Myrtle Beach says Horry County illegally collected millions in hospitality taxes for I-73
Myrtle Beach is suing Horry County claiming it illegally collected millions of dollars for road projects in which it didn’t agree to — most notably the construction of I-73 — through the hospitality tax.
Myrtle Beach filed the suit Wednesday afternoon in Horry County Circuit Court.
The tax has become a hot-button topic at government meetings throughout Horry County in recent months. City and town officials have taken efforts to take control of the tax from the Horry County Council.
Myrtle Beach officials argue that since 2017 the county has “wrongfully imposed, collected, retained and used revenues derived from the 1.5 percent hospitality fee.”
The lawsuit says the 1.5 percent hospitality tax stemmed from a 1996 program to help short- and long-term transportation needs. As part of that program, a tax would apply to Horry County municipalities called a hospitality fee, the filing states. The money funded a road improvement program throughout the county.
The fee, which went into effect in 1997, was set to expire after 20 years, according to the filing.
As the expiration approached, the Horry County Council took steps to extend the program or eliminate the conclusion date, Myrtle Beach officials say in the filing.
In July 2018, the Horry County Council approved a measure to dedicate $30 million a year from the fee to construct portions of I-73 in Horry County. The I-73 project was not part of the original 1996 road program, Myrtle Beach officials say.
City leaders in the filing said they did not agree to hospitality taxes being collected after Jan. 1, 2017, for anything other than paying off loans to the original road program.
Other local municipalities, including North Myrtle Beach and Surfside Beach — which are not part of the lawsuit other than being part of a “class” that could be impacted — have also “paid” the tax since 2017, the filing reads.
This year, Myrtle Beach, North Myrtle Beach and Surfside Beach passed ordinances restricting the county from taking the hospitality fee, and now each municipality collects 3 percent of the current accommodations tax and 2 percent of its hospitality tax.
The city is asking a judge to declare the Horry County ordinance that extended the tax deadline invalid and to prevent the county from collecting the hospitality fee. Its also asked for an injunction over the fee collection.
Horry County stands to lose over $20 million a year in hospitality taxes.
Just last week Myrtle Beach officials passed an ordinance seeking a partnership with the county to fund I-73, suggesting the county provide $9.8 million and the city contribute $7.5 million.
Horry County Chairman Johnny Gardner said he thinks the best way forward is for the county and the municipalities to negotiate a beneficial solution for all Horry citizens. In his experience as a lawyer, Gardner said, negotiating in good faith is typically better than a lawsuit.
After Tuesday’s County Council meeting before the lawsuit announcement, Gardner said he was expecting to meet with municipality leaders in the near future to decide I-73 funding.
City spokesman Mark Kruea said the city does not comment on pending litigation. Mayor Brenda Bethune and city council members declined to comment. Horry County spokeswoman Kelly Moore said it’s county policy not to comment on matters related to pending litigation.
North Myrtle Beach spokesman Pat Dowling said at he is not aware of any current intent by the North Myrtle City Council to sue the county over the hospitality tax.
Staff Writer Tyler Fleming contributed to this report.
This story was originally published March 20, 2019 at 6:30 PM.
