Proposed bill would make it easier to boost tourism tax

A bill that would make it easier for the city of Fort Smith to levy a 1% hospitality tax was filed Monday (Feb. 2)

The bill one was one of the top legislative priorities of the city of Fort Smith. Rep. Beverly Pyle, R-Cedarville, was one of the four bill sponsors.

HB 1317 would remove the 1,000-acre provision from a tax levy law, a move that would allow Fort Smith and other cities to enact a 1% hospitality tax without having to funnel the proceeds through an advertising and promotion commission.

Fort Smith board members and city staff have said they would only support an increase to the city’s hospitality tax if the city could control the funds. Presently, Fort Smith has a 3% tax on lodging that is collected and administered by the Fort Smith Advertising & Promotion Commission. Fort Smith is one of the few active tourism cities in Arkansas without a hospitality tax on restaurants and other prepared-food providers.

Ray Gosack, deputy Fort Smith city administrator, said the law change simply takes a provision in state law and makes it more applicable to other cities. The existing law, sometimes referred to as the Burns Park bill, was written and passed exclusively to allow the city of North Little Rock greater flexibility with hospitality tax collection and management.

It’s that flexibility Fort Smith seeks.

“This still requires voter approval, but what it does is give more local control, and allows the voters to decide how the proceeds are used,” Gosack explained.

A 1% tax on prepared foods in Fort Smith would generate between $1.5 million and $1.75 million annually, Gosack said.

 A similar bill — also lobbied for and supported by the city of Fort Smith — was defeated in the 2007 General Assembly.

“This bill might be hard to derail because it’s got the support of the Arkansas Municipal League behind it,” a state tourism official told The City Wire.

Bob Purvis, executive director of the Pine Bluff Convention and Advertising and immediate past chairman of the Arkansas Association of Convention and Visitor Bureaus, opposes HB 1317, saying it is essentially “a tax to enhance a city’s general fund.”

“I mean, you already know the situation in Fort Smith and what they did with their funds,” Purvis said. He was referring to the city’s use of general revenue funds from the Fort Smith Convention Center to subsidize the Fort Smith Public Library and other non-tourism organizations.

Also, Purvis said “the mechanism” for cities to raise the hospitality tax is in place. “You don’t need to change the law. … A city could just contract, like I explained earlier, just contract with an A&P commission” on how to disburse hospitality tax proceeds.

Gosack said a contract adds an unnecessary step.

“Why should a city have to contract with an A&P commission to get funding for city-owned parks? You’ll have to explain that one to me,” Gosack said.

No funds from an increased hospitality tax will be used to subsidize city operations, Gosack explained, saying that if proceeds are collected by the city, they remain in a separate account that is 100% transparent.

“This would not be replacement funding. The purpose of this is to supply additional funding to parks,” Gosack said. “That money (tax proceeds) would be there for all to see. We couldn’t play shell games with it even if we wanted to.”