Local chambers of commerce and nonprofits should start watching their pennies.
A mysterious drop in state funding may result in fewer dollars available for accommodations-tax grants. The money for the grants comes from the state's 2 percent tax on overnight lodging. Various nonprofits, arts groups, chambers of commerce and other vie for a cut of the proceeds. Recipients use it for events and activities that attract visitors to our area.
Previous recipients include Main Street Beaufort, USA; the Mitchelville Preservation Project on Hilton Head Island; and the Penn Center on St. Helena Island. Nearly 40 local organizations received a collective $500,000 in state accommodations-tax dollars last fiscal year.
All signs point to a smaller pot of money this fiscal year. The city of Beaufort reports a slight decline while the town of Bluffton's proceeds are down 21 percent through the first three quarters of 2014 compared with 2013. Meanwhile, Beaufort County expected to receive more than $700,000 this year but has received only $317,247 through the first three quarters. We'll have to wait and see what the fourth quarter brings, but it's likely to leave the county several hundred thousand dollars below its projection.
So why is there a drop? Is tourism down? No, say county leaders. They point to revenue from a separate 3 percent accommodations tax collected by the county that has remained stable. It too would have dropped if fewer tourists had visited the county.
The state claims the culprit is businesses that incorrectly reported their location. For example, some businesses in unincorporated Beaufort County mistakenly claimed to be in the towns of Bluffton and Hilton Head Island. When these businesses forwarded the taxes they collected to the S.C. Department of Revenue, the proceeds were mistakenly sent to the wrong jurisdiction because of the coding error.
Earlier this year, the state discovered that many businesses had made the mistake. It is now trying to redistribute the money correctly.
Still, that doesn't fully explain the problem. If that were the case, we would expect to see an increase in collections by Bluffton and Hilton Head Island and a decrease in collections by the county. But all of the jurisdictions are reporting a funding drop.
Something else appears to be amiss. To figure it out, leaders for our local municipalities and Beaufort County must push the S.C. Department of Revenue to peel the layers of the onion. Perhaps a second coding error is contributing to the problem.
In the mean time, Gary Kubic, Beaufort County's administrator, and Dick Farmer, chairman of the board that reviews accommodations-tax grants, have made a good decision to suspend applications for grants.
Without knowing the amount of money that will ultimately be available, it's wise to discourage groups from seeking it.
Organizations planning on applying for accommodations-tax dollars should heed the county's warning and not anticipate receiving much.
Of course, everyone hopes the errors that are causing the funding drop can be found and corrected very soon. But this may be a classic case in which being safe is better than being sorry.