Fort Smith board moves to enact 1% prepared food tax by ordinance

What a difference a week makes.

On Feb. 8, the Fort Smith Board of Directors appeared ready to push a municipal election on a 1% prepared food tax to support the Fort Smith Convention Center.

But at the Tuesday (Feb. 15) regular meeting of the Fort Smith board, City Director Steve Tyler amended his position and joined City Directors Andre Good, Philip Merry Jr., and Pam Weber in supporting an ordinance to enact the 1% prepared food tax.

The Fort Smith board spent most of 2008, 2009 and 2010 seeking a solution to plug the annual deficit. A state turnback program ended 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 operating 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.

The board first voted 7-0 to approve a convention center lease agreement with the Fort Smith Advertising and Promotion Commission. The agreement is contingent upon the 1% prepared food tax being enacted by the board or an election. State law allows only an A&P to collect and manage proceeds of hospitality taxes.

After the board voted to approve the lease agreement, a vote was expected on the ordinance to call for the election.

However, Director Good quickly moved to enact the tax by board vote. Director Weber seconded the motion. Before a vote could be held, Director Tyler amended Good’s motion with a sunset provision requiring the board to reconsider the tax in five years, and with a provision allowing the board to lower the rate if necessary. Weber also seconded the amendment. Voting for board enactment of the ordinance was Directors Good, Merry, Tyler and Weber. Voting against the measure were Directors George Catsavis, Don Hutchings and Kevin Settle.

Because the measure did not receive the five votes necessary to enact an emergency clause, the ordinance will have to be read twice more. Mayor Sandy Sanders said the board would convene in a brief special session prior to the Feb. 22 study session, and would convene again Feb. 24 at 6 p.m. for the third reading. After the third reading, the board will again have a chance on enacting the emergency clause and implementing the ordinance immediately. If the vote remains 4-3, the ordinance will not take effect until 30 days.

Because enactment of the tax is not planned for June 1, City Administrator Ray Gosack said not enacting the emergency clause will not be an issue.

Lavon Morton, an executive at Fort Smith-based Arkansas Best Corp. and member of the ad hoc committee that recommended the 1% prepared food tax, attended Tuesday’s board meeting and was pleased with the outcome.

“I think this is a positive move for the city, and a move forward,” he said.

An e-mail and social media campaign encouraging the board to enact the tax by board vote instead of an election emerged following the Feb. 8 study session in which the board was moving toward an election.

Jeff Smith, a financial planner in Fort Smith, was one of the first to respond. He sent an e-mail to more than 200 in the area, and posted his message on Facebook.

Richard Griffin, a prominent businessman in Fort Smith and chairman of the Central Business Improvement District, addressed an e-mail to the four City Directors — George Catsavis, Don Hutchings, Kevin Settle and Steve Tyler — who called for an election instead of board enactment. Griffin encouraged them to “exert some leadership and vote for the funding.”

Ward Henley, president of the Northside Town Branch Group, sent all members of the board a lengthy memo encouraging them to enact the 1% tax by ordinance rather than election.

However, several area restaurant owners have threatened to seek a referendum if the board chose to enact the tax by ordinance. Article 5 of the Arkansas Constitution requires 15% of the legal voters “of any municipality or county may order the referendum or invoke the initiative upon any local measure,” with the 15% tally coming from “the total vote cast for the office of mayor at the last preceding general election.”

In the election between Ray Baker and Sandy Sanders, 18,811 total votes were cast, with 15% rounding up to 2,822.