1% tax issue may continue after Friday hearing

There is no certainty that a ruling from Sebastian County Circuit Court Judge Michael Fitzhugh following the June 17 hearing about the 1% prepared food tax will be the end of the road for the contentious issue.

A 1% prepared food tax was enacted Feb. 24 by the Fort Smith Board of Directors to resolve the more than 10-year search to plug an annual deficit with convention center operations predicted to occur when $1.8 million in annual state turnback money dried up. The state turnback program — which supported expansion or construction of tourism facilities — ended for Fort Smith in June 2010.

Judge Fitzhugh on May 27 granted an injunction stopping collection of the 1% prepared food tax. The Citizens for Responsible Taxation, represented by Fort Smith attorney Brian Meadors, on May 24 filed the lawsuit asking to stop collection of the tax until a trial could be held in the attempt to force an election on implementation of the tax.

A ruling following the June 17 hearing could take many forms, and Judge Fitzhugh could rule immediately after the hearing or issue a ruling days or weeks later.

“There’s no guarantee the judge will rule at the hearing,” said Matt Ketcham, an attorney with the Fort Smith law firm of Nolan Caddell & Reynolds. “He (Fitzhugh) may also allow each side to submit briefs within 24 hours or 30 days after the hearing. … But it would not surprise me that, if you don’t get an immediate ruling, that you’ll have a final order within six weeks.”

Ketcham, who provides legal services to several area communities, also said an appeal is likely, especially if the anti-tax group loses. He’s not sure what may happen if Fitzhugh’s ruling is entirely or partially against the city’s position.

“That’s the more interesting question. What will the city do if they lose? Do they just accept it and go to a vote, or do they put this whole thing on hold and get direction from the (Arkansas) Supreme Court? … Meadors will most certainly appeal if he loses, but it will be the city that has the tougher decision,” Ketcham explained.

Meadors declined to speculate about possible action following a Fitzhugh ruling.

“We’ll have to wait and see what the judge does and what reasons he gives for his ruling,” Meadors said.

Fort Smith City Administrator Ray Gosack also said appeal considerations will be based on Fitzhugh’s ruling.

“It’s premature to make any decision about appealing. I think we would need to know the court’s reasoning behind a ruling that would be unfavorable to the city’s position. Until we know the court’s exact actions and the reasons for it, I don’t believe that we can speculate about any future legal actions,” Gosack said.

Ketcham said an appeal by either side would likely end up before the Arkansas Supreme Court. The parties have 30 days to file an appeal following Fitzhugh’s ruling, and either party may ask for an expedited hearing before the state’s high court. Ketcham predicted Meadors will immediately seek injunctive relief with the Arkansas Supreme Court to stop tax collection if Fitzhugh rules in favor of the city.

However, Ketcham said the time frame for the appeal process is uncertain.

“Yes, I think it’s fair to say we could have a decision from the (Arkansas Supreme) Court within a month of that (appeal hearing) or as long as a year,” Ketcham said.