SC Administrative Law Court Decisions

STATEMENT OF THE CASE

On November 16, 2004 the City of Myrtle Beach (City or Petitioner) filed this matter with the Administrative Law Court (ALC or Court) requesting a hearing regarding the Tourism Expenditure Review Committee’s (TERC or Respondent) determination that two separate disbursements of accommodations tax funds by Petitioner in the fiscal year 2002-2003, one in the amount of $10,000.00 made to the “4^th Annual Myrtle Beach Fall Rally” and one to “Myrtle Beach Fireworks/Beach Bang 2003” in the amount of $20,000.00, did not comply with the requirements of S.C. Code Ann. § 6-4-10(4) (2004).[1]

Based upon its determination, TERC certified to the State Treasurer, pursuant to S.C. Code Ann. § 6-4-35(B)(1)(a) (2004), that the disbursements were non-compliant and that $30,000.00 worth of future distributions of accommodations tax revenues should be withheld from Petitioner.

The issue before the Court is whether disbursements of accommodations tax revenues to “for-profit” entities permitted under § 6-4-10(4) and they are, are the specific expenditures in this case “tourism-related expenditures” which are required by the statute.

Pursuant to notice, a hearing on the merits was held before me on August 16, 2005 at the offices of the ALC in Columbia, South Carolina. For the reasons set forth below, I conclude that disbursements of accommodations tax revenues to “for-profit” entities are permitted under §6-4-10(4). Further, I conclude that the City’s $10,000.00 disbursement to the “4^th Annual Myrtle Beach Fall Rally” was compliant with Section 6-4-10(4) but the City’s $20,000.00 disbursement to “Myrtle Beach Fireworks / Beach Bang 2003” was non-compliant with § 6-4-10(4).

STIPULATIONS OF FACT

The parties entered into the following written stipulation of facts, with exhibits attached, pursuant to ALC Rule 25(C):[2]

1. The City received an application for a disbursement of accommodations tax funds for fiscal year 2002-2003 from the “4^th Annual Myrtle Beach Fall Rally Committee” in the amount of $10,000.00 and from the “Myrtle Beach Fireworks/Beach Bang 2003” in the amount of $20,000.00, true and correct copies of which are attached Exhibits “A” and “B,” respectively.

2. The fiscal year 2002-2003 applications for disbursements to the “4^th Annual Myrtle Beach Fall Rally Committee” and the “Myrtle Beach Fireworks/Beach Bang 2003” were reviewed by the local advisory committee at its meetings held on December 5 and December 19, 2002, but were not recommended to the City Council for approval.

3. The City Council, at its meeting held February 11, 2003, authorized disbursements from the fund created under § 6-4-10(4) for fiscal year 2002-2003 in the amount of $10,000 for the “Myrtle Beach Fall Rally” and in the amount of $20,000 for the “Myrtle Beach Fireworks/Beach Bang.”

4. The City entered into a “Grant Agreement” with the “Myrtle Beach Fall Rally Committee” dated April 16, 2003 for the $10,000 disbursement authorized on February 11, 2003, a true and correct copy of which is attached hereto as Exhibit “C.” Although the City has been unable to locate an executed copy, the City entered into a “Grant Agreement” with “Myrtle Beach Fireworks, Inc.,” at some point in time after the February 11, 2003 meeting of City Council, which “Grant Agreement” was in the same form as the document attached hereto as Exhibit “D.”

5. The City of Myrtle Beach filed with the Tourism Expenditure Review Committee the report required under S.C. Code Ann. § 6-4-25 (D) (3), which report is dated October 16, 2003 and reflects the fiscal year 2002-2003 expenditures authorized by the City Council for the “Myrtle Beach Fall Rally” and the “Myrtle Beach Fireworks/Beach Bang,” a true and correct copy of which is attached hereto as Exhibit “E.”

6. The Tourism Expenditure Review Committee issued a May 3, 2004 letter to the City of Myrtle Beach notifying it that the expenditures authorized by the City Council for the “International Heritage Festival,” “Myrtle Beach Fall Rally” and the “Myrtle Beach Fireworks/Beach Bang” were being questioned, a true and correct copy of which is attached hereto as Exhibit “F.”

7. The Tourism Expenditure Review Committee issued a July 19, 2004 letter to the City of Myrtle Beach again notifying it that the expenditures authorized by the City Council for the “International Heritage Festival,” “Myrtle Beach Fall Rally” and the “Myrtle Beach Fireworks/Beach Bang” were being questioned, a true and correct copy of which is attached hereto as Exhibit “G.”

8. The City of Myrtle Beach issued a letter dated August 19, 2004, responding to the May 3, 2004 and July 19, 2004 letters of the Tourism Expenditure Review Committee, a true and correct copy of which is attached as Exhibit “H.”

9. The Tourism Expenditure Review Committee issued a September 30, 2004, letter notifying the City of Myrtle Beach that the “International Heritage Festival” expenditure of $2,000 was deemed acceptable. However, the Committee voted to direct the State Treasurer’s Office to withhold $30,000.00 from future distributions to the City of accommodations tax revenues because the fiscal year 2002-2003 expenditures authorized by the City Council for the “Myrtle Beach Fall Rally” and the “Myrtle Beach Fireworks/Beach Bang” had been made to recipients that were for-profit entities, a true and correct copy of which letter is attached hereto as Exhibit “I.”

10. At the time the 2002-2003 expenditures were approved and disbursed the “4^th Annual Myrtle Beach Fall Rally Committee,” the “Myrtle Beach Fall Rally Committee,” the “Myrtle Beach Tavern Owners Association,” the “Myrtle Beach Fireworks/Beach 2003 Bang” and “Myrtle Beach Fireworks, Inc.” were not registered as non-profit corporations under South Carolina law.

11. On October 20, 2003, the Myrtle Beach Fall Rally Committee applied to the City of Myrtle Beach for a grant of fiscal year 2003-2004 accommodations tax funds for the “5^th Annual Myrtle Beach Fall Rally.” A copy of that application is attached hereto as Exhibit “J.” The Myrtle Beach Fall Rally Committee’s application for fiscal year 2003-2004 was not recommended to City Council by the local advisory committee. City Council approved $10,000 for “5^th Annual Myrtle Beach Fall Rally.”

12. On October 24, 2003, Myrtle Beach Fireworks applied to the City of Myrtle Beach for a grant of fiscal year 2003-2004 accommodations tax funds for “Beach Bang 2004.” A copy of that application is attached hereto as Exhibit “K.” In 2003, the local advisory committee recommended that $20,000 of Myrtle Beach Fireworks’ application for $25,000 in funds for Beach Bang ‘04 be approved by City Council. In 2004, City Council approved Myrtle Beach Fireworks’ application for $25,000 for Beach Bang ‘04. On May 26, 2004, Myrtle Beach Fireworks incorporated as a non-profit corporation under South Carolina law.

FINDINGS OF FACT

Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, taking into consideration the burden of persuasion by the parties, I make the following Findings of Fact by a preponderance of the evidence:

1. The “4^th Annual Myrtle Beach Fall Rally” was an initiative of the Myrtle Beach Tavern Owners Association and the Doghouse Bar intended to attract motorcycle enthusiasts to the Myrtle Beach area for the purpose of generating sales of goods and services by various vendors in the area.

2. Petitioner’s $10,000 disbursement to the “4^th Annual Myrtle Beach Fall Rally” was used to advertise and promote the “biker rally” in print media advertisements placed on billboards, in certain publications targeted to motorcycle enthusiasts, and on a website referenced in such advertisements which described the events associated with the “biker rally.”

3. Other than the $10,000 disbursement by Petitioner, the sole source of revenue for the “4^th Annual Myrtle Beach Fall Rally” was a $1,900 contribution by the Doghouse Bar.

4. Although a portion of the $10,000 disbursement by Petitioner to the “4^th Annual Myrtle Beach Fall Rally” was used to promote the commercial interests of certain bars and vendors catering to motorcycle enthusiasts, the rally was open to the public and many of the people from other areas of the State of South Carolina and adjoining states who went to Myrtle Beach for the rally contributed to its overall economy by spending money at many of its businesses and hotels/motels, not just the bars and vendors catering to motorcycle enthusiasts.

5. The “Myrtle Beach Fireworks/Beach Bang 2003” was an initiative of various hotels/motels, bars, restaurants, merchants and other commercial interests to provide fifteen fireworks displays during the summer of 2003.

6. Petitioner’s $20,000 disbursement to “Myrtle Beach Fireworks/Beach Bang 2003” was used primarily, if not exclusively, to help defray the $68,200 cost incurred by various hotels/motels, bars, restaurants, merchants and other commercial interests to produce the fireworks displays; only $321.03 was devoted to advertising.

7. This $20,000 disbursement by Petitioner was not used primarily to attract tourists to Myrtle Beach, but to entertain the customers/tourists already at the various hotels/motels, bars, restaurants, and merchants, and other commercial interests specifically associated with “Myrtle Beach Fireworks / Beach Bang 2003.”

8. Petitioner’s accommodations grant application form which was used in this case required an applicant to state whether it was organized as a non-profit entity. Petitioner required this information to be provided at the request of its local advisory committee. Petitioner’s grant application procedure with its system of controls, checks and balances for disbursing the remaining balance of accommodations tax funds allows it to retain its discretionary authority over how accommodations tax funds are expended when disbursed to private organizations.

STIPULATION OF LAW

The parties stipulated the following conclusion of law pursuant to ALC Rule 25(C):

1. The City is required, pursuant to S.C. Code Ann. § 6-4-25(A) (2004), to appoint a seven member local advisory committee, consisting of at least four persons involved in the hospitality industry, to make recommendations to the City Council on applications for the expenditure of revenue generated from the state accommodations tax provided for under S.C. Code Ann. §§ 12-36-920(A) and 12-36-2630(3) (Rev. 2000) and allocated to the fund created under S.C. Code Ann. § 6-4-10(4)(2004).

CONCLUSIONS OF LAW

Based upon the above Stipulations and Findings of Fact, I conclude the following as a matter of law:

Statutory Background

1. Pursuant to S.C. Code Ann. § 12-36-920(A) (2000), a sales tax of seven percent (7%) is imposed by the state on accommodations provided to transients in South Carolina. One component of that tax is a two percent “local” accommodations tax which, pursuant to S.C. Code Ann. § 12-36-2630(3) (Supp. 2003), must be credited to cities and counties in accordance with S.C. Code Ann. §§ 6-4-5, et seq. (2004).[3] In counties where more than $50,000.00 in revenues is generated by the two percent accommodations tax, these revenues are required to be allocated between the local government entity’s general fund and a special fund in specified amounts and percentages. See S.C. Code Ann. § 6-4-10 (2004).[4] The balance of the accommodations tax proceeds, remaining after the specific amounts and percentages, are allocated to the general fund and the first special fund is to be allocated to another special fund to be used for “tourism-related expenditures.” See § 6-4-10(4).

A city or county receiving more than $50,000.00 in revenue from the accommodations tax is required to appoint a seven member local advisory committee to review applications made for disbursement of funds available for “tourism-related expenditures.” See § 6-4-25(A) (2004). At least four of the local advisory committee members must be associated with the hospitality industry and at least two of these four must be associated with the lodging industry. Id. One member must represent cultural organizations receiving revenue from the accommodations tax funds. Id. In order for a disbursement of funds to be used for “tourism-related expenditures” to be made by a city or county, its local advisory committee must first review a recipient’s application for funding. See § 6-4-25(B). Local advisory committees are required to submit written recommendations on such applications at least annually and the city or county is required to consider these recommendations in conjunction with the other requirements of §§ 6-4-5, et seq.

TERC was established by the General Assembly in S.C. Code Ann. § 6-4-35 (Supp. 2003 and 2004) “to serve as the oversight authority on all questionable tourism-related expenditures.” In order for Respondent to be able to discharge its duties and determine whether local government disbursements of accommodations tax revenues comply with §§ 6-4-5, et seq., municipalities and counties are required to forward to it certain reports required under § 6-4-25(D) (2004), including details of the city’s or county’s expenditures from the special funds vis-à-vis the recommendations of the advisory committee. If, upon review of these reports, TERC questions whether an expenditure complies with the requirements of §§ 6-4-5 et seq., it must notify the city or county involved and may consider any further supporting information submitted by the local government involved. Furthermore, if TERC finds an expenditure to be non-compliant, it must notify the State Treasurer who must thereafter withhold from future distributions of accommodations tax revenues to the city or county involved an amount equal to the non-compliant expenditure. See § 6-4-35(B)(1)(a). If a city or county disputes a finding of TERC that an expenditure is non-compliant, its recourse is to this Court. Id.[5]

2. Petitioner is a duly incorporated municipality of the State of South of Carolina with all the powers, rights and duties afforded to a municipality by the State of South Carolina. S.C. Code Ann. § 5-7-10, et seq.

3. The expenditure of the accommodations tax funds by Petitioner in this matter is governed by S.C. Code Ann. § 6-4-10(4)(a)(2004), which provides in relevant part: “The remaining balance plus earned interest received by a municipality or county must be allocated to a special fund and used for tourism-related expenditures.”

4. S.C. Code Ann. § 6-4-10(4)(b)(2004) provides that, “’Tourism-related expenditures’ include: 1. advertising and promotion of tourism so as to develop and increase tourist attendance through the generation of publicity; 2. promotion of the arts and cultural events; ….”

Burden of proof

5. In administrative proceedings, the burden of proof is generally on the party who asserts the affirmative of an issue. Leventis v. S.C. Dep’t of Health & Environmental Control, 340 S.C. 118, 530 S.E.2d 643 (Ct. App. 2000); see also Randolph R. Lowell and Stephen P. Bates, South Carolina Administrative Practice and Procedure at 200-201 (S.C. Bar 2004). In this instance, Petitioner contends that Respondent improperly certified the disputed expenditures to the State Treasurer as non-compliant in accordance with § 6-4-35(B) (1). In accordance with the general rule, Petitioner bears the burden of proof. Petitioner asserts, however, that Respondent bears the burden of proof in this case because the TERC assessed a civil penalty or imposed a sanction of withholding $30,000 of accommodations tax revenues from the City. Petitioner further asserts that the standard of proof applicable to this case is clear and convincing evidence. The Court disagrees on both points. Contrary to Petitioner’s assertion, ALC Rule 29(B) is inapplicable since the withholding of a future distribution of state accommodations tax is neither a penalty nor a sanction.[6] As noted above, accommodations tax revenues are generated as part of the seven percent (7%) sales tax imposed by the State of South Carolina on accommodations provided to transients. S.C. Code Ann. § 12-36-920(A) (Rev. 2000). The 2% portion of this sales tax which generates the accommodations tax revenue is to be credited to Petitioner, but in accordance with S.C. Code Ann. §§ 6-4-5, et seq. (2004). See S.C. Code Ann. §12-36-2630(3) (Supp. 2003). This means that the distribution of accommodations tax revenue to Petitioner is conditioned upon Petitioner’s compliance with the requirements of §§ 6-4-5, et seq. in disbursing the funds. If funds distributed are found not to have been expended by Petitioner in accordance with the provisions of §§ 6-4-5, et seq., the State Treasurer – and not the TERC – withholds the expenditure that is not compliant “from subsequent distributions in accommodations tax revenue otherwise due.” See § 6-4-35(B)(1)(a) (emphasis added). Thus, rather than exacting a monetary payment from Petitioner to punish it, the legislature has provided that future distributions of specific state tax revenues to the City will be curtailed with the beneficiaries of that curtailment being other municipalities and counties. See §6-4-35 (B) (1) (c). It is well-settled that the legislature has plenary power in the area of taxation, subject

only to express constitutional limitation. Clarke v. S.C. Publ. Serv. Auth., 177 S.C. 427, 181 S.E. 481 (1935). The Court is unaware of any constitutional limitations on the legislature’s power to determine the manner in which accommodations tax revenues will be distributed. Cf. Westvaco v. S.C. Dep’t of Revenue, 321 S.C. 59, 467 S.E.2d 739 (1995). Accordingly, the Court concludes that a legislative determination not to make a distribution of state tax revenues requires no “payment” by the City and therefore does not impose a “penalty.” Therefore, ALC Rule 29(B) does not apply and the burden of proof remains with Petitioner. Given that, the standard of proof that the City must satisfy is a “preponderance of the evidence.”[7] See Anonymous v. State Bd. of Med. Examiners, 329 S.C. 371, 496 S.E.2d 17 (1998).

6. Petitioner is the proponent in this contested case, which does not involve the assessment of a civil penalty or a sanction. Therefore, Petitioner bears the burden of proof.

7. In order to meet its burden of proof, Petitioner must establish by a preponderance of the evidence that the $10,000 disbursement to the “4^th Annual Myrtle Beach Fall Rally” and the $20,000 disbursement to the “Myrtle Beach Fireworks/Beach Bang 2003” were compliant with S.C. Code Ann. § 6-4-10(4).

Disbursements to “for-profit” entities

8. Petitioner contends that Respondent has improperly interpreted § 6-4-10(4) to preclude a disbursement of accommodations tax revenues to entities that are not organized as “non-profit.” According to Petitioner, because § 6-4-10(4) contains no such limitation on expenditures of accommodations tax revenues by a municipality or county, Respondent’s certification of non-compliance to the State Treasurer with respect to the $10,000 disbursement to the “4^th Annual Myrtle Beach Fall Rally” and the $20,000 disbursement to the “Myrtle Beach Fireworks/Beach Bang 2003,” on the ground that neither entity was organized as a “non-profit” entity, was improper. Petitioner argues that Respondent has impermissibly added a requirement to § 6-4-10(4).

Petitioner points out that § 6-4-10(3) requires that any organization created by a municipality or county to manage and direct the expenditure of accommodations tax funds for the promotion of tourism be organized as a non-profit entity while § 6-4-10(4) is silent in this regard; thus, Petitioner would assert that § 6-4-10(4) must be interpreted as not including any limitation with respect to the manner in which a recipient of accommodations tax funds is organized (i.e., “for-profit” versus “non-profit”). Although application of the canon of statutory construction expressio unius est exclusio alterius would result in such an interpretation, the canon may not be used to defeat legislative intent. State v. Leopard, 349 S.C. 467, 563 S.E.2d 342 (Ct. App. 2002). The maxim is not a rule of substantive law, but only a rule of statutory construction which should be used with care. Id.

Respondent asserts that it has properly interpreted § 6-4-10(4) to preclude disbursements to entities which are not “non-profit” and, in support of that assertion, partly relies upon South Carolina Attorney General Opinion No. 85-12, issued February 11, 1985, which concludes that “accommodations tax cannot be appropriated to a private for profit organization to be expended by the organizations to advertise and promote its event.” The basis for the legal opinion is that a local government cannot delegate its discretionary authority to a private for profit entity. Id. The author of the Attorney General’s opinion made the assumption that the “appropriation to the for profit organization would be expended as directed by the for profit organization.” Id. Petitioner correctly contends that the 1985 Attorney General’s opinion is not applicable to this matter because Petitioner, not the beneficiary of the disbursement, directs how the accommodations tax funds are expended through a grant application process that complies with S.C. Code Ann. § 6-4-10, et. seq.

Under Petitioner’s grant application system, an organization applies to it to be able to expend accommodation tax funds for a specific purpose. The grant application is reviewed by Petitioner’s staff and sent to a local advisory board for its recommendation. After those two steps have been completed, the Myrtle Beach City Council exercises its discretionary authority and decides whether the purpose of the expenditure has merit and complies with the terms of the accommodations tax statutes. If City Council approves the application, it authorizes the expenditure of the accommodation tax funds for a specific purpose. When City Council authorizes an expenditure, the organization has no discretionary authority left to exercise. The funds must be used as authorized by Petitioner, or it can demand the return of those funds.

Petitioner’s checks and balances are created to insure that the accommodations tax funds are spent for tourism related expenditures as directed by it. Petitioner does not delegate its discretion to for-profit or not-for-profit entities. In this matter, Petitioner’s disbursement of funds through its grant application system complies with the requirements of the accommodations tax statutes.

Petitioner does not contend that it has unbridled discretion to spend the accommodation tax funds. The City must comply with the statutes. The Legislature delegated to the Petitioner the responsibility for making the expenditures and along with that responsibility must come some flexibility in deciding the best way to promote tourism within its jurisdiction. In discussing the legislative purpose underlying the use of accommodations tax funds the South Carolina Court of Appeals in Thompson v. Horry County, 294 S.C. 81, 362 S.E.2d 646 (Ct. App. 1987), observed:

In our view, the statute reflects a practical recognition by the Legislature that expenditures which promote tourism will generally enlarge the economic benefits for an entire geographic area of the county without regard to municipal boundary lines…. For this reason, it makes sense to give counties some flexibility as to how and where they spend accommodations tax revenues. Id at 648..

Respondent acknowledges that there is no language in § 6-4-10(4) that expressly precludes a disbursement of accommodations tax revenues to a for-profit entity; nonetheless, Respondent asserts that such an expenditure is inconsistent with the intent of the act that accommodations tax revenues be used for the advertising and promotion of tourism because funds so expended would be used to promote the interests of the for-profit entities. According to Respondent, its statutory charge to oversee all “questionable tourism-related expenditures” under § 6-4-35(B)(1)(a) justifies its determination that expenditures to for-profit entities are not proper under § 6-4-10(4).

The Court generally gives deference to an administrative agency's interpretation of an applicable statute or its own regulation. Brown v. South Carolina Dep't of Health and Envtl. Control, 348 S.C. 507, 560 S.E.2d 410 (2002). Nevertheless, where, as in the present case, the plain language of the statute is contrary to the agency's interpretation, the Court will reject the agency's interpretation. Id.; Richland County School Dist. Two v. South Carolina Dept. of Educ., 335 S.C. 491, 517 S.E.2d 444 (Ct. App. 1999).

The cardinal rule of statutory construction is to ascertain and give effect to the intent of the General Assembly. Wigfall v. Tideland Utilities, Inc., 354 S.C. 100, 580 S.E.2d 100 (2003). Where the language of a statute is plain, unambiguous and conveys a clear meaning, there is no need to apply rules of statutory interpretation. Tilley v. Pacesetter Corp., 36655 S.C. 361, 585 S.E.2d 292 (2003). Respondent argues that the plain language of this statute lends itself to two equally logical interpretations and that the rules of statutory construction must be applied to resolve the ambiguity and ascertain the legislature’s intent. Kennedy v. S.C. Retirement System, 345 S.C. 339, 549 S.E.2d 243, rehearing denied, 349 S.C. 531, 564 S.E.2d 322 (2001). The Court does not find that § 6-4-10(4) is ambiguous. It contains no reference to any limitation upon the type of entity which may receive disbursements of accommodations tax revenues under that subsection; it only requires that expenditures there under be “tourism-related.” Thus, the logical interpretation of the plain language of the statute is that no such limitation exists. The authorization of Respondent in § 6-4-35(B)(1)(a) to “serve as the oversight authority on all questionable tourism-related expenditures” does not lend any ambiguity to § 6-4-10(4). (Emphasis added).

Furthermore, our Supreme Court enunciated the Latin principal of ital ex scripta est (“so the law is written”) in Beaty v. Richardson, 56 S.C. 173, 180, 34 S. E. 73, 76 (1899), stating that “the legislature must have intended to mean what it has plainly expressed, and consequently there is no room for construction…Where the words of a statute are plainly expressive of an intent, not rendered dubious by the context, the interpretation must conform to and carry out that intent. It matters not, in such a case, what the consequences may be.” Section 6-4-10(4) is plain and clear. The application of its words will not lead to an absurd result. It is not appropriate for this Court to search for legislative intent beyond the borders of the statute. A logical interpretation is that an expenditure must be “tourism-related” but is not required to be made to a non-profit organization. In the present case, the plain language of the statute does not contain any requirement that the funds in question be disbursed to a non-profit entity. If the legislature had intended to restrict the expenditure of funds in question to non-profit corporations it could have easily done so. In fact, the legislature did restrict the expenditure of certain funds to organizations specifically organized as non-profit organizations in the section immediately preceding the section in question. Cf. S.C. Code Ann. §§ 6-4-10(3) & 6-4-10(4)(a). Petitioner correctly contends that Respondent is not authorized to create additional restrictions on the discretionary authority of local governments in connection with disbursing accommodations tax funds.

In Thompson, supra, the Court of Appeals interpreted an earlier version of the accommodation tax statutes. That case involved taxpayers’ challenge to Horry County’s expenditure of accommodation tax funds in certain geographical areas. The appellate court found the legislature had prescribed two requirements for expenditures from the special fund: (1) they must be "tourism-related" and (2) they must be made "primarily in the geographical areas of the county in which the proceeds of the tax are collected where it is practical." Id. The circuit court had held most of the challenged expenditures were unlawful because, in its opinion, the Act prohibited the County from spending taxes collected in the unincorporated areas of the county. The appellate court reversed the trial court finding no such prohibition appeared in the text of the statute. Id. The appellate court further found that if the Legislature had intended to restrict the expenditure of accommodation tax funds to certain geographical areas it could have easily done so. In light of the foregoing, I conclude that Section 6-4-10(4) does not preclude disbursements of accommodations tax revenues to entities that are not organized as “non-profit.” However, the Court agrees that it is reasonable for Respondent to question expenditures that result in public funds being distributed to private interests unrestrained by the limitations applicable to non-profit entities.

“Tourism-related” expenditures

9. Respondent contends that even if § 6-4-10(4) does not prohibit disbursements from the fund created thereunder to for-profit entities, certification of the $10,000 disbursement to the “4^th Annual Myrtle Beach Fall Rally” and the $20,000 disbursement to the “Myrtle Beach Fireworks/Beach Bang 2003” to the State Treasurer as non-compliant was appropriate because the expenditures were not “tourism-related.” The Court agrees with this contention as to the disbursement to “Myrtle Beach Fireworks/Beach Bang 2003,” but not as to the disbursement to the “4^th Annual Myrtle Beach Fall Rally.”

“Tourism” has been defined by the legislature to “mean the action and activities of people traveling outside their home communities for any purpose, except daily commuting to and from work.” See § 6-4-5(4). As it relates to the instant case, the purpose of the statute which Petitioner would necessarily be seeking to fulfill is the promotion of travel by people to Myrtle Beach for reasons other than work since neither expenditure in question involved the provision of “facilities” or “services.” The question then becomes whether an expenditure of accommodations tax funds to a for-profit entity promotes tourism.

As to the “4^th Annual Myrtle Beach Fall Rally,” Petitioner contends that the advertising authorized by it was for the fall rally event and not for individual businesses. The event attracts tourists to the area from many different states and many businesses benefit from the tourists who attend the event. Petitioner’s Budget Director, Mike Shelton, testified all grant requests promote events that are narrowly tailored to appeal primarily to certain tourists. For example, baseball tournaments appeal primarily to baseball fans. He testified that Petitioner attempts to promote diversity through its selection process by approving grant applications from many different organizations that appeal primarily to different groups of tourists.

The Court does not find any limitations in the statutes which prohibit Petitioner from expending accommodations tax funds to advertise events which are directed to a certain group of tourists. Obviously, accommodations tax funds cannot be used for private commercial advertising. That expenditure would violate the constitutional prohibition of using public funds for private purposes. S.C. Const., art. X, §6; see also Anderson v. Baehr, 265 S.C. 153, 217 S.E.2d 43 (1975). However, in this matter the expenditures were for advertising a public event that attracted tourists to the City of Myrtle Beach. The fact that one group of tourists may be more interested in the event and those tourists tend to patronize many of the business organizations sponsoring the event does not prevent the expenditure from being a tourism-related expenditure.

It is clear from the evidence that the “4^th Annual Myrtle Beach Fall Rally” organization expended the $10,000 disbursed to it to advertise its “event.” Even though a portion of the purpose for staging this “event” was to benefit the bars and vendors which catered to these many tourists who came to Myrtle Beach, it is without doubt that during their stay in Myrtle Beach they benefited the entire retail business community and accommodations industry.

Respondent argues that since the application for this disbursement was made by the “Myrtle Beach Tavern Owners Association,” it could have only benefited them and was not tourist related because it did not benefit the entire business community. It is true that the publications in which advertisements for the event were placed were targeted to motorcycle enthusiasts. The website referenced in these advertisements referred potential attendees to a series of “events” at specific bars and vendors catering to motorcycle enthusiasts. The only source of funds for the “event” – other than the questioned expenditure – was a contribution by one of the bars prominently featured on the referenced website. The actual statement of revenues and expenditures by the Myrtle Beach Fall Rally for the event in question shows that, with the exception of advertising expenses, there were no costs associated with the event. See Respondent’s Exhibit 1. The Court finds that the tourism that resulted from this expenditure was incidental to and a direct result of these funds and advanced the business interests of the entire Myrtle Beach business community. Accordingly, I conclude that the $10,000 disbursement to the “4^th Annual Myrtle Beach Fall Rally” was “tourism-related” as contemplated under § 6-4-10(4) and that the certification by Respondent of such disbursement as non-compliant to the State Treasurer was improper.

However, I conclude that the $20,000 disbursement to the “Myrtle Beach Fireworks/ Beach Bang 2003” organization did not constitute a “tourism-related expenditure” as contemplated under the statute. The evidence establishes that not more than $329 out of the $20,000 disbursed (if that much) was used to advertise or promote the 15 fireworks displays approved by Petitioner. Rather, the evidence establishes that the disbursement was used to defray a portion of the approximately $68,000 cost of putting on the fireworks displays, the balance of which was borne by local restaurants, bars, shops, hotels and various other merchants. The Court agrees with the position advanced by TERC Vice Chairman Siegling that use of accommodations tax funds for the principal purpose of defraying operational expenses for a weekly event that is produced at the behest of commercial interests simply funds a business undertaking by those interests The near complete lack of advertising of the firework shows is evidence that the expenditure did not promote tourism by attracting tourists, but merely served to reduce the cost of commercial enterprises wishing to entertain tourists who were already present in the area. Therefore, I conclude that the $20,000 expenditure was not “tourism-related” as required by the statute and that Respondent properly certified it as non-compliant to the State Treasurer.

10. Accordingly, I conclude that Petitioner has failed to meet its burden of proof as to the $20,000.00 disbursement to the “Myrtle Beach Fireworks/Beach Bang 2003.” It has not established that such was tourism-related. However, Petitioner has met its burden of proof as to the $10,000.00 disbursement to the “4^th Annual Myrtle Beach Fall Rally.” I find that this disbursement was used by the recipient organization for tourism-related purposes. Therefore, TERC properly certified to the State Treasurer that $20,000 should be withheld from future distributions of accommodations tax revenues to the City because of its noncompliance with S.C. Code Ann. § 6-4-10(4) in disbursing $20,000 to the “Myrtle Beach Fireworks/Beach Bang 2003” in fiscal year 2002-2003.

CONCLUSION

Based upon the foregoing,

IT IS HEREBY ORDERED that the action by Respondent to the State Treasurer’s Office to withhold $20,000.00 from subsequent distributions of accommodations tax revenues to Petitioner based upon its finding that Petitioner’s $20,000.00 disbursement to “Myrtle Beach Fireworks / Beach Bang 2003” was non-compliant with § 6-4-10(4) is affirmed; and

IT IS FURTHER ORDERED that the action by Respondent to the State Treasurer’s Office to withhold $10,000.00 from subsequent distributions of accommodations tax revenues to Petitioner based upon its finding that Petitioner’s $10,000.00 disbursement to “4^th Annual Myrtle Beach Fall Rally” was non-compliant with § 6-4-10(4) is reversed.

AND IT IS SO ORDERED.