State lawmakers extend sales tax for tourism through 2029

A one cent sales tax that has raised millions of dollars to market Myrtle Beach as a tourism destination to out-of-state visitors was initially killed by Gov. Nikki Haley, but resurrected by the state assembly this week in the waning hours of the legislative session.

The action allows the Myrtle Beach City Council to extend the sales tax beyond 2019 without going to the voters as a referendum.

The sales tax has funneled millions of dollars into the Myrtle Beach Area Chamber of Commerce, which received 100 percent of the funds the first two years after it was enacted in 2009 to pay for tourism advertising.

The City of Myrtle Beach then received a 20 percent split from the proceeds, of which nearly $18 million was set aside as tax credits for resident property owners and more than $8.5 million was used for tourism-related capital improvement projects, according to Mark Kruea, Myrtle Beach spokesman. The other 80 percent raised roughly $20 million a year for the chamber, said that organization’s president, Brad Dean.

A bill to extend the ability of cities to levy the tax through 2029 was vetoed by Haley last week. The House and Senate overrode the governor’s veto on Wednesday by an overwhelming majority.

The Senate passed the veto override 40-5, while the House voted 80-13. The entire Horry County delegation voted in favor of the veto override, except for Rep. Carl Anderson, D-Georgetown, who was absent for the vote.

Myrtle Beach Mayor John Rhodes says the money was initially needed to help the Grand Strand recover from the Great Recession, and is still essential to advertise Myrtle Beach and provide tax-breaks for resident property owners.

“We have to have resources to promote the area, to compete with Virginia Beach and other places in Florida,” Rhodes said. “So the tourism development fee has been essential in growth of tourism, and growth of local residents.

“It does work, and those who think it should have been a referendum don’t understand the consequences of what would happen if it didn’t pass,” Rhodes said.

Rhodes said putting the question to the voters, rather than passing it again through a city council ordinance, would be taking “a gamble.”

“If we put it up for a referendum vote, it was going to take an awful lot of campaigning to educate people on how taxes are reduced and what would happen if they didn’t vote yes -- taxes would go up close to five times what they are,” Rhodes said.

“So to have the bill passed the same as in the past was extremely important, not only to keep advertising dollars for Myrtle Beach, but for taxes,” Rhodes said.

Haley says she vetoed the bill because it allows local governments to increase taxes on residents without a vote by the public.

“It is my belief that local tax increases - whether they are fees, property millage, or local option taxes - should be allowed only if the citizens subject to the tax agree to it through public referendum,” Haley said in a letter to House Speaker James H. Lucas, outlining her objections to extending the timeline for the tax.

“Past elections have yielded mixed results - some communities agree to self-impose new taxes and fees and others reject them,” Haley said.

The bill passed in 2009 was scheduled to expire in 2019. Dean maintains that an extension was needed this legislative session so the property tax credit did not lapse.

“The primary focus was to correct the law to allow it to continue uninterrupted,” Dean said. “The property tax credit could disappear, and no one wanted to see that happen.”

Haley said that arguments by supporters that the extension was needed for tax relief was “misleading,” because 80 percent of the funding is spent on tourism marketing and promotion.

The law allows towns that collect at least $14 million in state accommodation taxes in a fiscal year to levy the one percent tax through referendum or by a council vote. Myrtle Beach authorized the tax through the city council.

Dean says the funding for marketing and advertising has helped increase the number of tourists who visit Myrtle Beach from between 13 million and 14 million a year to 17 million annually, with a goal of reaching 20 million visitors over the next four years.

“When it was implemented, it was at the height of the Great Recession and we had to react to dire economic circumstances to protect our base of tourism and prevent a steep decline in tourism,” Dean said. “The tourism development fee has successfully enabled us to grow our economy, improve our infrastructure and create jobs while cutting city property taxes.”

This story was originally published June 2, 2016 at 5:22 PM with the headline "State lawmakers extend sales tax for tourism through 2029."