1% hospitality tax focus of convention center meeting

The need for and public views toward a 1% hospitality tax fueled the most passionate discussion at Thursday’s (May 13) ad hoc committee created to consider funding options for the Fort Smith Convention Center.

An 8-member ad hoc committee was recently appointed by the Fort Smith board of directors to consider and recommend funding and/or operations options for the Fort Smith Convention Center. The city faces a potential convention center operations loss of up to $1 million annually to the city budget as early as 2011. The shortfall comes courtesy of the June 2010 expiration of $1.8 million from a state turnback program.

Members of the ad hoc committee are:
Tom Caldarera, restaurant owner
George McGill, businessman/insurance
Kevin Moran, Sparks Health System
Lavon Morton, ABF Freight System
George Moschner, Baldor Electric Co.
Craig Rivaldo, Arvest Bank
Ben Shipley, attorney

The most discussed option is a 1% tax on prepared foods. The tax — often referred to as a hospitality tax or hamburger tax — in Fort Smith would generate between $1.5 million and $2 million annually. Fort Smith is the only large tourism city in Arkansas without a hospitality tax on restaurants and other prepared-food providers.

Other options considered include instituting a business license fee that could collect up to $1.9 million annually, and asking voters to readjust the 1% street tax so a certain percentage goes to the convention center and quality of place projects. The street tax collects between $17 million and $20 million a year.

Prior to the discussion, City Administrator Dennis Kelly outlined what could be funding by a 1% hospitality tax.
• Convention center operations — $1.1 million annually
• Capital expenditure reserve for convention center — $240,000 annually
• U.S. Marshals Museum — $250,000 annually
• Fort Smith Classic — no more than $100,000 annually (variable funding, based on percentage of revenue generated)
• Area festivals — $40,000 (variable funding, based on percentage of revenue generated)
• Fishing tournament facilities — $50,000 (limited to three years)
• Bass Reeves statute support — $50,000 (for first two years of hospitality tax collection)
• Arts community support — $50,000 (begins in third year after Bass Reeves support ends)

Moran said in the groups he talks to, “people use strong words” to express disapproval of the hospitality tax. Caldarera agreed, noting there are “a lot of negative feelings among restaurant owners” in the area — especially among those who own fast-food operations.

Moschner, the committee chairman, said people won’t see it as just 1% more for a meal, they will see a combined sales tax rate of more than 10%.

“You’ve got to add it up, because they (consumers) will,” Moschner said.

Kelly said he thinks the public will support a tax if they see all the benefits it can provide to the regional economy.

“I agree, there is a lot of criticism out there because people have not heard the balanced story, so to speak,” Kelly said.

Morton said citizens will have to decide if they want a convention center and if they want the city to be in the tourism business.

“The big question is, ‘Do you want a convention center or not?’” Morton told the committee. “Because the other cities we compete against have one.”

Claude Legris, executive director of the Fort Smith Convention & Visitors Bureau, said a misconception exists that public convention centers are moneymakers. Instead, he noted, they are designed to create the most economic impact for a regional economy while losing the least amount of money.

“It’s (convention center) going to run a deficit, and I don’t think the public understands that,” Legris said.

McGill, who has been quiet during much of the recent meetings, held court for several minutes to explain what he hears from “grassroots and ground level” people.

“They’re asking me, ‘George, how much is this going to cost me?’” he said, adding that he tells them if he has a $60 restaurant tab to entertain family or friends the tax would add 60 cents. “And then they want to know what they will get for that.”

McGill said he explains that a 1% hospitality tax will help keep a convention center open that brings numerous events to town and supports many of the University of Arkansas at Fort Smith entertainment programs; it will help support art groups around the city and will help Fort Smith compete with other cities for tourism dollars.

“And they say to me, ‘I’m willing to pay that,’” McGill explained.

Continuing, McGill told the other committee members: “You cannot afford to let this facility close. … Nobody wants to see a boarded-up convention center.”