Plan for Fort Smith sales tax advisory committee moves forward

The Fort Smith Board of Directors unofficially agreed on the basics of a sales tax advisory committee during a board study session Tuesday night (March 8) after much discussion and listening to input from the general public.

The BOD approved a resolution March 1 that committed them to creating a sales tax advisory committee for the city. Directors approved two ordinances Feb. 22 that will allow voters in the city the opportunity to vote on the continuation of a 1% sales tax in a special election during the Arkansas state primary election May 24.

The first ordinance approved by the board will renew a 0.25% sales tax that is evenly allocated between the city’s fire department and city’s parks and recreation department. Directors voted 5-2 to extend the tax eight years, with collections from Sept. 30, 2022, to Sept. 20, 2030. The 0.25% sales tax that is evenly allocated between the two departments is set to expire on Sept. 30. That tax generated $5.7 million in 2020.

The second ordinance will extend a 0.75% sales tax from Jan. 1, 2023, to Dec. 31, 2030, with 83.3% of the revenue going to federal consent decree work on the city’s water and sewer system, and 16.7% directed to the city’s police department. The 0.75% sales tax was approved to pay the debt incurred for water and sewer projects and those bonds will be paid in full during the third quarter of 2022. This means the sales tax will end on Dec. 31.

“With the adoption of Resolution No. R-31-22, the Board of Directors has committed to the creation of a committee to review revenues and expenditures related to city sales and use taxes by April 5, 2022,” a memo from Deputy City Administrator Jeff Dingman on the matter. “At current issue is the desire of the Board for the city to be transparent with the public regarding the revenues from sales and use taxes levied by the City of Fort Smith.”

The preliminary direction given by the board to city administration was the board would consist of nine citizens, one from each of the cities four wards and five at-large members, along with the mayor, who will serve as an ex-officio member with a voice but no vote except as needed in times of tied vote. The deputy city administrator and the city’s finance director also would serve as ex-officio members with voice. At least one of the committee members will be a certified public accountant.

Three members would be chosen for one year, three for two years and three for three years, so all seats would not be up for appointment at the same time. After the initial terms, all terms would be for three years. Members could request to be reappointed.

The committee would review expenditures from all the city’s sales tax funds quarterly. It would meet quarterly, once to review the revenues and expenditures and once to approve the minutes and report that will be sent to the board of directors.

The city now levies a 1% sales and use tax for the streets, bridges and associated drainage capital improvement program. It also levies a total of 1% in sales and use taxes that on May 24, will be considered for renewal by Fort Smith voters. If approved, the total sales tax rate in the City of Fort Smith would remain at the current 9.5%, and revenues from the renewed/extended city sales and use tax would be allocated as follows: 1/8 cent to Fire Department needs (8-year extension of 2012 tax), 1/8 cent to Parks Department Capital Improvement Projects (8-year extension of 2012 tax), 1/8 cent to Policy Department needs (8 year tax), 5/8 cent to Wastewater Consent Decree (8 year tax) In addition, the city receives an allocation of the county-wide 1% sales and use tax levied by Sebastian County. The allocation is determined by percentage of population within the county.

There was some discussion about whether the committee would review all the sales taxes, but the consensus was that in doing so, it made all the sales tax business more transparent, which would build more trust with the citizens.

Fort Smith Attorney Joey McCutchen, who has been vocal about the creation of the committee as well as details that needed to be considered about the taxes prior to the board passing the ordinance calling for a sale tax election, he appreciated that the board requested that reports being given to the committee be very clear on what each expenditure was and how it aligned with the perimeters of each tax, which Director Lavon Morton stressed to the administration had to happen.

“I don’t think, as Director Morton was saying, this needs to be an information dump. … I think anyone who doesn’t have an accounting background should be able to look at this and be very clear. … I think that is very important – a transparent, clear report. … I think that only builds trust, and I think that builds relationships between community members and the board. I think this is just a good thing overall,” McCutchen said.

The committee would only make certain that expenditures from the sales taxes were going towards projects they should be. It would not have say in what projects from each department would be approved.

“You all are the elected folks. You have been elected by the people. So, for a committee … to come in and say, ‘We want the money spent this way,’ well that is your responsibility. We fully recognize that,” McCutchen said.

The committee meetings would be open meetings with proper notice given to the public before each meeting. McCutchen asked that the meetings be recorded in order for citizens to see what happened at them like BOD meetings and study sessions.

Board members and members of the public speaking at the meeting agreed that the committee needed to be formed with members appointed before the sales tax renewal election.

“The committee should be named as soon as possible. Certainly before the vote, and the vote needs to be in a transparent way, not in executive (session),” McCutchen said. “I think it is important to know who has been chosen and the reasons those folks have been chosen.”

It was moved and seconded to put the sales tax advisory committee on the March 15 board meeting, so that the committee be advertised and citizens could submit an application to sit on the committee. The board said they wanted the committee members to be chosen before the end of April.