Myrtle Beach, Horry County settle dispute over hospitality fee collection
A nearly two-year dispute over how to divide up a local revenue stream could finally be over.
Twenty-two months after the City of Myrtle Beach first sued Horry County over its collection of a 1.5% hospitality fee on hotel stays, admission tickets and food sales, the two sides announced Friday morning they had reached a new settlement agreement.
The settlement would be the second such agreement since the city first sued in March 2019. Both sides thought the issue was settled late last year before a state Supreme Court judge told them in December to start over.
Details of the settlement were not immediately available because other local governments in Horry County, including North Myrtle Beach and Conway, are party to the suit and their councils must approve the settlement before it’s made public, several local council members said Friday. Horry County Council and Myrtle Beach City Council both held special meetings Friday to approve the settlement, and both councils approved the agreement unanimously, signaling an expected agreement by the others.
Myrtle Beach Mayor Brenda Bethune said the settlement is a good solution for everyone involved.
“I applaud the county for joining us at the table to reach a settlement,” Bethune said in a statement to The Sun News. “I also thank the other municipalities for their patience during this process. As the class representative, the city takes that responsibility very seriously. We are all pleased to have come to this point.”
Council members from both Myrtle Beach and Horry County called the agreement a compromise, saying they weren’t 100% happy with it but that it was the best the two sides could come up with. Councilors from both sides said they were hopeful the agreement means the dispute over the hospitality fee is now settled and both the county and municipalities can have additional clarity as they work to draft budgets for next fiscal year.
One piece of the compromise appears to be over how to divide up a $19 million pot of money that was collected via the hospitality fee between 2017 and June 2019 when a judge ordered the county to stop collecting it due to Myrtle Beach’s lawsuit. Horry County Council member Johnny Vaught confirmed some of the $19 million will go towards the South Carolina Bar Foundation, but wouldn’t say how much. That’s significant because the city and county previously disagreed on that point.
Last fall, Myrtle Beach and Horry County came to an agreement on how to collect and divide up the hospitality fee once it’s re-implemented, but came up with separate plans for how to divide up the $19 million, and asked a judge to settle that matter. Horry County wanted the $19 million to be distributed to the municipalities while Myrtle Beach wanted to put the money in a separate fund to reimburse businesses wrongly charged by the fee, and then donate the rest to the Bar Foundation, the charitable wing of the South Carolina Bar Association. Under the new agreement, some of the $19 million will go to the foundation, Vaught said.
“It wasn’t exactly the way I wanted it to go but we’re going to drive on from where we are,” He said Friday. “I think it’s a really good thing that we finally got it settled. I’d rather see the municipalities get all the money we collected but that’s not how it worked out.”
Despite few details of the settlement being available, news of the agreement is significant because it could mark the conclusion of a nearly two-year-long lawsuit between Horry County’s municipal governments over millions of dollars in collected revenues. It appears likely that the municipalities will begin collecting and receiving the hospitality fee revenue once the other municipalities sign off on the agreement and the lawsuit is formally settled.
How we got here
The suit originated in March 2019, when Myrtle Beach accused Horry County of illegally collecting a 1.5% hospitality fee on hotel stays, admission tickets and food and beverage sales in the county beginning in 2017. The county had collected that fee since 1997 as a means to pay for roads and other transportation infrastructure as part of its original RIDE program. That program was intended to run for 20 years, but the county voted to extend it for another six years in 2016, with the program now set to end in 2022. Myrtle Beach said in the suit that the county should have consulted with city officials before pursuing the extension of the fee.
Since the implementation of the original RIDE program, Horry County has enacted two additional transportation programs, RIDE 2 and RIDE 3, though it continued to collect the 1.5% hospitality fee in the county’s cities. That collection amounts to significant sums for the county and the municipalities, according to budget documents. The 1.5% hospitality fee collected in the municipalities has netted around $40 million each year in the years prior to the COVID-19 pandemic, and a related 1% hospitality fee collected in the unincorporated areas has netted Horry County around $8 million each year recently.
In 2018, Horry County Council voted to spend $30 million of the additional hospitality fee collections on a long-coveted Interstate 73, the controversial interstate extension that could bring floods of new tourists from northern states closer to the beach.
In the suit, Myrtle Beach argued that the county should not have been allowed to continue to collect the hospitality fee, let alone dedicate the revenues to certain projects, past 2017 without the consent of the other municipalities. Around $19 million was collected via the fee between the end of the RIDE program and June 2019 when a judge ordered the county to stop collecting the fee.
In addition to settling how the fee collections would be divvied up, the suit sought answers on what to do with the $19 million already collected. In September 2020, it appeared the city and county had reached a settlement in the case. While the municipalities had agreed on a scheme for distributing the fee collection, they chose to leave the question of what to do with the $19 million up to the courts. Myrtle Beach wanted to create a fund for businesses to be reimbursed for wrongful collection of the hospitality fee for six months, after which the rest of the money would go to the South Carolina Bar Foundation. Horry County wanted the money divvied up among the municipalities.
A state Supreme Court judge threw a curve ball in December, saying the municipalities had to figure out all matters related to the fee before a settlement could be approved, and thereby tossing the settlement out. That move also caused budget-related headaches for Horry County and Myrtle Beach as both are working to draft their first budgets after being hit hard by the COVID-19 pandemic. Each has lost millions due to the pandemic and a delay on collecting the hospitality fee revenue threatened to continue 2020’s budget deficits into 2021.
“We have all been greatly affected by COVID-19 and the work that has happened this past year to get to this point today is a collaborative effort between the county and the City of Myrtle Beach and we thank them for agreeing to come to the table so we can do what’s best for everyone concerned,” Bethune said Friday.
‘Getting this thing over with’
Council members from both Horry County and Myrtle Beach said Friday they weren’t at liberty to discuss the details of the agreement until North Myrtle Beach, Surfside Beach, Atlantic Beach, Conway, Aynor and Loris council all vote to approve the deal, and a judge declares the lawsuit settled.
Still, members from both councils called the deal a compromise and said they were happy to be able to move on.
“This is a compromise. This is clearly not what either side aimed for in the beginning,” said Myrtle Beach Council member Gregg Smith. “(But) I’m happy to come to this conclusion.”
City Council member Michael Chestnut added: “I’m looking forward to getting this thing over with.”
Horry County Councilman Danny Hardee, who represents the Red Bluff and Green Sea areas of council, said he was satisfied with. the settlement and said it will allow the county to have more clarity as it workshops next year’s budget.
“When you know what you’re working with you can make decisions,” he said. “It feels like a little cloud has lifted. But at the same time, we shouldn’t have been there in the first place.”
County Councilman Harold Worley, who represents part of North Myrtle Beach, said he’s ready to move on from the suit.
“I think everybody concerned is ready to settle this thing and get it behind us and move forward,” he said.
This story was originally published February 5, 2021 at 11:16 AM.