Posted on Fri, Dec. 01, 2006

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State rules MB misused tax funds

By Lisa Fleisher

The Sun News

Myrtle Beach has to find up to $58,000 of its own money to pay for several studies already in progress after a state committee said the city was funding the projects improperly.

This is the latest in a series of battles the city has fought with the Tourism Expenditure Review Committee over the use of accommodations tax funds.

The funds are money the city gets back from South Carolina after the state collects a 2 percent tax from the lodging industry. The state redistributes a portion of the money to local governments for tourism-related expenses.

Myrtle Beach's share of that money is about $6.4 million each year - about 84 percent of what its businesses send to Columbia.

Cities decide how to spend the money, and the committee, made up of representatives from the hospitality industry, cultural arts and the state, reviews the expenditures and approve them.

The committee said a number of projects this year were inappropriate, including two the city had already started: an environmental analysis and a study of whether streetcars would work in Myrtle Beach.

The committee's decision means the city has to fund the projects with its own money, which could come from the general fund. As for the $58,000, it stays with the city, but the council must use it for other projects.

When the committee sent its ruling earlier this year, Myrtle Beach had two options: give the money back or fight it in court.

The majority of city council thought it was not worth the cost of legal fees - which the city attorney estimated could be between $15,000 and $25,000 - and decided Tuesday to reallocate the money to other projects.

City Councilman Wayne Gray said he agreed with the state committee that the city should fund the studies from other sources.

"Let's not spend $30,000 debating that so we can say philosophically we were right," he said. "I think there was a better way to deal with it. Why don't we ask some of the members of [the committee] to come down and talk to us?"

Other city council members said the city should fight for the right to use the tax money.

"I just feel like when you are doing something that has to do with tourism, whether it's a study or something actually being built, then it should be OK," Mayor John Rhodes said. "Streetcars are going to be there to move tourists around."

Several years ago, the city wanted to use accommodations tax money to help fund a weekly fireworks display that businesses put on over the summer, but the state committee said it was inappropriate to help fund a for-profit venture.

City spokesman Mark Kruea said an administrative law judge said the state law does not specify that the accommodations tax money must go to a nonprofit, a ruling the committee challenged.

The next year, the businesses set up a nonprofit corporation, and the city again gave money toward the events.

But the committee once more challenged the appropriation, saying that the display was not a tourism event.

The judge agreed. The city is appealing that decision.