Convention center group endorses 1% hospitality tax

The ad hoc convention center committee on Wednesday (May 26) unanimously endorsed the idea of a 1% hospitality tax to fill an up to $1 million funding shortfall related to the Fort Smith Convention Center.

They also said the city needs to focus on public education if it wants to gain approval of efforts to support the convention center and other quality of place projects.

The committee was formed by the board of directors after the board spent more than 18 months trying to come up with a solution to plug an up to $1 million annual deficit when a state turnback program ends in June 2010. The city has received about $1.8 million a year from the tourism turnback fund, but the city will receive only $888,723 in 2010.

Members of the ad hoc committee are:
Tom Caldarera, restaurant owner
George McGill, businessman/insurance
Kevin Moran, Sparks Health System
Lavon Morton, Arkansas Best Corp.
George Moschner, Baldor Electric Co.
Craig Rivaldo, Arvest Bank
Ben Shipley, attorney

Rivaldo did not attend Wednesday’s meeting.

The committee first met April 22 and have reviewed several options, including a 1% hospitality tax, finding cuts in the city’s roughly $40 million operating budget, reallocating a portion of the city’s 1% street tax, re-instituting a business license fee and finding a 3rd party operator. The legalities of merging the convention center operations and the Fort Smith Advertising and Promotion Commission also have been discussed.

The 1% hospitality tax, which is estimated to raise $1.8 million a year, came with a committee caveat that it come with a merger of the convention center and A&P. The committee recommendation did not specify whether the 1% tax be approved by voters or instituted by an act of the Fort Smith board of directors. However, the committee did discuss the need for public education about the need and uses of the tax — which hinted at seeking voter approval of the tax. (Link here to learn more about the tax and its potential uses.)

Restaurateur Caldarera said most restaurant owners he talks to to are “definitely against it” at first, but “they start to kind of come around” when they understand how it would support the convention center and tourism industry. However, Caldarera said not many restaurant owners are supportive.

“It’s generally unpopular with restaurant owners,” he told the committee.

Shipley agreed with Caldarera’s assessment that people support the tax once they understand the benefits and alternatives. He said he has talked to many people across “all economic strata” and they often change their minds when they understand the bigger picture.

“Of all the alternatives, they say this (1% tax) is the best way to go,” Shipley said. “Once people get the details and not the knee-jerk reaction, but once they get the details” they are supportive of the tax.

Moran disagreed. He hears from people who say “enough is enough” when it comes to new taxes.

“Even though it adds 60 cents to a $60 meal, it’s the principle,” Moran said of the responses he gets when asking about a 1% tax.

Morton said a misconception among the public is that the city should be able to find money in a $40 million – $45 million general budget to fix the shortfall. He cited the committee’s research as showing the city may have some corners to cut, but not anything near enough to touch the convention center funding gap.

The committee reluctantly approved reallocating a portion of the city’s 1% street tax program as a last resort to resolving the convention center issue. Shipley said he has heard from many people who warn him against touching the street tax.

“They say, ‘We will defeat it and we will defeat it handily,’” Shipley explained. “It’s a very emotional thing with people. They are very proud of the street tax.”

McGill said voters will support the 1% hospitality tax once they understand the alternatives and benefits to the local economy.

“Let’s give them a clear picture of what this is going to do. … We have to tell people what is in this for them,” he said. “The money stays here … like with the street tax. I like my streets. I think our streets make an impression on businesses that visit our city. This (1% hospitality tax) will do likewise.”

Moschner said the board report is likely to include a request to seek more efficiencies and revenue opportunities in convention center operations — including a better process to audit the 10% charge the center collects from catered food and beverage sales.

“You have to have some mechanism in place to audit this,” Moschner told Convention Center Director Frankie Hamilton. “I think there is a chance we are losing money there.”

Gosack said the committee will meet again at Noon, June 2, to potentially finalize the report it sends to the board.