Bolton: It’s time SC lawmakers give cities, counties more funding options

Associate EditorAugust 25, 2013 

Warren Bolton

TIM DOMINICK/TDOMINICK@THESTATE.

— AS I LISTENED to city manager Rebecca Rhodes explain why Cayce was seriously considering adopting the hospitality tax, it became increasingly clear to me what this week became clear to her and other Cayce officials, although for different reasons: The 2 percent levy on prepared food isn’t what the municipality needs.

During a recent visit to The State to try to sell the since-abandoned idea, Ms. Rhodes noted that Cayce is too rich to get USDA grants, community development block grants have been cut significantly, the city doesn’t have much bonding capacity, and the state cap on property taxes makes it hard to bolster the general fund.

While a revenue source that must be devoted to attracting tourists might allow the city to pay for some local projects, it won’t fix the real problem.

What Cayce needs — what local governments across South Carolina need — is for lawmakers to give cities and counties options that allow them to raise revenue to fund general operations and services.

Unfortunately, the General Assembly has failed to give local governments alternatives beyond a few sales tax options, such as the hospitality tax, that come with strings attached. Cities and counties must use the 2 percent restaurant tax to pay for tourism-related projects.

That’s why it would make sense for lawmakers to expand the use of the hospitality tax so local officials can use it to meet actual needs, even if they do use some for those other things. But at least let local officials decide how to address the needs of their communities.

Many local governments have adopted the hospitality tax under the guise of luring tourists, but they end up spending tidy sums on parks and other projects traditionally paid for through the general fund.

It was surprising and refreshing that Ms. Rhodes didn’t try to hide the fact that the hospitality tax would relieve pressure on the general fund.

Some local officials I have talked with refuse to acknowledge that, instead defending the decision to adopt the hospitality tax as purely a way to boost tourism. But that’s a hard sell when you live in the Midlands, which isn’t exactly a big tourist draw. Look at how Columbia and Richland County use the tax, and it’s obvious that this is simply another way to shift the cost of park expansions and other projects out of the general fund. This year, Columbia even transferred $3 million in hospitality tax revenue to its general fund for so-called tourism-related expenses.

Cayce City Council was all set to adopt the hospitality tax this fall, and use its projected $644,000 in annual revenues to pay for upkeep of the local museum and the Riverwalk, along with more dubious expenditures on new lights, crosswalks, landscaping and welcome signs on thoroughfares.

But the council shelved the idea on Wednesday after Lexington County officials warned that adding that tax now could damage their chance of convincing voters throughout the county to increase the sales tax by a penny on the dollar to pay for transportation needs. Although there are problems with limiting local governments’ options to sales tax levies — which already are too high in South Carolina and tend to be regressive — at least local transportation sales taxes pay for things local communities actually need.

Cayce officials haven’t abandoned the idea of a hospitality tax. They’ve just put it on hold until they see whether voters adopt the transportation tax, because they still see a need to position the city for growth and development.

“What we’re trying to do is look ahead and put Cayce in the best position possible” to succeed, Ms. Rhodes said. “We’re just trying to be as creative and forward-thinking as we can.”

Cayce long has sought to separate itself from its neighbors; it particularly has sought to shake the notion that it simply is a bedroom community of Columbia, in an effort to develop a unique identity.

Ms. Rhodes said if Cayce is to take control of its destiny, it needs alternative funding sources so that it can invest in itself. And indeed, it makes sense to let visitors help pay particularly for the Riverwalk, which draws 600,000 visitors a year to the town of 12,000.

But even though Cayce wasn’t going looking for projects to use hospitality tax money on, and officials were against following the lead of Richland County and Columbia and doling the money out to private organizations, the fact is that eventually the day would come when it would complete its initial list of projects and find itself looking for ways to spend money that can be spent only on attracting tourists. And like Columbia and Richland County today, it would find itself scraping up money to pay for city operations or services while a pot of money sits there that it can’t use for that purpose.

It sends a conflicting and confusing message to taxpayers when they see governments able to improve parks or beef up amenities or fund festivals not essential to the daily operation of a city or county even as elected leaders must make budget discussions about limiting basic services.

State legislators created this problem by limiting what elected leaders can do to pay for the needs of their communities. Isn’t it about time the Legislature took the handcuffs off local governments’ finances?

Reach Mr. Bolton at (803) 771-8631 or wbolton@thestate.com.

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