February 6, 2014

Myrtle Beach officials assert city followed procedure in 2008 disbursement of A-tax funds

S.C. Supreme Court ruled city did not follow state rules regulating accommodations tax spending

Myrtle Beach officials said they do not believe the city did anything wrong when it spent more than $300,000 in accommodations money, despite a S.C. Supreme Court ruling Wednesday that state rules were not followed.

Myrtle Beach attorneys were reviewing Wednesday’s Supreme Court ruling in which the majority of justices said the city improperly put the $300,000 into its general fund during the 2008-2009 fiscal year and then used it to cover tourism-related public services including police and fire department expenses.

The city received more than $6 million in accommodations tax revenues that year.

“We haven’t made a determination that our process was wrong,” city manager Tom Leath said Thursday. “We believe we did follow [the law].”

Leath said once the attorneys have been able to determine if the city did something wrong, city officials will determine the next step, possibly ending a five-year battle between the city and a state committee that oversees how cities spend accommodations money.

“If they can determine that we did something wrong, then we’ll make a motion to council to change our practices,” Leath said. “If they determine that we did what we were supposed to do, we’ll ask [the court] to reconsider or rehear the case.”

The statewide Tourism Expenditure Review Committee had challenged four grants to outside entities totaling $302,545 and a state administrative law judge ruled for the city.

TERC is the oversight group set up to determine whether those expenditures are proper.

The justices reversed that decision in a 3-2 ruling Wednesday, saying technically the law had not been followed. But the majority said they recognized the challenged grants were for tourism services as required by law.

TERC Chairman Ed Riggs said the committee won’t be ready to release a statement until it’s determined if the city will ask for the case to be reheard.

“When the cloud settles then we’ll have a better idea of what’s going on,” he said.

Leath said the good news in the ruling was that the court’s interpretation of the statue was not challenged.

“We firmly believe that high tourist concentration cities can use the money to pay for additional public services caused by the increase in population,” Leath said.

State law requires hotels and other temporary lodgings to charge a 7 percent accommodations tax, with 5 percent going to the state and the remaining 2 percent going back to the county or municipality where the lodging is located.

That 2 percent is to be used for tourism-related expenditures, such as advertising. According to the decision, Myrtle Beach transferred $302,545 in accommodations tax money to the city’s general fund, which bypassed the S.C. Accommodations Tax Act’s provisions.

TERC invoked its authority and said the expenditures were noncompliant and a majority of justices agreed.

The opinion, written by Justice John W. Kittredge, pointed to an internal memorandum that stated, “council decided to sweep accommodations tax funds to the general fund to cover tourism-related public services.” Kittredge wrote that by moving those funds, the city did not comply with the accommodations tax act.

Leath said the city’s practices regarding accommodations tax disbursement have not changed since 2008.

“I’m not sure what we did wrong,” he said. “Until we understand that we did something wrong – if we did something wrong – we’ll keep doing things the way we have. … Right now we’re just looking at did we procedurally do something wrong. If we did, we can always fix procedure.”

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