Fort Smith board seeks details on tourism merger plan

The Fort Smith Board of Directors is expected on Jan. 25 to review the legal structure of a plan to fund and operate the Fort Smith Convention Center using a 1% prepared food tax.

On Tuesday (Jan. 11), Fort Smith Convention & Visitors Bureau Executive Director Claude Legris presented the board a broad proposal that would use an estimated $1.8 million in revenue from a 1% prepared food tax to consolidate the convention center with the Fort Smith Advertising & Promotion Commission. The operation would also generate an estimated $700,000 in revenue from convention center rental. Estimated convention center revenue for 2010 is around $640,000.

FUNDING ISSUE, LAW
The Fort Smith board spent most of 2008, 2009 and 2010 seeking a solution to plug the annual deficit. A state turnback program ended in June 2010 from which the city received about $1.8 million a year. In 2010 the city will receive only $888,723. A fund balance will allow the city to cover the convention center shortfall for most of 2011. City Administrator Ray Gosack said the convention center fund at the end of 2011 will have a balance of a little more than $300,000.

Arkansas law requires restaurant (prepared food) and hotel taxes supporting local tourism efforts and facilities be managed through an advertising and promotion commission. The Fort Smith A&P now operates using revenue from a 3% hotel tax. In 2009, the tax collected $671,912, down more than 16% from 2008.

Legris stressed repeatedly that the proposal was not set in stone, but represents “the thoughts of the A&P Commission.”

Essentially, a tax to fund an up to $1 million annual gap in convention center operations would require the convention center and the Convention & Visitors Bureau to merge under the Fort Smith A&P umbrella. Legris said the A&P’s management priorities would include a focus on customer service, fiscal responsibility through operational efficiencies and staff development.

AD HOC WORK
Legris also praised and cited the work of an ad hoc committee he said sifted through the funding options and found the right plan.

The seven-person committee was formed in April 2010 after the board spent more than 18 months trying to come up with a convention center funding solution. The committee 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, finding a third-party operator, and the legalities of merging the convention center operations and the Fort Smith A&P.

On May 26, the committee unanimously endorsed the idea of a 1% prepared food tax to fill an up to $1 million funding shortfall related to the Fort Smith Convention Center.

OPPORTUNITY FUND, PARKING
Legris said the estimated $700,000 in event revenue generated each year by the convention center could be used to create an “Opportunity Fund.” The proposed idea would use 50% of the event revenue to “support festivals, special events and other tourism-related projects” approved by a 9-person committee. The committee would be comprised of three city representatives, three from the A&P and three citizens.

The other 50% would be used to reinvest in the convention center, Legris explained.

Legris said the fund would be “very comparable” to Fort Smith’s outside agency funding program. In the 2011 budget, the Fort Smith board approved $202,700 to support 25 agencies.

“This would be unique to Fort Smith,” Legris said of the Opportunity Fund.

The plan also includes an annual $200,000 payment for 10 years to pay for construction of a 164-space parking lot next to the center where sits the empty and former Shipley Baking plant.

Other advantages listed by Legris of a merger supported by a 1% hospitality tax include:
• Offering lower rental rates to improve chances of recruiting more events;
• Creating additional parking;
• Funding more tourism-related events;
• Improved marketing of the convention center;
• Improved operational efficiencies; and,
• Recruiting or creating more events for the modern theater in the center.

BOARD VIEWS
“This is just a grand opportunity for Fort Smith to take it to the next level,” City Director Philip Merry Jr. said about the A&P proposal.

City Director Andre Good said he understands some citizens don’t like a 1% prepared food tax, but he is ready to move forward.

“My concern is not about being re-elected, it’s about doing what’s right,” Good said.

Mayor Sandy Sanders asked the board if they wanted city and A&P staff to draft a more formal proposal for review at the Jan. 25 board study session. At least four of the seven directors said they did.

But City Director George Catsavis — who campaigned with a promise to oppose a 1% tax and push for a third-party operator — does not support the plan.

“I still am,” Catsavis said when asked if he is still against a prepared food tax. “I am not wavering on that.”

But he has wavered on the third-party operator idea, saying a deeper look into the issue has convinced him it’s “not a viable option.”

OTHER BUSINESS
Prior to the convention center discussion, the board convened a voting meeting to consider the contract of City Administrator Ray Gosack. Gosack, who served the past 12 years as a deputy city administrator, was hired during the board’s Jan. 4 regular meeting. His salary package includes a $149,500 annual salary, a $450 monthly auto allowance, severance allowance of four months’ salary with health benefits, and a performance review in July and in December each year after 2011.

The board unanimously voted to approve the contract.