Lawsuit over hospitality fee is over. Horry County to again collect fee soon

Horry County will once again collect a 1.5% hospitality fee on hotel stays, admission sales and prepared food and beverages now that a lawsuit settlement involving the fee appears to be over for good.

Horry County and the City of Myrtle Beach have been involved in litigation over the county’s collection of the 1.5% hospitality fee for nearly two years, and the county released details of a settlement agreement between the two sides Friday evening.

The county could begin collecting the fee again as soon as April, which is when a judge is expected to give the settlement agreement final approval. The fee amounts to a small charge on the region’s entertainment products and allows the local municipalities here to benefit from the influx of tourist traffic each year.

The city and county had been locked in an often-public dispute over the collection of the fee since March of 2019 after Myrtle Beach alleged that Horry County should not have collected the hospitality fee past January 2017. The county originally enacted the fee in 1996 to help pay for roads and other infrastructure under its original RIDE program, and the fee was supposed to be collected for 20 years. In 2017, Horry County Council voted to extend the collection of the fee indefinitely, and dedicated part of of the county’s portion of the fee to building Interstate 73, a major highway extension that would help bring tourists and business closer to the Grand Strand. Some of the money also would have been used for public safety services.

Myrtle Beach objected to the extension of the fee, and argued that money collected in the city shouldn’t be spent on county services. The other municipalities in Horry County sided with Myrtle Beach Around $40 million was collected in Horry County between January 2017 and June 2019, with $19 million of that owed to Myrtle Beach, North Myrtle Beach and the other cities, and $21 million of that belonging to the county.

The county’s $21 million has been sitting in a bank account untouched since Circuit Court Judge William Seals granted the injunction nearly two years ago. How to distribute the $19 million was a major sticking point.

The settlement clears that matter up. According to the settlement:

• The City of Myrtle Beach will put the $19 million into a special settlement fund and people who paid the hospitality fee will be able to file claims with the city to get their money back. That means that if you paid the hospitality fee in Myrtle Beach, North Myrtle Beach or another municipality in Horry County between Jan. 1, 2017 and August 1, 2019 you’ll be able to get the 1.5% fee you paid back.

• That settlement fund will be open for claims until May 15, and then the city will close it.

• Once the fund is closed, 50% of what’s left will be distributed proportionally to the cities for use on “tourism-related projects and programs.” Myrtle Beach will receive the largest share, North Myrtle Beach the second largest share, and Conway the third.
  
  

• Another 25% of what’s leftover from the fund will go to the South Carolina Bar Foundation, the charitable arm of the state Bar Association, for use on “access to justice programs and services” in Horry County.

• The last 25% of the fund will sit in a City of Myrtle Beach bank account to take care of any legal issues or claims regarding the hospitality fee for a period of three years. After that period, the money will be distributed to the cities proportionally.

“This settlement resolves the dispute in a manner which protects the rights of the persons who paid the Hospitality Fee during the period in question, serves the needs of the City, the County, and the other participating municipalities, and ends a dispute over a novel issue of law in a manner that benefits all the residents of, and visitors to, Horry County,” Horry County spokesperson Kelly Moore wrote in a press release detailing the settlement.

None of the $19 million will pay for attorney fees.

Once a judge gives the settlement agreement final approval, likely in April, the county will be able to use the $21 million that’s been stored in an escrow account since 2019. That money will be a needed injection of cash into the county’s budget, said County Council member Johnny Vaught.

“It’s going to do lots of good for us in terms of bringing on more fire and more police,” Vaught said Friday. “(People) are going to see an increased presence in police, they’re going to see a new service center on International Drive, they’re going to see increased fire protection, better equipment for our firemen and shortened times for police and fire calls.”

He added: “That’s what we’re looking towards getting done that we weren’t able to before.”

Pending several legal formalities, it appeared as of Friday night that the dispute over the hospitality fee was officially over. Judge Seals had approved an earlier settlement agreement in September, but the state Supreme Court tossed that settlement out in December. That was because the city and county hadn’t agreed to a solution on how to distribute the $19 million. Each had drafted plans, and Seals sided with the county, choosing its plan of distributing 100% of the $19 million to the cities. Myrtle Beach, however, was concerned about being sued by people who had paid the hospitality fee and wanted only half the $19 million to be distributed to the cities.

Even though Seals sided with the county, the state Supreme Court said that the two sides had to reach an agreement on the $19 million themselves. That threw a wrench in Horry County’s budget plans, causing the county to delay talks on its 2021-2022 budget for a month. The county being able to collect and spend the hospitality fee money will help make up for budget losses caused by the coronavirus pandemic, Vaught said. The county has reported losing $22 million during the COVID-19 pandemic due a slowdown in tourist traffic.

“We had it all figured out until the Supreme Court blew it away,” Vaught said.

The settlement agreement could also, in the future, help revitalize plans for Interstate 73. Vaught said those discussions likely won’t begin until the coronavirus pandemic is fully concluded but said the hospitality fee coming back online could allow Horry County and the other cities to begin discussions on if some of the money should be dedicated to building that highway.

“We’ll come up with some kind of formula,” Vaught said. “Everybody knows we need I-73.”