Beaufort County has suspended applications for accommodations-tax grants because of a steep, unexpected decrease in state funding, according to county officials.
The fund is replenished by proceeds from the state's 2 percent tax on overnight lodging and is designated to fund programs that promote tourism and attract visitors.
The decrease could jeopardize some funding for area chambers of commerce and local nonprofit groups.
The reduction is the result of corrections in the way the state distributes accommodations-tax proceeds, county chief financial officer Alicia Holland said.
When businesses forward the taxes they collect to the S.C. Department of Revenue, they also report the county and municipal jurisdictions where they operate, according to department spokeswoman Bonnie Swingle. The department then distributes proceeds accordingly.
Earlier this year, the state discovered that some businesses had incorrectly reported their jurisdictions, Swingle said. For example, businesses within the towns of Bluffton or Hilton Head Island might have mistakenly coded their tax collections for unincorporated Beaufort County.
The state is now trying to redistribute the money correctly.
In theory, that would not take accommodations-tax money out of Beaufort County; it would simply mean more of it is controlled by the municipalities and less of it by the county, Holland said.
However, both county and municipal governments say their funding has dropped.
For instance, the city of Beaufort reports a slight decline, and the town of Bluffton's proceeds are down 21 percent through the first three quarters of 2014, as compared with 2013.
Beaufort County expected to receive more than $700,000 in fiscal year 2014 -- as it has in the past three years -- but has received only $317,247 through the first three quarters of the year, Holland said.
Fourth-quarter allocations, which will be made at the end of August, are likely to leave to the county with several hundred thousand dollars less than it expected, Holland said. It's unclear by how much, she added.
A decrease in tourism doesn't seem to explain the declines, Holland said. She noted that revenue from a separate 3 percent accommodations tax collected by the county has remained stable.
That fund is used to pay for expansion of the Spanish Moss Trail, lifeguards at Hunting Island State Park and the Santa Elena Foundation, and it is not affected by the discrepancy in state funding.
However, the decrease could affect funding for area chambers of commerce and nonprofits, such as Main Street Beaufort, USA; the Mitchelville Preservation Project on Hilton Head; and the Penn Center on St. Helena Island.
In fiscal year 2013, the county distributed $500,000 in state accommodations-tax dollars to almost 40 local organizations, according to county documents.
County administrator Gary Kubic and Dick Farmer, chairman of the board that reviews accommodations-tax grants, decided to suspend applications earlier this month. Kubic and Farmer will decide when to resume grants in early September, after the county receives its fourth-quarter allocations, Kubic has said.
Follow reporter Zach Murdock at twitter.com/IPBG_Zach.