Lawsuit filed to block 1% prepared food tax

The Citizens for Responsible Taxation on Tuesday (May 24) filed a lawsuit asking to stop collection of a 1% prepared food tax in Fort Smith until a jury trial can be held in the attempt to force an election on implementation of the tax.

Sebastian County Circuit Court Judge Michael Fitzhugh has scheduled a 1 p.m., Friday (May 27) hearing on a preliminary injunction to stop collection of the tax.

“At the hearing, we will ask the judge to stop the tax from going into effect until the lawsuit can be resolved.  t would unfair for the City to collect taxes while the lawsuit is pending when, ultimately, the City may very well lose the lawsuit,” Fort Smith attorney Brian Meadors, who filed the action, said in a statement.

Speaking to The City Wire, Meadors said he anticipates a ruling from Judge Fitzhugh prior to the scheduled June 1 implementation of the new tax.

The lawsuit seeking the injunction suggests that “irreparable harm” will come to the “tens of thousands of restaurant owners and patrons” if the tax is implemented only to later by overturned by court action or a public vote.

1% TAX HISTORY
The tax was enacted Feb. 24 by the Fort Smith Board of Directors to resolve a more than 10-year search to plug an annual deficit with Fort Smith Convention Center operations 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.

The Fort Smith Advertising & Promotion Commission approved on May 20 the rules and regulations for collection and enforcement of the 1% prepared food tax. The 50 pages of rules and regs are being promulgated this week during a series of meetings with owners and managers of restaurants and other businesses that sell prepared foods.

Claude Legris, executive director of the Fort Smith A&P, said they will “absolutely” proceed with implementation of the tax unless Judge Fitzhugh says otherwise.

FAILED PETITION PROCESS
The lawsuit stems in part from a rejected effort by Eddie York and other members of the Citizens for Responsible Taxation to seek a public election on the 1% tax. On March 26, the group submitted about 4,460 signatures, with 2,822 valid signatures required to force a vote on the issue.

However, Fort Smith City Clerk Sherri Gard and Fort Smith attorney Jerry Canfield raised issues with how the petitions were submitted and the validity of claims of petition organizers who said they witnessed petition signatures.

During an April 20 hearing held by Gard and Canfield, Frank Glidewell, one of the petition organizers, admitted to not witnessing all the signatures for which he had signed an affidavit affirming his being the witness to all signatures he submitted. Glidewell said during the meeting he would meet with Gard the next day to clarify which signatures he witnessed. Glidewell never made the meeting.

After other petition organizers were unable to verify they witnessed all signatures, Gard ruled April 25 the petitions were insufficient.

RELIEF SOUGHT
Meadors asserts in the court filing that Gard “either intentionally or with reckless disregard for the truth and consequences of her actions, misled the Plaintiffs during the petition process,” causing the organizers to fail in their efforts.

Further, Meadors claims Gard “conspired” with top city officials by making the process difficult and subjecting the petitions “to a level of scrutiny unheard of in any prior referenda.”

In the lawsuit seeking the jury trial, Meadors asks the court to dismiss the tax ordinance altogether and pay the legal and other fees accrued by the Citizens for Responsible Taxation, or, as an alternative, force the city to accept the petitions and conduct a public vote on the 1% ordinance.

Link here for a PDF copy of the legal documents filed Tuesday.