDOT will oversee the project from design through construction.

The written agreement states, “SCDOT shall provide an Annual Work Plan to the county on the activities proposed by March 31 that the county shall approve prior to June 30 before commencing work in the succeeding fiscal year.”

SCDOT provided a work plan for next fiscal year which allots $6 million for engineering services and $6.5 million for right of way acquisition. Council has yet to act on that work plan, but there is NO money in the upcoming budget to pay for it.

The plan was for Horry County to provide up to $25 million per year from 1.5% Hospitality Fee revenues collected countywide as funding. Since March 2019, the county has been sued by the cities over hospitality fee collections and there is no guarantee at this time how much, if any, of the countywide 1.5% fee revenue will be available to the county in the next or ensuing fiscal years.

However, Section V of the agreement, “Payments by the County”, states,  “The County shall maintain an account balance which shall be sufficient to cover the Project expenses for the relevant fiscal year including annual payments to the consultants, contractors or SCDOT…”

In addition, Section III D of the agreement states, “Nor shall the County’s prior approval be required for any right-of-way acquisition agreement or consultant agreement for work of the Project provided the cost thereof does not exceed the estimates provided in the Annual Work Plan.”

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Mayors Add Confusion to Hospitality Tax/I-73 Funding Debate

After watching a video last evening of a news conference held in Conway yesterday by the mayors of the various incorporated municipalities in Horry County, under the auspices of the Horry County League of Cities, I was dumbfounded by the misinformation and political spin by those elected leaders to the public.

I do enjoy it when the mayors get together and issue statements under the League of Cities banner. The League of Cities is nothing more than a lunch club of the mayors and the chairman of Horry County Council if that official wishes to attend. It has neither official nor legal basis for doing anything, but it sounds good in the media.

The issue was hospitality tax collections in Horry County and who gets to keep the revenue beginning next fiscal year. The latest catalyst for this public discussion is a proposed bill dropped by the Horry County legislative delegation on the next to last day of this year’s legislative session.

Simply put, the bill, if it eventually passes, extends collections of a 1.5% hospitality tax countywide with the revenue going to Horry County Government. The cities and the county also collect an additional 1% hospitality tax within their respective jurisdictions for a total hospitality tax of 2.5% throughout the county. The tax has been on the books by county ordinance since late December 1996 with the proceeds of the countywide 1.5% portion being used to fund major road projects in the county under the collective banner of Ride I projects (SC 22, SC 31, US 501 improvements for example).

The initial duration of the tax was supposed to be 20 years with several additions through the years which extended payment on Ride I bonds through January 2019. Each of the municipalities in the county passed resolutions supporting the 1996 county ordinance.

In April/May 2017, Horry County Council, under the leadership of then chairman Mark Lazarus and administrator Chris Eldridge, unilaterally acted, with the rest of council going along, to remove the sunset provision of the hospitality tax ordinance that was to end the collection of the countywide 1.5% tax when Ride I bonds were paid off.

The idea of Lazarus and Eldridge was to use the approximately over $40 million annual revenue from the 1.5% portion to fund building of I-73 in Horry County.

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County Response to City Lawsuit Follows Recent Pattern

Horry County’s response to the lawsuit over hospitality fees filed last month by the City of Myrtle Beach follows a pattern the county has used in recent years when it is challenged in court.

That pattern is to launch a subjective attack on the opponent rather than argue objective facts of the case.

The county claimed SkyDive Myrtle Beach committed 112 safety violations and was running an unsafe operation at Grand Strand Airport. To date, neither the county Department of Airports nor the Federal Aviation Administration has yet to produce documentation of even one safety violation but SkyDive Myrtle Beach has been closed down since 2015.

The county claimed Horry County Treasurer Angie Jones mismanaged her department and fired employees in order to provide openings for political allies. The county’s counterclaim called for Jones to personally bear responsibility for any shortfall in her department funding, of which there was none.

In its answer to the city’s lawsuit, Horry County claims Myrtle Beach has mismanaged its budget for years and “now attempts to circumvent state law to shore up its own finances.”

Obviously the county’s claim that the city has mismanaged its budget is a subjective political one as well as being erroneous. One guide to effective budget management is bond rating. The city’s bond rating is AA, the same as the county’s.

On the basis of the city’s original complaint and the county’s response, the city appears to have the better legal argument to this non-lawyer observer.

The county’s claim of budget mismanagement on the part of the city appears to have no more validity than the false allegations of wrongdoing made by county attorney Arrigo Carotti and former administrator Chris Eldridge against Chairman Johnny Gardner. The county’s tendency to create a narrative then try to claim it as fact is too repetitious to be accidental, but it is not a legal argument.

The city’s initial act to claim all hospitality fee revenue collected within the city limits and the county’s attempt to extend a countywide 1.5% hospitality fee collection ad infinitum are the starting point of this dispute. The cities of North Myrtle Beach and Surfside Beach followed Myrtle Beach’s lead with new hospitality fee ordinances.

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Sun Sets on I-73 Funding

Nearly two years ago Horry County Council voted to remove the sunset provision on the countywide 1.5% hospitality tax that was passed 22 years ago to pay for Ride I projects, in order to provide a long term funding source for construction of Interstate 73 within the county.

Two days ago, the sun set on the I-73 project when Myrtle Beach city council called BS on the county’s right to extend the tax beyond paying off Ride I bonds by unanimously passing first reading of an ordinance to keep all the hospitality tax collected within its corporate limits for its own projects.

Yesterday, word began circulating around the county that North Myrtle Beach and Surfside Beach would soon mirror the Myrtle Beach initiative by voting to keep hospitality tax revenues collected within their respective jurisdictions for their own uses.

Ending the county’s ability to collect a 1.5% hospitality tax countywide will force county council to immediately terminate a financial participation agreement it signed with SCDOT on December 13, 2018, to provide funding for the I-73 project.

It appears county council was seriously misinformed about its ability to continue to collect a 1.5% hospitality tax ad infinitum when it voted to end the sunset provision of the original law. As a result, available county funding for important initiatives may suffer a serious setback because of the greed of a few proponents of the I-73 project and the rush in which they moved to extend county hospitality tax collections.

According to state law, hospitality tax revenue must be spent primarily within the local jurisdiction in which it is collected.

State law allows for local governments to impose up to a 2% hospitality tax with counties able to enact a 1% countywide hospitality tax. However, the county cannot collect more than 1% within the municipalities without permission by the municipality.

Section 6-1-720(A) of state code provides: “A local governing body may impose, by ordinance, a hospitality tax not to exceed two percent…The governing body of a county may not impose a local hospitality tax in excess of one percent within the boundaries of a municipality without the consent, by resolution, of the appropriate municipal governing body.”

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I-73 Votes Ignore Immediate Local Needs

The I-73 participation agreement Horry County signed with SCDOT in December, at the urging of administrator Chris Eldridge and former council chairman Mark Lazarus, ignores local road needs, highlighted by recent flooding issues, for a new road that is years and over one billion unidentified and uncommitted dollars from completion.

When county council adopted Resolution 82-18 in July 2018, it specifically dedicated up to $25 million toward the I-73 project only. With this resolution in place, the county may not use any of this money toward repair or improvements to U.S. 501, S.C 9 or other roads in the county as flooding events since Hurricane Floyd in 1999 have shown to be needed. These funds can be used to improve S.C. 22 as that is part of the I-73 project.

There has been a general rush to dedicate funds for I-73 since right after the June 2018 primaries. Council held a special meeting on July 24, 2018 where Resolution 82-18 was passed which dedicated up to $25 million per year of 1.5% Hospitality Fee revenue to the I-73 project.

Staff immediately began conversations with SCDOT to develop and present the I-73 participation agreement. During the November 28, 2018 fall budget workshop, council approved allowing the administrator to execute the participation agreement with SCDOT. The agreement was executed by administrator Eldridge for the county and Christy Hall, the state Transportation Secretary on December 13, 2018.

At the July 2018 special meeting council also passed Resolution 84-18 directing staff to develop a plan to use $18 million of the 1.5% Hospitality Fee revenue on public safety and other roads. In addition, the resolution directed staff to draft an amendment to Section 19-6(h) of the Horry County Code of Ordinances, which currently requires all of the 1.5% revenue to be deposited in a Special Road Fund. The amendment would allow the $18 million to be used on other state approved tourism related expenses such as public safety, recreation, storm water and other infrastructure improvements.

To date no amendment has been presented to council. The amendment would require a three reading ordinance to become law. In addition, no plan for use of the $18 million has been presented.

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