Citizens gather to discuss 1% prepared food tax

Editor’s note: The first version of this story referred to the city’s $40 million general fund budget as an operating budget. The error has been corrected.

About 50 attended a citizen-initiated forum held Saturday in Fort Smith to discuss the 1% prepared food tax, with George Moschner highlighting the talk with a impromptu speech encouraging citizens to support the tax and demand accountability in its use.

At issue is the funding of the Fort Smith Convention Center. The Fort Smith Board of Directors may be close to resolving a more than 10-year search to plug an annual deficit predicted to occur when state turnback money dried up. The state turnback program ended for Fort Smith in June 2010 from which the city received about $1.8 million a year. In 2010, the city received only $888,723. A fund balance will allow the city to cover the convention center shortfall for most of 2011.

An ad hoc convention center committee formed by the city board met several times in Spring 2010 and reviewed many funding options, including a 1% hospitality tax, finding cuts in the city’s roughly $40 million general fund budget, reallocating a portion of the city’s 1% street tax, re-instituting a business license fee and finding a 3rd party operator. That group eventually endorsed a 1% prepared food tax.

State law allows only an A&P to collect and manage proceeds of hospitality taxes.

On Feb. 15, the Fort Smith board voted 4-3 to enact the tax by ordinance, and voted 7-0 to enter into a lease agreement with the Fort Smith Advertising & Promotion Commission to manage the convention center. Enactment of the tax is planned for June 1.

A group of restaurant owners have threatened to gather signatures and force the 1% tax to a referendum.

Proponents of the convention center and the tax — estimated to raise $1.8 million a year — say the center brings thousands of people to Fort Smith each year and generates an economic impact of up to $20 million. Opponents of the tax say the convention center does not benefit the community, or believe the money to fix the deficit can be found in other areas of the city budget.

‘EFFECTIVE AND USEFUL’
At Saturday’s event, held at Sweet Bay near Creekmore Park, organizer Jeff Smith said the meeting was an opportunity for people to gather and “try to weed through” the information related to the convention center funding issue.

When asked about the surplus of funds from the tax above what is needed to address the convention center deficit, Fort Smith A&P Executive Director Claude Legris and Fort Smith Mayor Sandy Sanders said a ticketing system and parking lot construction is part of a proposed management plan to increase efficiencies and improve operations.

“We want our convention center to be more effective and useful,” Legris said.

To do that, convention center rates may be lowered, entertainment offerings will need to increase and the A&P will need to recruit more conventions. All that costs money, Legris explained, adding that he hears from citizens who want the convention center to be more effective rather than “nickel and dimed.”

ECONOMIC IMPACT CHALLENGE
Gosack also explained that enacting the ordinance by board vote gives the city board “more flexibility” in holding the A&P accountable. If an election is held and the tax is approved, the board can’t adjust or withdraw the tax without holding an election, and a special election costs between $20,000-$25,000.

The discussion also included several minutes to explain the economic impact of the convention center after Jack Swink questioned the figures. Swink was using convention center revenue as the factor for determining economic impact. Legris and City Administrator Ray Gosack explained that economic impact is factored not by the convention center revenue but by the estimated spending and number of people — out of area and locals — who attend events at the convention center.

RESTAURANT RESPONSE
Michelle Stockman, with Hollywood Stars Pizza, questioned why restaurants were “singled out” in the enactment of the 1% prepared food tax. Gosack said the prepared food tax “is the mechanism provided by the (Arkansas) Legislature” because they believed restaurants and hotels were the primary beneficiaries of tourism development.

Stockman and Leonard Cernak, also a restaurant owner, argued that the tax will hurt the restaurant industry. Food inflation, higher gas prices and an overall uncertain economy are keeping people out of restaurants, and the tax will push more people out, Stockman argued. Cernak said he couldn’t pass the 1% on to customers, with the tax coming out of his pocket.

However, Debra Presson, a catering director at the Golden Corral in Fort Smith and member of the Fort Smith A&P Commission, disagreed. She said her restaurant caters to some of the most cost-conscious customers in the region, but another 9 cents on a $9 meal will not change their restaurant habits.

“I’m not crazy about the tax, but we are way far east of the convention center, and we’re packed every weekend” there is an event at the convention center, Presson said of the center’s benefit.

CONVENTION CENTER VISION
It was toward the end of the Saturday morning meeting when George Moschner, an executive at Baldor Electric Co. and the chairman of the ad hoc committee that recommended the 1% prepared food tax, made his pitch.

“For the first time in 10 or 11 years, we finally have a group with a vision” for operating the convention center, Moschner said of the A&P plan. “They’re trying to put together a bigger package.”

Moschner said the committee’s review concluded that the convention center is necessary to the quality of place of the region and that the city doesn’t have enough flexibility in its budget to provide the funds to maximize the use of the center. And while he appreciates all the other funding ideas offered, Moschner said the 1% is “clearly” the best alternative.

“Do we want that, do we want to buy plywood and put it on the windows,” Moschner said.

However, Moschner also challenged attendees to hold the A&P accountable in its use of the tax proceeds and better management of the convention center.

“I’m going to push for operational efficiency at the convention center because it hasn’t been (efficient), in my honest opinion,” he said.