After protests from community groups clamoring for their fair share of millions in Columbia’s hospitality-tax dollars, City Council is trying to clamp down on how those dollars are distributed.
Council’s efforts over the past two years to provide seed money to small startup festivals has led to an outcry. Most of the complaining has come from larger, more established organizations that say their events – which create Columbia’s identity as a place to live and visit – are being discounted. Some have gone around the funding process to try to get what they want.
That has prompted council to enact new restraints on spending for recipients of hospitality tax money, the 2 cents on the dollar collected on purchases of prepared food and beverages from restaurants, bars, grocery stores and other businesses. Part of that effort could include the city’s first cost/benefit analysis of the so-called H-tax money.
“There’s strong sentiment on council that the process needs to be changed,” said Councilman Brian Dequincy Newman, who chairs council’s budget committee. “The question has been, for the past two years, how do we change it?”
Council itself has a track record of overspending its H-tax budget – then turning around to balance the deficit with money from a hospitality surplus account that over the past four years has been all but drained.
Since council instituted it in 2002, the tax has generated about $77 million, according to the city’s business license office, which tracks the money.
Arts, business groups push back
Some of Columbia’s cultural and economic anchors – including the Columbia City Ballet, operators of the Nickelodeon movie theater and the Congaree Vista Guild – have been among the most vocal about council’s shift over the past couple of years in funding smaller groups and events.
Largely, they are upset by reductions in their recent allotments from an 11-member citizens’ panel that oversees about one-third of the total pot of hospitality tax dollars, which this year is projected to reach $9.3 million. However, recommendations from that citizen’s panel require council’s approval.
“It doesn’t make sense to have little, startup requests go up against a $500,000 capital improvement project,” said Andy Smith, the new director of the Columbia Film Society that operates the Nickelodeon, which just moved into a renovated Main Street theater. “There are more efficient ways to do this.”
Smith’s group asked the citizen’s panel for a half-million dollars last year and received nothing.
But the organization has gotten $1.1 million in the six previous years and had pledged not to ask for more anytime soon, according to Libby Gober, the city staffer who works with the citizens’ committee. Smith counters that the pledge was based on receiving the full $500,000 his group previously had requested.
The Columbia Film Society, feeling slighted, appealed directly to Mayor Steve Benjamin, Smith said, because the organization was in a financial pinch. It was close to moving into its new building and was short of money to complete the renovation.
Ultimately, the group received $300,000 from two private foundations and scaled back renovation of a second floor of the theater, Smith said.
Smith did not get what he wanted from the city. But Benjamin stepped in for about two dozen other groups and persuaded council to spend $464,500 on requests that either had been rejected by the citizens’ committee or had not been screened by city staffers.
William Starrett, artistic director of City Ballet, in February asked the city for $500,000 annually to give the troupe “a stable foundation” to expand. But council approved only the $130,000 that the citizens’ committee recommended.
Starrett argues that the ballet is an “economic development heavyweight,” generating $2.6 million in H-tax revenue from more than 50,000 people who attend performances and other ballet functions each year.
Unlike some other organizations that rely more on hospitality tax dollars, Starrett said City Ballet gets 10 percent of its budget from the city.
The tax was passed primarily with the intent of helping the arts community, Starrett said.
“We didn’t do that 2-cent tax so we could support the (State) Fair or support the football team,” he said. The State Fair, the University of South Carolina and the Gamecock Club regularly receive hospitality tax money.
Brian Dukes, president of the Vista Guild’s board, said his members want to get revenue proportional to how much hospitality tax money the popular Vista entertainment district generates. That sum has held steady in recent years at about $1.4 million annually, city figures show.
The guild has received $810,000 over the past three years, about $600,000 short of what they wanted in that time.
But few, if any, organizations received their full requests. That is primarily because more organizations are seeking city money, and more of it, because of a sluggish economy and a drop in corporate giving.
Change is coming
Council already has voted to require H-tax recipients to give preference to local advertising and marketing firms before turning to promoters in Atlanta, New York or other major advertising centers.
Some council members have said groups that receive large sums and sponsor successful events should be putting profits into an account and be prepared to be weaned off the tax dollars.
Council is considering even deeper changes, though it has yet to settle on how much to overhaul the system.
Now, organizations requesting hospitality tax dollars from the citizens’ committee must undergo a rigorous screening that includes disclosing financial and tax records, as well as answer questions to justify the budgets they request. That process is unlikely to change.
But Councilman Newman is to propose that the citizens’ committee would oversee less money and fewer organizations – largely those that hold neighborhood festivals.
Among other parts of his plan:
• Large organizations, which he calls “H-tax institutions,” would be funded by one larger pot of money that council controls. Groups in this category would include the Congaree Vista Guild, Five Points Association and, ultimately, a group to represent the Harbison area that surrounds Columbiana Centre. Businesses around that mall in recent years generated as much in hospitality tax dollars as the Vista and Five Points combined, records in the business license office show.
• Performing arts organizations would have another pot of money, also controlled by council.
Councilwoman Tameika Isaac Devine remains a staunch supporter of the citizens’ committee and the way council allocates revenue. She said she is willing to listen to alternative suggestions. But, “I don’t think we need to dismantle the committee process.”
Benjamin would not say whether he endorses Newman’s plan. But, he said, “The ultimate responsibility lies with us, not a citizens’ committee appointed by us.”
The current system “is not broken,” he said. But it needs “efficiencies.”
Councilman Cameron Runyan, who chairs the Arts and Historic Preservation Committee, is working on the idea of a cost/benefit analysis.
Last week, Runyan sent a letter to some 100 recipients of hospitality tax money, seeking answers to 14 questions about how they have spent the funds since the city started collecting the tax.
“We’ve been doing this for a decade and nobody’s done an assessment or stopped to say, ‘Is this where we really want to go with this?’” Runyan said.
Council’s stewardship of hospitality tax dollars also could come under fire.
City financial records show council has overspent what it has taken in each of the past five years in hospitality tax revenues, ranging annually from $817,000 to $2 million.
Council balanced the spending by drawing down a $6.6 million hospitality tax surplus that had accumulated by mid-2008. That surplus today is down to about $25,000.
Council has no fixed timetable for making changes but it hopes to have them in place by January, when the next round of applications are due.