Fort Smith Board critical of convention center costs, delays talk on prepared food tax

The Fort Smith Board of Directors took aim at the Fort Smith Convention Center during Tuesday’s (Jan. 12) study session. The pointed questioning forced postponing talk of enacting a prepared food tax.

Tim Seeberg, manager of the facility, was forced to defend the Center’s existence under a heavy barrage of questions from City Director Tracy Pennartz, who pointed out that the $840,267 of local tax generated by the facility for the first three quarters of 2015 was of questionable benefit when one looked at the $777,000 subsidy the city provides in addition to an unreported amount in “in-kind services.”

The in-kind subsidies include employee benefits. The Center employs 13.5 annually with total compensation of “around $700,000 a year,” Seeberg said, though he did not specify how much of that number was benefit-related and how much was direct salary.

Additionally, the city provides water and sewer services, which Seeberg was unable to ballpark at Tuesday’s meeting, though he acknowledged he could provide estimates at a later date.

“We don’t know what those numbers are,” Pennartz said. “For all we know, it could be a quarter of a million dollars, so it seems like the amount it takes to run the Convention Center is a wash with the tax revenue it brings in.”

Director George Catsavis added that “any business that faced this type of numbers would have to change something.”

Pennartz agreed.

“It’s not an easy thing to operate under the current matrix, and it’s clear to me that the matrix has to change. And that’s my challenge to you (Seeberg) and to us (City Directors). It has to change in this decade,” Pennartz said.

Despite the tense Q&A, the Convention Center did grow under Seeberg’s direction, posting a total revenue record for 2015. Rental revenues were up 2.7% from 2014 to $638,640, beating the previous year’s tally of $597,728. Overall revenues showed a slight improvement of 0.1%, rising from $709,163 in 2014 to $709,882 in 2015. Together, 2015 and 2014 have claimed the Nos. 1 and 2 spots, respectively, in the facility’s history. Total expenses clocked in at approximately $1.5 million.

Discussion of the agenda item went long Tuesday causing related item No. 3 to be pushed back another two weeks. That item concerned a possible 1/2 cent prepared food tax that could generate as much as $917,609 annually, according to a memo from Acting City Administrator Jeff Dingman.

“A significant portion of the revenue from a Prepared Food Tax collected at restaurants in Fort Smith would be derived from non-residents, from both visitors and local residents that reside outside the city limits,” Dingman explained. “The discussion around implementation of such a tax in the current environment would be centered on the fact that the tax would replace the General Fund’s subsidy of the convention center and allow the city a significant source of general funds to apply to its liability for the police and fire pension programs (LOPFI).”

The LOPFI fund requires approximately $2 million per year in order tp remain solvent for the foreseeable future, and it was a source of debate during budget deliberations for 2016.

Fort Smith in 2004 implemented a higher 3.28 multiplier for the “LOPFI” pension plan, up from the base multiplier of 2.94. When the base multiplier was adopted, the city had an $11.863 million balance in its pension contribution fund and was adding $1.346 million annually to the plan. That was before the financial crisis of 2008, when the plan started withdrawing more money than the city was putting in, setting it up for the eventual insolvency projected for 2019.

A new 1/2 cent tax could be a hard sell for Fort Smith voters if previous efforts are any indication. In November 2011, a special election was held for a 1% prepared food tax, and 62.7% of voters rejected it. Directors Keith Lau and Andre Good volleyed on the viability of a second try at a meeting in June 2015. Lau said he doubted the city could sell a tax increase without “tangible” cuts and other budget changes. He added that he wasn’t interested “in pushing another tax for a plan that doesn’t provide a ‘total fix’ for the pension problem.”

Good, however, felt the “political environment” had changed from where it was in 2011.

“Now it’s for police and fire,” he said, adding that voters could be more accepting of a 1/2 cent tax for such a purpose.

There is also the feeling among some Board members that voters might be more willing to pass a tax increase following the city’s recent cost-cutting efforts that resulted in a $3.2 million reduction in general fund spending from 2015 to 2016.

Discussion of the item will resume at the Jan. 26 study session.

The next regular meeting of the Fort Smith Board of Directors will be held at the Fort Smith Public Schools Service Center on Tuesday (Jan. 19). It will begin at 6 p.m., and is open to the public.