Explanation of the two percent development tax in Myrtle Beach
Myrtle Beach’s two percent development incentive has been in place for a couple of years, but may not be widely understood. In fact, the incentive was the subject of a Facebook post recently. Someone wanted to know who pays for it. Great question. The city has two forms of incentives for developers, and both work in basically the same way. Here’s a detailed explanation of the process.
One incentive is for certain target industries that City Council has prioritized as a way of diversifying our economy and providing more jobs for our residents. The target industries are: medical providers, technology companies and what’s known as “experiential retail.” To date, the city has received one application for a targeted industry incentive, but it was not approved.
The second type of incentive is based on location and applies to those areas where City Council seeks to encourage redevelopment. The developer of the hotel nearing completion on Ocean Boulevard at Sixth Avenue North applied for this incentive, and it was approved. This is the South Mixed Use District, one of the older parts of the city. The project underway on Ocean Boulevard at Seventh Avenue North also would be eligible, but the developer has not applied for the incentive.
When a developer applies for an incentive, city staff and Council review the proposal, and Council must either approve or deny the application. If approved, the developer can receive a voucher for up to two percent of the project’s construction cost – not including any land cost – but only after the project is finished. The maximum incentive is $1,000,000, which would require a project to have a construction value of at least $50,000,000.
Once a certificate of occupancy has been issued for the completed project, the developer can use the voucher during the next five years to recover costs already paid, such as building permit fees, tap fees and impact fees. Other reimbursable costs include business license fees and water and sewer fees, up to the maximum incentive value. However, the incentive does not apply to property taxes, accommodations taxes, hospitality fees or other payments.
How does the city fund the incentive? From the development itself. Taxpayers don’t contribute anything to the two percent incentive. All property taxes flow as usual under these incentive programs. Instead, the developer can recover certain costs that were paid upon completion of an eligible project.
Everyone benefits from the development incentive, once it’s approved. The city gets a target industry or a desired redevelopment project, which may not have otherwise occurred, while the developer can recover a small portion of the costs paid to build the project.