COLUMBIA, SC — Columbia’s hotels and restaurants are challenging the city on the use of meal-tax money to buy the Palmetto Compress warehouse, save it from demolition and refit it.
Leaders of the trade groups leading the challenge said they will file a lawsuit if City Council gives final approval to the purchase using up to a $7 million loan backed by hospitality taxes, the legal name for meal taxes.
“Yes. We are that adamant,” Steve Graves chairman of the Columbia Hotel and Motel Association board said Friday of a possible suit. “Absolutely,” added Bobby Williams, Graves’ counterpart at the Columbia Restaurant Association board.
This new front on the fight over the former cotton warehouse represents a new fissure between the city’s preservationists and the business community. Some private citizens plan Monday to join the chorus of protest about the purchase plan at a news conference.
Friday’s challenge came in the form of a letter asking City Council to delay a final vote on the loan championed by Mayor Steve Benjamin.
The letter was written by attorney Joe McCulloch, hired by the trade groups to fight the purchase.
“This would divert hospitality funds from the many groups which depend upon them and subvert the city’s efforts that should be dedicated to smart spending for tourism development,” McCulloch wrote. “... my clients ... strongly oppose the allocation or binding of these hospitality taxes for this real estate” or its upkeep.
Williams, owner of Lizard’s Thicket restaurants, said arts groups are particularly worried they might lose their shares of meal-tax allocations. “They’re all scared to death,” Williams said. “They’re scared that if they say anything, they’ll be cut.”
The state hospitality tax law limits use of the money to activities or buildings that attract tourists, to promote the arts, for recreation or historic preservation.
Patrons who buy prepared meals or beverages in the city pay a 2 percent tax on each bill. The tax is expected to generate $8.5 million this year and has been growing slowly but steadily as the economy creeps toward recovery. Competition for the money is intense, and recipients have grown uneasy by some of council’s decisions on how to divvy the pot of money.
On March 26, council cast the first of two votes to borrow up to $7 million from First Citizens Bank to purchase the 320,000-square-foot, four-story, brick structure near the University of South Carolina arena. Benjamin said the purchase price is $5.65 million.
The city’s plan is to be a bridge owner, selling the building to a private, as-yet-undetermined developer.
The financing plan calls for the city to pay interest only for the first two years, said Councilwoman Tameika Isaac Devine. That sum is $140,000 annually.
Council members said they hope not to use meal tax revenues unless they cannot flip the nearly century-old building within two years, Devine said. Still, they could use the so-called H-tax money if they chose.
The group of owners of the Palmetto Compress insist its age, condition and structural design prevent reuse. It has to come down before the property, at a high-profile location, can be developed, they have said. Edwards Communities Development Co. of Columbus, Ohio, had a contract with the owners but recently dropped the controversial plan to buy the property, tear down the warehouse and build an 800-bed student housing complex.
The city’s historic preservation community has been fighting for months to stop demolition after Benjamin first started then withdrew an effort to have the warehouse declared a city landmark. That would make demolition much more difficult.
Robin Waites, director of Historic Columbia Foundation, said there is sufficient meal-tax money to go around.
“I think there’s enough money in the H-tax pot ... that there’s a way to allocate the money so that these organizations are not hurt,” she said.
In the months-long standoff that already has included lawsuits over votes taken by a city design commission, the Chamber of Commerce has argued that saving the warehouse is unfriendly to the city’s business climate.
After the Ohio developers withdrew, Benjamin proposed to council that the city buy and flip the building and about five surrounding acres.
In a 5-2 vote, council went along and said the city’s agreement with the owners called for closing a contract by April 15. That’s why council needed to act quickly, Benjamin and Devine said during the vote.
The trade groups said in their letter that council was to cast that final vote this coming Tuesday. But city manager Teresa Wilson said a final vote is not on Tuesday’s agenda. However, council’s agenda was not released publicly Friday afternoon as usual.
“Everything’s not ready, contractually,” Wilson said. Plans are for council to vote April 16, she said.
Devine said that perhaps the closing date could be delayed. “I’m open to looking at other sources (other than meal taxes) if people are concerned about that,” she said.
Benjamin is on vacation with his family and had not read the trade groups’ letter, his aide Michael Wukela said. “Nothing in the mayor’s proposal has changed, and under his proposal H-tax would only be a backstop,” Wukela said.
Rusty DePass, a civic and political activist, has organized a news conference for Monday morning, expecting council was to vote Tuesday.
DePass said he knows no one who believes that backing the purchase with meal taxes is a good idea.
“I’m putting myself out there, and we’ll see how many people will follow,” he said.
Reach LeBlanc at (803) 771-8664.