Do no harm

guest commentary by Michelle Stockman

The Fort Smith Board of Directors recently met to discuss how the city will prioritize and fund “quality of place” projects. By now it is no secret that the city needs to find a way to fund the continued operations of the Fort Smith Convention Center. In addition to the Convention Center, the Board of Directors has added other “wish list” items to include on their “quality of place” agenda that include riverfront development and athletic/aquatic parks.

Fort Smith has been addressing the idea of “quality of place” for several years now, and the city has seen good results from the efforts. Economic development efforts across the country have embraced the idea of “quality of place” for the past 10-15 years as an additional tool to attract business relocations. States and communities are very competitive in offering traditional incentives as well as lifestyle amenities to attract new businesses into the community. Likewise, businesses have become more employee focused and seek communities that will support their desires for a happy workforce.

It is no secret that Fort Smith has been the state leader on manufacturing relocations into the region. In the heyday of plant relocations, Fort Smith won time and again. However, the heyday is over and industrial recruitment has lost its much of its luster. While industrial recruiting is still a necessary tool in the economic development tool kit, creating a special “quality of place” has grown in importance to encouraging and supporting entrepreneurship and white collar job attraction.

In this day of balancing work and life obligations, cities that assist citizens to be productive in both have succeeded. We’ve seen non-destinations become the Top 10 of the best places to live, work, start a business and play. Austin, Texas, Raleigh, N.C., Littleton, Colo., and more have replaced New York, Chicago, Los Angeles and Miami as places to live. In Fort Smith, an effort is underway to attract and retain the talent that is needed to boost and encourage a vibrant economy.

However, the Fort Smith Board of Directors has proposed two counterproductive ideas for funding the “quality of place” measures they wish to build. In realizing that the city faces a “chicken or the egg” scenario in building additional attractions within the city, two proposals have the potential to harm the city more than it helps.

The first proposal, and seemingly more popular idea, may attach up to a 3% prepared food tax. In other words, when you go out to eat at any restaurant within the city limits, you may end up paying 12.25% on the food bill. With many locally owned restaurants struggling to survive this down economy, this tax not only affects the citizens who are the regular patrons of these restaurants, but the restaurant owners will see a negative impact on their sales. In a city that was eager to be the first to start a community center to support entrepreneurship, this additional tax is counterproductive to the original intent to support small entrepreneurial businesses.

Likewise, restaurants are the life blood and front line in helping to create a “quality of place.” Increasing the tax rate to equal or surpass the tax rates that you would typically see in New York or Chicago does not fit with the size and the citizens of the city. I can eat at a fine restaurant in Phoenix and only pay 8% tax on my food or I can eat in Van Buren and only pay 9.25% tax.

The second proposal to support the funding of the Convention Center and other entities is to renew the privilege (or business) license fee. While the directors noted that this proposal would be a last resort measure, the proposed fees would jeopardize the survival of many small entrepreneurial companies and deter future businesses from relocating to Fort Smith. The directors proposed to charge $200 plus $15 per employee (up to a maximum of $30,000) for a privilege license in Fort Smith.

While most towns and cities utilize the privilege license as a means to obtain census data on the businesses that operate within that community. Others assess a small fee to businesses for applying for and obtaining a privilege license to cover the administrative expenses incurred by that community for the license.

In Arkansas, Bentonville and Fayetteville do not require businesses to obtain privilege licenses. Rogers, Little Rock and Conway require the privilege license, but do not charge a fee for obtaining the license (though Little Rock does charge businesses a small yearly property-like tax on their businesses). Jonesboro and Springdale charge a small fee for their privilege licenses, but neither city charges more than $150 a year. Oklahoma City and similar larger cities within the mid-west charge up to $200 a year for a privilege license.

The problem with this proposal is the city is seeking all our businesses to pay for entities within the city that are for all the citizens. Most of the businesses in Fort Smith are working as hard as they can to survive this economic nuclear winter that started in late 2007. The intention of the privilege license is to grant a business the right to do business within city limits. Adding as large a fee as Fort Smith proposes will grant the businesses the right to decide on whether they want to conduct their business in Fort Smith at all in the future.

When the idea of “quality of place” is to attract people to a community, pushing our businesses out is not a way to pay for the rest of us to play. It’s time to consider the health of our business environment before charging forward on paying for facilities that would be rendered useless if we lose our business base.

Michelle Stockman works with Little Rock-based Arkansas Capital Corp. to promote entrepreneurship development around the state. Stockman earned a bachelor’s degree from Loyola University-Chicago in communications and fine arts, and earned a master’s in entrepreneurship from Western Carolina University. She can be reached at [email protected]