Local and statewide support, opinions mixed on restaurant tax

Fort Smith restaurateur Eddie York says a small group of local restaurant owners and the Arkansas Hospitality Association will band together to kill any attempt to gain voter approval of a 1% prepared food tax in Fort Smith.

But like a lot of the talk and action related to fixing the up to $1 million shortfall with the Fort Smith Convention Center, it’s not that simple.

The Fort Smith board of directors meets today (June 29) at noon to figure out how to proceed following a report from an ad hoc committee that unanimously endorsed the idea of a 1% prepared food tax.

The ad hoc convention center committee was formed by the board of directors after the board spent more than 18 months trying to come up with a solution to plug an up to $1 million annual deficit when a state turnback program ends in June 2010. The city has received about $1.8 million a year from the tourism turnback fund, but the city will receive only $888,723 in 2010. (Link here for more details on the convention center funding issue.)

The ad hoc committee first met April 22 and reviewed several options, including a 1% hospitality tax, finding cuts in the city’s roughly $40 million operating budget, reallocating a portion of the city’s 1% street tax, re-instituting a business license fee and finding a 3rd party operator.

On May 26, the committee endorsed the idea of a 1% prepared food tax that would also support the U.S. Marshals Museum and art and entertainment facilities and programs. As part of that endorsement, the committee called for a management merger of the convention center and the Fort Smith A&P.

The city board has held special meetings and discussed the convention center issue for more than 18 months. The board 5-2 on Jan. 26 to seek voter approval of a 1% prepared food tax to fix the funding problem. But there has been no movement since the board vote to push a plan to voters.

LOCAL OPPOSITION
“I think with just a little bit of our organization pushing back on this, I think we can help convince the city not to fool with this thing,” York said Monday. “Leave the restaurants alone, I mean, find some other way to pay for it.”

York says he’s for saving the convention center, adding that it helps the overall economy. He isn’t sure where the money should come from, but thinks the group of restaurant owners can come up with a better plan.

“I am definitely for the convention center and Fort Smith needs it. That thing is vital for Fort Smith,” York said. But when asked about how it should be funding, York noted: “I don’t have those answers yet, but we are going to get a group together and get those numbers together and make a proposal.”

The group should come together in the next few weeks, York advised. He said the Arkansas Hospitality Association will probably help the Fort Smith restaurant sector oppose a 1% prepared food tax. AHA Executive Director Montine McNulty was unwilling to commit for or against the plan.

“We generally follow what the (local AHA) leadership wants,” McNulty said. “The ideal thing is when the local city officials work with the industry and try to work something out.”

(Burt Haifley, general manager of the Courtyard Marriott in downtown Fort Smith and near the convention center, is president of the local AHA chapter. He is also a member of the Fort Smith Advertising & Promotion Commission. The City Wire was unable to connect with Haifley, but will update this post when he provides comment.)

McNulty did question the economic timing of a tax.

“The biggest issue right now is the state of the economy. This is just a terrible time to put a tax on the restaurant industry,” she said.

Burt Haifley, general manager of the Courtyard Marriott in downtown Fort Smith and across the parking lot from the convention center, is president of the local AHA chapter. He is also a member of the Fort Smith A&P. (The City Wire was unable to connect with Haifley, but will update this post when he provides comment.)

HOT SPRINGS, LITTLE ROCK EXPERIENCE
Peter Brave, owner of Brave New Restaurant in Little Rock, is not a fan of the capital city’s 2% prepared food tax. Little Rock also has a 2% hotel tax to support its convention center and tourism efforts. Brave, in the restaurant business more than 20 years, said the tax supports only those restaurants near in the convention center and the nearby Clinton Presidential Library.

“My stance on this is that it benefits a very, very small handful of the people. And by people I mean restaurant owners there (in downtown Little Rock). If we get a large convention in town, I’m not going to benefit from it. … the people within walking distance of the hotels and the Clinton Library, they benefit,” Brave explained.

Frank Deuschle, a partner in The Brick House Grill in Hot Springs, can see the convention center from his restaurant. That city’s convention center and tourism operation is funded with a 3% prepared food tax and a 3% hotel tax. Deuschle likes the tax. He says it helps all small business owners in the city.

“To me, it’s a community exercise … and I am a capitalist. I’ve been in business my whole life. But there are certain things that have to be considered from a community standpoint,” Deuschle said.

LOCAL RESTAURANT SUPPORT
York is not likely to find support from Fort Smith restaurant owners/operators Tom Caldarera and Kevin Dorey.

Caldarera and his family own and operate two restaurants — Taliano’s and Emmy’s — and a catering operation. He was a member of the ad hoc committee and is a member of the Fort Smith A&P. He supports a prepared food tax but admitted during a May 26 meeting the tax is “generally unpopular” with most restaurant owners.

Dorey is the operating partner of 21 West End in downtown Fort Smith. An investor in the restaurant is City Director Cole Goodman.

“My personal opinion is that it should be spread around among everybody. But if it’s going to help our convention center, then we are for that. I know our business benefits because of it,” Dorey said. “Last week when the pharmaceutical convention was in town, I did a lot of extra business because of that.”

The restaurants of Dorey and Caldarera are near the convention center. Dorey admits more reluctance to support the tax if he operated a restaurant away from the convention center.

“I might not like it, but I would probably support it because it helps our overall economy,” he said.

BAD FOR BUSINESS?
York and McNulty’s view that a restaurant tax would hurt the restaurant sector finds little support among other restaurant and tourism players.

Brave, who dislikes the tax in Little Rock, interrupted a question about the possibility of a 1% hamburger tax driving away customers to laugh at the suggestion people stay away because of a tourism tax.

“Not really. I don’t see that,” Brave said. “I think you can absorb that. If that 1% is going to put you under, then you have other problems.”

Deuschle said it may cause a “low-margin” restaurant to reconsider pricing, but disagreed with the notion that a 1% tax would reduce business.

Maryl Koeth, executive director of the Van Buren Advertising and Promotion Commission, said she has had “maybe three or four” complaints from restaurant owners in the more than 20 years the 1% hamburger tax in that city has been on the books. In 1989 a group of Van Buren business owners agreed to pay for a special election to approve the tax and creation of the city’s tourism program. The city also has a 1% tax on lodging that supports Van Buren A&P marketing efforts.

“A 1% hospitality tax on a restaurant in a down economy is not going to be the deciding factor for people. That one percent is not going to be the make or break,” Koeth said. “Most people have no idea that they are paying a 1%, especially in the bigger cities.”

Deuschle supports the Hot Springs prepared food tax, but was unwilling to say he would support the tax if he was a Fort Smith restaurant owner.

“You have to look at how much and how they are going to operate it. … If they are drawing in the activity, enough activity, then I would be in favor of it. But you have to have that traffic there (convention center) to draw in X number of people in the community. If that’s the case, then shoot, there’s no question you need to support it.”