Richland County to review funding process for hospitality tax program

Richland County Council is reviewing its process of awarding taxpayer dollars to local organizations to promote tourism-related activities to determine whether the 11-member body needs to improve the way it allocates the grants, which are approved by a majority vote.

The review will entail an internal audit and recommendation of a new approach for the distribution of hospitality tax proceeds.

Focusing on the past three fiscal years, County Administrator Gerald Seals has initiated an internal of the County’s hospitality tax program.  The internal audit will review whether utilization and distribution of the hospitality tax has been in compliance with the existing County policy.  The audit will cover the last three fiscal years, dating back to FY 2013.  The audit will be completed by Dec. 30, 2016.

At the same time the internal audit is being conducted, staff is reviewing the County’s approach to distributing the proceeds generated by the hospitality tax.

“Although many organizations receive grant funding through Richland County Government each year, we realize there are questions in the community about the process,” Seals said. “Council has asked me to review the current advocacy-based system and provide a recommendation for a more compliance-based system.”

The assessment centers on the County’s hospitality tax, or h-tax, program, funded largely by a 2 percent sales tax on prepared food consumed at local restaurants in unincorporated Richland County. Through publicly recorded votes, County Council awards funding to local organizations to spur tourism in Richland County.

The County’s current system is described as an advocacy-based system, in which each Council member can lobby the other members of County Council for local organizations to receive funding.  The decision to fund is then determined by a majority vote of County Council.  By contrast, under consideration is a compliance-based system, in which the funding process is neutral in that it is based on each organization requesting funding to demonstrate it meets a pre-ordained set of standards. County Council is expected to receive recommendations by Jan. 6, 2017 from Seals that addresses the merits of a compliance-based process with related guidelines and policies.

Regardless of the method used to allocate h-tax funds, Seals points out that County Council must vote to approve all funding. No individual Council member can appropriate funds to an organization. Each h-tax award must be approved by a majority vote of County Council.

In reference to recent questions about members of Council advocating for funding, Seals said it is best to get accurate information.

“Corruption, even the charge of corruption by innuendo, is easy to hurtle; we must be careful about throwing spit balls to see what sticks,” Seals said. “Ultimately, it is up to law enforcement to determine corruption. The internal audit will reveal whether or not improprieties have been engaged in concerning the distribution over the last three years concerning the award of hospitality tax funding.”

The County allocated a total of $3,668,516 in h-tax funding for the FY 2017 budget year that ends June 2017. The top five benefactors of h-tax funds in FY 2017 are Columbia Museum of Art, $765,872; Historic Columbia Foundation, $385,143; Township, $300,000; Pinewood Lakes Foundation, $230,000; and Columbia International Festival, $169,895.

H-tax funds must be used for tourism-related expenses, but some expenditures are not eligible for funding:

• Items, such as T-shirts, cups or trophies, given to tourists at the event
• Insurance or licenses
• Invoices outside the funding year
• Some salaries
• Decorations
• Gift cards
• Signage and banners
• Directional signage
• Programs
• Volunteer T-shirts and other items distributed at the event

As it relates to County Council’s funding of community organizations, Seals emphasizes that it is important for residents to understand Council’s role.

“It is Council as a body that makes the decision – not a decision of an individual Council member,” Seals said. “We have to be careful about accusing an individual of corruption when the decision making includes the entire body.”