Horry County’s plan to privatize parks and recreation facilities hits major road bump
Plans to move forward with privatizing Horry County’s three recreation centers are on hold until staff can address a new financial concern.
Council has been considering handing off the day-to-day control of some its recreation department for months now. But first the council must approve a “request for proposals” that sufficiently outlines what privatization might look like so companies can apply to be the new operators.
The RFP process hit a bump in the road on Thursday when a Horry County Council subcommittee was informed that privatization could risk the tax-exempt status of loans used to build the centers.
Now county staff members are going to re-examine the scope of the privatization proposal to make sure the county does not risk losing the tax status of its loans if the proposal does move forward.
Why privatize parks?
The county is only looking to privatize recreation centers in Carolina Forest, the North Strand and South Strand to relieve strains on the parks and recreation department’s budget.
Discussions of privatization began back in the spring when Horry County Council was debating a tax increase to maintain current recreational activities.
During the summer, a special committee was formed to discuss what a potential RFP might look like if Horry County begins formally soliciting offers from private companies.
If council did nothing to help the parks department, recreational offerings across the county could shutter or stop receiving routine maintenance.
Parks Director Paul McCulloch said 25 percent of the department’s budget goes toward operating the three recreation centers without the same return in revenue. The centers offer meeting spaces, pickleball courts, basketball courts and workout rooms.
If approved by full county council, these proposals will be sent out with a list of standards a company must accept to even be considered as a candidate. These standards include the quality of the recreation center, cost of service and hours of operations.
Ideally, a private company could maintain current operations and help save county money.
The savings from privatization could help improve recreational offerings in western Horry County or improve public safety, County Council Member Dennis DiSabato said .
A private company might find inefficiencies in how the centers are currently operated and potentially explore new revenue streams, he added, such as increasing usage fees for facilities.
Problems with privatization
Council Member Al Allen is skeptical that a company will find enough ways to cut costs while also maintaining current standards to turn a profit. He worries that a private company will price out working class families or elderly people looking to the county to provide activities.
“We won’t know until we ask,” Council Member Gary Loftus responded.
But for now the county must wait to send out its RFPs until an issue with its tax-exempt status can be addressed.
The bonds used to build recreation centers were tax-exempt because they were for public-use buildings. If a private company gets complete control of the operations, those bonds run the risk of becoming taxable, driving up costs for the county.
Essentially, the federal government is okay with not getting tax revenue when local governments build a public building. But if a private company comes in and the building’s use become profit-driven, then the IRS might decide the local government needs to pay taxes on its loans.
Horry County was made aware of this risk when it obtained legal opinions from bond lawyers this week. The bonds will be paid off in 2028, Horry County Assistant Administrator Barry Spivey said.
Horry County staff members will look at what type of agreement would be within the bounds of federal regulations to make sure the tax-exempt status isn’t revoked.
Another problematic issue for privatization is the use of recreation centers during a hurricane or natural disaster. This could be a sticking point with a private company who could lose access to the property during a storm for an indefinite amount of time, Assistant County Administrator David Gilreath said.
“You might not get it back for a few months, or maybe a few years depending on the severity of the disaster,” Gilreath said.
During Hurricane Florence, the recreation centers were not used, but the facilities are part of the county’s plan in case of emergency, Assistant Administrator Randy Webster said.
Interested businesses will be aware of all Horry County’s conditions ahead of applying to be the new operator. The county also reserves the right to refuse all proposals if none satisfy a majority of council’s concerns about privatization.
Horry County will most likely revisit the privatization in January.
