Accommodation Taxes Rise in Charleston

March 22, 2011

Investigative Reports

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TThe Nervehe sun seems to be breaking through the clouds over the local economy.

Charleston County staff told the county council’s finance committee at the March 10 meeting that accommodation tax revenues were likely to be higher than anticipated than when the FY 2011 budget was put together.

And, as council members exclaimed, the result should warm the hearts of the county’s municipalities as well as that of the county.

The original FY 2011 budget projected accommodation taxes of $8.1 million. Staff is now projecting $9.75 million for the year.

The increase reflects stronger-than-anticipated visitor numbers, essentially tourists, to the region and the higher patronage of hotels, motels and guest houses.

State regulations limit the use of accommodation tax funds. But broadly, their application must be to tourist- or visitor-related activities or projects.

Of the gross total collections, 10 percent is directed to the Convention and Visitor Bureau. The balance is split, largely by formula, between the county, municipalities, debt servicing relating to specific projects and “outside agencies.” Distribution to the latter is wholly discriminatory.

After allowing for collection expenses, the finance committee was told that a $1.63 million surplus over the original projection was expected for the year.

Staff, being conservative, thought that distributions to the municipalities should be raised, an amount set aside to restore the contingency reserve to 5 percent, and that the unobligated fund balance be allowed to rise.

Predictably, council members had a less conservative view.

Staff originally proposed that the distribution to the municipalities should be raised to 75 percent of normal allocations. This would mean an increase from $618,000 in the original budget to $1.177 million.

But the committee was unanimous in voting for an even larger increase, to 100 percent of the normal allocation, lifting the total to $1.569 million.

The city of Charleston receives the largest distribution at $768,000 compared to the original projection of $297,151.

Committee members also voted to raise the allocation to the College of Charleston and the Citadel. Some years ago, the county indicated that it would contribute $350,000 a year for debt servicing relating to sports facility construction but subject to fund availability.

Distributions to the entities were cut in recent years and in FY 2011 were projected at $75,000 each. Staff recommended that the funding for the Citadel be raised to $175,000. But committee members thought it unfair to leave the College of Charleston behind and boosted its allocation to $175,000 also.

Most people should be happy with the committee’s action. The municipalities will receive an unexpected windfall of nearly $1 million, the Citadel and the College of Charleston $100,000 each, and the Convention and Visitors Bureau $165,000.

In a sense, the county reaped no benefit but it was able to add to the 5 percent contingency reserve and boost the unobligated fund balance by $351,000. And there is the pleasant prospect of higher revenues next year.

Warwick Jones is a resident of Charleston and has been involved with a number of area organizations, including the Charleston County Greenbelt Advisory Board and the Preservation Society of Charleston.