Stagnant revenue causes Myrtle Beach council to consider increasing property taxes

mprabhu@thesunnews.comMay 17, 2014 

After years of making small cuts and changes to the Myrtle Beach operating budget without any significant growth to the city’s revenue, staff members say it’s time for City Council members to make some tough decisions to make sure the budget is balanced – including raising property taxes.

“For the last four or five retreats we have told council that the general fund is a concern,” city manager Tom Leath said. “We are having a harder and harder time growing property tax and business license [revenues]. We’ve told them there will be a day of reckoning. The day of reckoning is here.”

The budget, as proposed to City Council during last month’s budget retreat in Pinopolis, included increased solid waste, water and sewer fees and a $125 subscription fee for people to use the library.

City Council members have said they do not plan to impose the library fee and are considering options – ranging from increasing property taxes to changing the laws for business licenses – for ways to make up the $800,000 shortfall that would occur without the subscription fee. Property taxes have increased once in the past 10 years, by a total of 1.5 mills. The rate has been 66.1 mills since 2011.

Residents will learn which budget balancing options could be included when City Council votes on the first reading of the budget May 27. The city is required to pass a balanced budget by June 30.

Some council members said they were concerned that a 1 percent local option sales tax, which helps to provide a property tax credit to owner-occupied residences in the city, could be impacting the city’s revenue.

The state legislature passed a law in 2009 that allowed Myrtle Beach to take advantage of a 1 percent local option sales tax, with 80 percent of that revenue to be used for tourism advertising and 20 percent being used to reduce property taxes through credits to homeowners.

The city law provides an 88.5 percent tax credit people whose primary residence is in Myrtle Beach, which can amount to hundreds of dollars in savings.

Councilman Phil Render said he worries that as the number of people who own and reside in property in Myrtle Beach grows, causing growth in the amount of services required by the city, providing a tax credit based on a percentage could cause problems with revenue.

“We’re a victim of our own success,” Render said. “It’s very advantageous to be a primary homeowner in Myrtle Beach.”

Render said if the number of owner-occupied residences continues to grow, something will have to be done to make sure property tax revenue continues to grow with it.

Councilman Michael Chestnut said council members are considering capping the amount of money available to residents through the property tax credit.

“Three or four years ago, there was a certain number of [owner-occupied residences],” Chestnut said. “As that number grows, there’s less taxes being collected, but more service needed. How can we at the same time deliver a tax credit to the people without putting a strain on the budget and tightening up services. There is some concern about that.”

The fastest growing section of the city – many with owner-occupied homes – is on the former Myrtle Beach Air Force Base, however property taxes collected in The Market Common district must be used to pay for things such as infrastructure within that area.

Council members also have said they would like the city to hire more police officers who would be assigned to the boardwalk and former Myrtle Beach Air Force Base. Chief Warren Gall said the increased number of people in those areas – both residents and tourists – has increased the need.

Gall requested 20 additional patrol officers and five additional communications officers. He estimated that increase to cost about $1.2 million for operational and equipment costs.

“Calls for service have increased by 10,000 over last year, that’s police and fire,” Gall said.

Render said his No.1 priority for the budget is increasing public safety in the city.

“Council will have to employ a blend of fee and revenue increases to provide the level of services our residents are accustomed to,” he said. “I would only support a property tax increase if it was dedicated to increasing public safety [personnel].”

Councilman Wayne Gray also said he would like any property tax increase to be directly linked to authorizing new police positions, though he said adding all 25 positions now might not be feasible.

“I certainly would want to condition any tax increase to a specific new program, which would be 10 to 12 new police officers,” he said.

Gray said he hoped council would be able to find ways to reduce expenses and increase revenues – possibly through changes to the business license ordinance – to make up the $800,000 gap that will be left in the budget if the council doesn’t impose the library fee.

City Council approved first reading of an ordinance Tuesday that would get rid of exemptions for a number of businesses including vendors who participate in festivals, nonprofit organizations, such as a church that also runs small businesses to fund their ministry, and owners of single unit-long term rentals. If council approves second reading of the ordinance, those businesses would be required to purchase a business license.

The ordinance also would change the rate for non-city businesses, those that operate in city limits but its office is not in Myrtle Beach, charging double what city businesses pay for their licenses. The current ordinance charges non-city businesses 1.5 the city rate.

Much of the money the city collects is earmarked for specific things, such as capital improvements or repaying bonds the city has taken out, budget director Michael Shelton said. The general fund, which is used to pay for the city’s operational costs, is mainly made up of revenue collected through property taxes and business licenses.

“We’ve done what we could to cut back without large impact on our service levels, but even after you make those cuts, you need [to increase revenue],” he said. “We’re doing a lot of things to bring in tourism – and we’re succeeding at those things – but a lot of what comes with that success is to provide increase services and to do that you’ve got to have the revenue from somewhere.”

Contact MAYA T. PRABHU at 444-1722 or follow her at Twitter.com/TSN_MPrabhu.

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