Fort Smith, Conway are larger Arkansas cities without a business license fee

A survey of eight of Arkansas’ larger cities shows Conway as the only city other than Fort Smith not collecting a business license fee.

Reinstating a business license fee is one of the options Fort Smith city staff has presented to the Fort Smith Board of Directors to cover a shortfall in the city’s pension contributions for police and fire employees. The fee was dropped more than 30 years in exchange for business support of a sales tax increase.

According to City Administrator Ray Gosack, the city’s LOPFI (police and fire pension) fund will be insolvent by 2021. And that insolvency was pushed from 2019 to 2021 by a recent Board vote to reduce benefits under the pension plan.

During a June 23 study session, the Board looked at three options on reinstating a license fee. The first option could generate $1.976 million. It would collect $20 per employee for businesses with employees from 1 to 500. The fee would be capped at $10,000.

The second option could raise at least $1.435 million with a plan that would charge a business $20 per employee from 26 to 500 employees with a cap at $10,000 a year. Businesses with 25 or fewer employees would not pay a fee.

The third option would charge a flat fee of $150 for all businesses and raise an estimated $761,550 a year. The cost to manage all three options is estimated to be $107,000 a year.

The survey, conducted by city staff, looked a the fee structure in Conway, Fayetteville, Hot Springs, Jonesboro, Little Rock, North Little Rock, Rogers, and Springdale. As noted earlier, Conway is the only city to not have a fee. Following are some of the details in survey from cities who have a business license fee. Fort Smith staff did not ask each city for annual revenue from the fees. However, Springdale did report that its fees generated $137,699 in 2013, and $133,419 in 2012.

• Fayetteville
Home-based fee of $22 per year
Non home-based fee of $35 per year

• Hot Springs
Fees are based on business category and range between $75 and $1,500 a year.

• Jonesboro
Fees are based on business category and range between $25 and $2,500 a year.

• Little Rock
Fees are based on business category and range between $75 and $2,700 a year.

• North Little Rock
Fees are based on business category and range between $90 and $1,000 a year.

• Rogers
Fees are based on business category and begin at $40 and increase based on factors such as employees, hotel rooms, and restaurant seats.

• Springdale
Fees are based on business category and range between $40 and $300 a year.

Many of the cities have a lengthy list of business categories and various fees for each. Hot Springs has a $75 fee for a business that sells fireworks, a $100 annual fee for “couriers and messengers,” a $200 fee for a business in poultry or egg production, and a $1.50 fee for businesses “primarily engaged in the seasonal parking of automobiles on open air lots.”

Jonesboro has a $35 annual fee for barber shops with one chair and a $10 fee for each additional chair. A hotel in Jonesboro with 150 rooms or more has a $400 annual fee. Manufacturers in the city employing more than 300 pay a $2,500 annual business license fee. Restaurants with 20 “chairs or stools or less” pays $50 a year. Restaurants with more than 300 chairs or stools pays $300 annually. And if you plan to operate a Turkish bath in Jonesboro, be prepared to pay a $35 annual business license fee.

In Rogers, manufacturers pay a $50 base plus $3 for “each employee or owner working 25 hours or more per week.” A restaurant in Rogers with more than 75 seats pays an annual business license fee of $150. Hotels with one to six units pays $50 a year, plus $3 for each unit above six.

A majority of the Board members have told The City Wire they either do not support reinstating a business license fee or want to see more budget cuts before they consider new fees or taxes.

City staff is expected to present refined options to address the pension shortfall during a July 14 study session. The Board could vote on other options at a July 21 board meeting.