Fort Smith tourism funding and management: We do it different in these parts

story and photos by Michael Tilley

Editor’s note: This is the second part of a series by The City Wire investigating the funding and management of the Fort Smith Convention Center. The first part of the series explained how the city of Fort Smith will have drained more than $4.8 million away from the convention center to fund non-tourism related projects and organizations.

Unlike what has happened in Fort Smith, there was no siphoning of turnback or general revenue funds in Hot Springs or Pine Bluff, two towns that also benefited from the state’s tourism turnback funds.

Steve Arrison, CEO of the Hot Springs Advertising and Promotion Commission, which manages the Hot Springs Convention Center, said his group puts as much of the turnback and revenue funds possible into a reserve fund. Arrison estimates a reserve fund of about $8 million by 2010.

“Just the interest that that money generates will take care of the capital needs of the convention center,” Arrison said. “Every once in a while, we might have to touch principal, but that’s usually for something big and requires” commission approval.

Hot Springs is set to collect another $2 million in the next two years from the turnback fund. A hospitality and restaurant tax in Hot Springs not only supports the city’s advertising and promotion efforts, it also funds operations at its relatively active and successful convention center.

Gosack said he does not recall any suggestions from Fort Smith city board members or previous administrators about pushing as much convention center revenue and/or turnback funds into a reserve fund.

Also, Hot Springs manages its tourism and convention effort under one organizational umbrella — not unlike the way it’s managed in most cities in Arkansas and around the country.

Except for Fort Smith, where the Advertising and Promotion Commission and the Fort Smith Convention Center — both in the business of recruiting and taking care of tourists and visitors — operate under separate budgets with separate directors.

Arrison politely refused to comment on the dual nature of Fort Smith’s tourism and convention effort, other than to say it was “unusual” and also to point out the many advantages — coordinated advertising, coordinated staffing, etc. — his organization sees from having the tourism and convention center operate under one roof.

Bob Purvis, executive director of the Pine Bluff Convention and Advertising and Promotion Commission, seemed somewhat surprised when asked if convention center proceeds or any other tourism-related proceeds are mingled with the city of Pine Bluff’s general fund.

“No. Of course not. Not at all,” he responded emphatically.

That city fell out of the tourism turnback fund cycle four years ago, losing about $700,000 a year, Purvis said. Although the city collects about $1.4 million a year from hotel and restaurant taxes, Purvis said losing the turnback funds “severely crippled” the organization for a few years. Budget cutting and other financial responses eventually stemmed the losses, but he said it remains difficult to put money aside for capital improvements.

‘DUPLICATION OF EFFORTS’

As for his organization managing tourism efforts and the convention center business, well, it’s the only way to do it.

“It (having tourism and convention center operations under one organization) has worked for most cities. It appears to me to be the most practical method,” Purvis said.

Also, Purvis was not shy about suggesting a possible solution for the upcoming convention center funding problem in Fort Smith. The “practical solution,” he advised, would be for the city to institute a restaurant tax. And because under state law only Advertising and Promotion Commissions can collect hotel and restaurant taxes, the city of Fort Smith should contract with the A&P to dedicate a percentage of the tax proceeds to the convention center, city parks or other tourism/recreation venues, Purvis explained.

Gosack, with the city of Fort Smith, said there has not been any “serious discussion” of pulling the advertising and promotion effort and convention center management under one administrative roof.

However, new Fort Smith City Administrator Dennis Kelly said at a special Dec. 23 city board meeting he is “seriously looking” at a review of downtown Fort Smith tourism and economic development efforts. Kelly said he wanted to the board to know he is giving the issue considerable thought, but would not have a report prior to the board’s Jan. 10 retreat.

Kelly told The City Wire that he is concerned about “duplication of efforts” among the four or five groups active in promoting tourism and downtown development.

Hamilton said bringing Fort Smith’s tourism efforts under one administration “would help make more efficient” the jobs of her staff and the staff of Claude Legris, director of the Fort Smith Advertising and Promotion Commission. That’s a big admission when considering that consolidation could cost Hamilton her job.

Legris declined to comment about potential management structures, but did note that “a strong financial model is critical to the success of public assembly facilities which very rarely turn an actual profit, but are designed more as the catalyst to bring economic impact to a community through the spending by the traveling public.” 

EXTENDING THE TURNBACK
The other option for Fort Smith, Purvis noted, would be to hope for or lobby for reinstatement of the turnback fund program.

Purvis noted that when Pine Bluff’s turnback funds expired, the other cities didn’t lobby for extension. But with Fort Smith, Hot Springs and Little Rock about to see their funds expire, Purvis said their could be some pressure to extend what has been a vital funding program for Arkansas’ convention and tourism facilities.

“My political judgment is that in a few years when all the turnback funds expire, then the political influence of Hot Springs, Little Rock and Fort Smith could extend the turnback funds,” he said. “When they all come together, and when it’s (losing turnback funds) happening to them, then it might happen. Another thing is that it will depend on the state’s financial position.”

The office of Gov. Mike Beebe is aware of talk about extending tourism turnback funds, according to office spokesman Matt DeCample.

“It is an issue that has been discussed in our office,” DeCample said, “but frankly, it’s not a front-burner issue right now.”

He said Beebe is “open-minded” about a possible extension, but because there are no “firm proposals,” the governor doesn’t have a firm opinion on the issue.

McNulty, who has directed the Arkansas Hospitality Association for 12 years, said seeking an extension is politically sticky. When the program was revamped in 2001, legislators decided to help pay the debt of existing convention centers and then end the program.

“But they (Legislators) said, ‘That’s it. That’s the end of the program. Don’t come back again,’” McNulty explained.

To seek an extension in the 2011 General Assembly would place a large burden of proof on Arkansas’ tourism industry.

“I’m not saying it can’t be done, but as an industry, we would really have to work for a year to gather the information and the evidence and demonstrate how important that is. To take a hard look at the economic impact of what these centers are doing and how important it is for the state,” she said.

Theoretically, the state’s financial position could stop the flow of turnback funds before 2010 — just as Kruithof with the city of Fort Smith warned in 2001.

Arrison suggests just such a scenario if the state economy gets hammered by the national recession. Although the fund is set to expire in 2010, Arrison said the funding has to be approved for 2009 and 2010 payouts.

Would a tight budget cause legislators to put an early end to turnback funds?

“Well, you never know. There is no guarantee of anything,” Arrison said.

Which could be a good reason why, as Kruithof noted in April 2001, cities or groups “should not take these funds for granted.”