Fort Smith Board approves military overlay district, Parrot Island tax reimbursement plan

The Fort Smith Board of Directors passed an ordinance during its regular meeting Tuesday (June 19) that amends the 2019 Unified Development Ordinance and creates what has been a  controversial Military Compatibility Area Overlay District.

The board voted six to one in favor of the ordinance with Director George Catsavis voting against it.

City officials say the overlay district is needed to support the foreign pilot training center at Ebbing Air National Guard Base. It was developed by the city to “protect public health, safety, and welfare of the community and preserve and maintain existing and future operational capabilities of the Fort Smith Regional Airport/Ebbing Air National Guard Base.”

“The MCAOD outer boundary is the entirety of the city limits and extraterritorial jurisdiction; however, only certain portions of the city have regulations. There are three military compatibility areas: Lighting MCA, Noise MCA and Security MCA,” noted a memo from Maggie Rice, director of development services for the city.

The Fort Smith Planning Commission voted four to three against creation of the district on May 14.

Though neither the military nor the federal government has specifically requested the city do so, the city hired Matrix Design Group for $210,000 in 2022 to help to draft the document, which City Administrator Carl Geffken said was done in order to make the city more attractive to the Air Force for the Foreign Military Sales Program.

Ebbing, home to the 188th Wing in Fort Smith and co-located with the Fort Smith Regional Airport, was selected in March 2023 by the U.S. Air Force to be the long-term pilot training center supporting F-16 and F-35 fighter planes purchased by Singapore, Switzerland, Poland, Germany, Finland and other countries participating in the Foreign Military Sales (FMS) program. Initial estimates are that 1,500 military personnel and family members will be associated with the new center once it is fully operational.

DISTRICT DETAILS
In the proposed overlay district, the city set out a proposed set of guidelines dealing with lighting in areas near the airport, sound reduction requirements in new construction in the area included in the overlay and height restrictions on new construction on property connecting to airport property.

For property physically contiguous to the airport, there are more stringent guidelines proposed for new construction that include a maximum height of 35 feet above the established airfield elevation of 469 feet and a 30-foot buffer between buildings and the airport property.

Rice has said that in most instances property is below that 469 feet elevation, so owners would be able to build higher than 35 feet. She gave as an example the new Mercy Cancer Center would be able to build up to 80-90 feet. Also, any property to be sold to a foreign entity, defined as any non-U.S. owned entity, would require Fort Smith Board of Directors approval.

REPEAL OF MORATORIUM
The board also passed an ordinance repealing a temporary moratorium on new residential housing constructions in areas around the airport.

A temporary moratorium on residential construction was enacted in June 2022 and expanded in October 2023 while the city worked to develop regulations to help mitigate the impacts associated with the foreign military sales program. The ordinance passed Tuesday will allow residential housing building permits to again be issued in those areas where the temporary moratoriums applied.

PARROT ISLAND SALES TAX
In other business, the BOD unanimously passed a resolution that will start the reimbursement process for customers erroneously charged sales tax on tickets to enter Parrot Island Waterpark.

Beginning in 2021, Parrot Island’s new point-of-sale system mistakenly collected more than $400,000 in sales tax for almost three years. A 2015 review by the Arkansas Department of Finance and Administration determined that the sales of admission tickets to Parrot Island, which is jointly owned by the City of Fort Smith and Sebastian County, are not subject to Arkansas gross receipts tax. The park’s gate system was originally set up to not collect city, county or state sales tax, just the state’s 2% hospitality tax.

When a new Point-of-Sale (POS) system was implemented in the park, that exemption was missed in the POS programming and the park collected taxes on the sale of admissions tickets from April 20, 2021, through Nov. 30, 2023. During that time, Parrot Island mistakenly collected $401,792 on behalf of Sebastian County and the City of Fort Smith for the payment of sales taxes, when such transactions were exempt from sales tax.

Rick Coleman, CEO of American Resort Management, which oversees the waterpark, said the money collected from the sales tax is still in the park’s account and is available.

The city resolution would allow the city to ask Sebastian County Circuit Court to authorize the commencement of an “Interpleader Action” to discharge the city and county of liability for the funds mistakenly collected, and dispense the funds appropriately, Dingman noted in a memo.
The county has passed a similar resolution, Geffken told the board Tuesday night.

Jerry Canfield, attorney for the City of Fort Smith, said last month that the interpleader procedure would place the funds into the registry of the court. There would be a class of persons, those people who paid the taxes inappropriately, who will be given notice. They will then have the opportunity, under a period of time set by the court, to make a claim for the money paid, Canfield said.

The funds for action will come from Parrot Island’s operating fund. Though that fund is a city account, it is not the city’s general fund, said Josh Buchfink, the city’s public relations manager. The funds from the tax were collected but never paid to the state, Canfield said. Therefore, all the funds mistakenly collected remain in the Parrot Island fund.

Colby Roe, an attorney for the City of Fort Smith, said that typically the court will appoint a representative for the class of defendants. That representative will more than likely hire counsel, Roe said. The court could then award a fee to the counsel, but that money will come from the funds available. Neither the city nor the county would be responsible for the fees for counsel, Roe said.

“Currently, we are working with our attorneys at Daily & Woods (law firm) to identify all affected individuals. Plans to notify those affected will be determined as we collect more information,” Buchfink said.

Daily & Woods is only representing the city in this case. They are not representing individuals in the lawsuit. Sebastian County Prosecuting Attorney Daniel Shue is representing the county in the matter. Attorney fees related to the interpleader case will come from the collected funds. They will not receive a percentage of the class action settlement, Buchfink said.