Will The Accommodations Tax Advisory Committee Continue To Get Along With Charleston Area Convention & Visitors Bureau?

By Brian Sherman for The Island Eye News

Three members of the Isle of Palms committee that is supposed to be advising the Isle of Palms City Council about how it should distribute the state accommodations tax funds collected from the owners of short-term rental properties are questioning the city’s longterm relationship with the Charleston Area Convention & Visitors Bureau (CVB). At an Oct. 27 meeting of the Accommodations Tax Advisory Committee (ATAX), Chairman Ray Burns and Douglas Truslow, who were appointed in February of this year, along with Glenda Nemes, grilled CVB Executive Director Helen Hill about a variety of subjects. Among other items, they apparently aren’t happy that the organization reports its budget and expenditures to the city, and they believe Isle of Palms pays more for the same tourism marketing services provided to nearby towns such as Sullivan’s Island and Folly Beach. “The document given to us under the idea that it’s a budget – I don’t consider it to be a budget,” Burns commented later. “It’s what they call a program of work. They allocate our money to their goals and objectives. It has nothing to do with any actual expenditures that have anything to do with tourism promotional activities specifically for the Isle of Palms.” Hill, however, insisted that the CVB, also known as Explore Charleston, has had “a long, successful relationship” with the Isle of Palms and that the city is getting its money’s worth for the $733,416 it funneled to the CVB during the fiscal year that ended June 30, 2021. She said there is good reason to commingle all the money her organization receives from the 10 government entities she represents in the world of tourism marketing – Isle of Palms, Charleston County, Berkeley County, the towns of Kiawah Island, Seabrook Island, Mount Pleasant and Sullivan’s Island and the cities of Charleston, Folly Beach and North Charleston. “It’s true that the money is in one pot. Isle of Palms is part of the destination marketing of this community,” she explained. “The areas of our state that have been the most successful have been those that have banded together and sold together. We know we’ve been successful that way. We know it works.” 

State accommodations tax 

Owners of short-term rentals in Isle of Palms are charged 14% in taxes, including the 5% state sales tax, 2% to Charleston County and 1% each for the Charleston County local option sales tax, transportation tax and school district tax. They also must pay 1% each for the Isle of Palms accommodations tax and beach preservation fee. The large chunk of money that is supposed to fall under the purview of the Isle of Palms ATAX Committee is the 2% state accommodations tax. In fiscal year 2021, after the state siphoned off funds to distribute to towns and counties with limited short-term rental properties, Isle of Palms received $2,469,730 from this source. Under state law, the city gets the first $25,000 plus 5% of the remainder for its general fund – in Isle of Palms’ case for fiscal year 2021, that amounted to $147,237. The rest is split into two pots. The city must use 65% of the money for tourism-related activities that can include law enforcement, traffic control, public facilities and highway and street maintenance. However, “the funds must not be used as an additional source of revenue to provide services normally provided by the county or municipality but to promote tourism and enlarge its economic benefits through advertising, promotion and providing those facilities and services which enhance the ability of the county or municipality to attract and provide for tourists.” The remaining 30% goes into a fund that must be used for advertising and promoting tourism. A city is required to select or create one or more organizations to handle this job. The Isle of Palms chose the Charleston Area CVB in the late 1980s, according to Hill, the CVB’s longtime director. Hill and the CVB are not without their supporters on the ATAX Committee. At the Oct. 27 meeting, a motion to advise the City Council to evaluate alternatives to its current destination marketing organization – the CVB – passed by a 4-2 vote, with Truslow, Burns, Nemes and Sally LeydicMulig voting “yes” and Malcolm Burgis and David Nelson opposing the move. Rusty Williamson was absent. Later, a motion to recommend that the city reject the fiscal year 2022 budget presented by Hill failed when Leydic-Mulig changed sides and voted with Burgis and Nelson. “I think they do a good job with our ATAX money,” Nelson commented. “Sullivan’s Island is a ridiculous comparison, and I don’t think Folly Beach compares to the Isle of Palms. We have a huge resort; Folly doesn’t. Kiawah would be a good comparison.” According to information provided by Kiawah Island Communications Manager Stephanie Braswell, the town, which has 1,317 short-term rental properties, paid $742,916 to the CVB in fiscal year 2020- 21 and budgeted $459,751 for fiscal year 2021-22. City Administrator Aaron Pope said Folly Beach created its own destination marketing organization in 2005. The Tourism and Visitor Promotion Committee, a stand-alone taxexempt organization, received $459,516 in accommodations tax money for the fiscal year ending June 30, 2021, according to Director of Finance Lee Gessner. Pope said the TVPC’s FY22 budget includes $25,000 for CVB membership and $22,000 for CVB advertising. In FY 21, those numbers were $20,000 and $21,000, respectively. “Each year, the TVPC develops a budget of proposed projects and presents it to City Council,” Pope said. “City Council adopts it by resolution, but the TVPC board is responsible for all execution. City staff does not participate in the day-to-day operations of the tourism marketing projects beyond dedicating one staff member as a liaison to attend the meetings – and handling the bank account, checks and purchasing.” Board members are appointed by the Council, and the board selects its own officers and writes it own bylaws, Pope said, adding that the TVPC maintains visitfolly.com, places print, digital and television ads and runs special marketing promotions. In fiscal 2021, Sullivan’s Island, which has only 43 shortterm rental properties, received $27,047.88 for its general fund, $26,626.10 for its 65% fund and $12,288.84 for its 30% fund. Isle of Palms, meanwhile, received $2,469,730 from the state, transferred $25,000 plus 5% of the remainder – $122,236.50 – to the general fund, for a total of $147,237, leaving $733,416 for the CVB. According to IOP City Administrator Desiree Fragoso, the city has issued 1,474 shortterm rental licenses, 751 of them inside the gates of Wild Dunes and 723 on the rest of the island. The amount of ATAX money distributed by the state to the Isle of Palms has grown steadily during the past decade. The city received $1,172,737 in fiscal year 2011, and that number increased every year until fiscal 2020, falling to $1,707,133 when the short-term rental business was ravaged by the COVID-19 pandemic. The industry rebounded in fiscal 2021. The amount transferred to the CVB grew from $344,321 in fiscal 2011 to $733,419 this year. The money has been well spent over the years, according to Dan Battista, senior vice president of Lowe, a company that is one of the owners of Wild Dunes Resort. A statement released by Battista pointed out that “Explore Charleston and Lowe remain steadfast in our shared goal of making Isle of Palms a great place to work and live for both residents and visitors. Explore Charleston has successfully promoted Isle of Palms to overnight visitors for over 35 years. They have specifically focused on bringing visitors who stay longer, which increases tourism tax revenue for the city. This economic activity reduces the tax burden on residents, supports local jobs, promotes local business and puts the island in a more favorable financial position to fund essential services that make our community stronger. It would be difficult for a startup organization run by the city or an advertising agency to deliver the results that we have enjoyed in partnership with Explore Charleston.” 

Issues of concern 

Burns and Truslow brought up several issues at the Oct. 27 ATAX Committee meeting, including a recent letter from the Tourism Expenditure Committee advising cities, towns and counties that their destination marketing organizations must produce an annual budget at the beginning of the year and a review of its activities at the end of the year. The TERC, an 11-member committee that reviews tourism-related spending with accommodations tax funds, pointed out that these documents must be reviewed by the ATAX Committee and approved by the City Council. In Truslow’s opinion, the ATAX Committee is supposed to review expenditures out of both the 30% and 65% funds, something he said has not been happening. Fragoso said the committee has been reviewing and making recommendations to the Council concerning how to spend money from both pots. “We were supposed to, but we’ve been a rubber stamp. We have been an absolute rubber stamp until this year. Decisions have already been made before it gets to us,” he said, adding that both the State Supreme Court and now the TERC have determined that the ATAX Committee must use “due diligence to determine where the money is going.” Nemes, Truslow and Burns all raised red flags that without proper documentation from the CVB, the state might decide to withhold ATAX funds from the Isle of Palms. The law states, in part, that “If TERC finds an expenditure to be in noncompliance, it shall certify the noncompliance to the state treasurer, who shall withhold the amount of the expenditure found in noncompliance from subsequent distributions in accommodations tax revenue otherwise due the municipality or county.” “If someone gave me $733,000 of their money and told me to invest it and then to come back and account to them for it, I would do that,” Nemes stated. “And it wouldn’t be with a report that said ‘here’s what I did for the general area.’ I would say this is what I did for you.” Apparently unhappy with Burns’ charges of insufficient transparency and accountability prior to Hill’s presentation at the Oct. 27 meeting, she preceded her comments with a response: “I would like to say for the record that the comments by Chairman Burns are absolutely not correct. We have provided a full and complete accounting of accommodations tax funds from the 30% pool from the Isle of Palms every year since we have received this funding. His comments are in many ways disingenuous because he has received that information.” “I came here in the spirit of how much our organization and our community love the Isle of Palms,” she added.Hill said the Isle of Palms has gotten more than its money’s worth for its 30% funds. “One thing we have always measured success on is have we created new overnight visitors,” she said. “In the visitor world, maximum impact is not people choosing to come for a day but for the night. They eat, tour and enjoy the community. Have we created that demand? We’ve been very successful.” She added that Explore Charleston has done an excellent job of bringing overnight visitors to the Isle of Palms during the winter months, when the owners of short-term rentals and other businesses need vacationers to choose Isle of Palms over other locations. She cited the CVB’s efforts to convince airlines to invest in Charleston, pointing out that with Southwest, Jet Blue, Allegiant and Breeze now operating in the Holy City, travelers have the option to fly directly to 36 cities. Hill’s presentation at the Oct. 27 meeting included a list of changes the CVB plans to make its arrangement more palatable to the ATAX Committee. These include a separate website for Isle of Palms that is expected to be in operation by spring 2022 and a spot on the site for every hospitality-related business on the Isle of Palms. Currently, only 21 IOP companies that are members of Explore Charleston are listed on the CVB’s site. Hill said they pay anywhere from $750 to $5,000 a year for that privilege. Burns said the changes were his suggestions. “They were off-the-cuff ideas that I felt would be meaningful expenditures that would be targeted for Isle of Palms,” he said. “She took those ideas and tried to run with them. That’s a positive thing on her part. I’m more interested in trying to find solutions to problems, rather than just criticizing.” “This has been painful for everybody to walk this path,” Hill commented. “There have been some difficult decisions. Many times, if we persevere, we’re going to come out with something better on the other end.” “Doug has asked some questions nobody else has asked,” she added. “We have complied with every mandate annually for giving them how we were going to spend money. The challenge was they didn’t like the way we report.” 

She concluded: “What they want us to do is to lift them up individually, which we’ve never done before. That’s what we’re going to do.”

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