The Little Rock City Board of Directors is set to consider next week a two-cent increase in the sales tax on hotel rooms and to call an election on pledging the money to a bond issue for improvement and expansion of the Arkansas Arts Center. The meeting is at 6 p.m. Tuesday.
Two ordinances are required. One adds a third 1-cent tax to the existing two-cent levy on hotel, motel, bed and breakfast and short-term condo rentals. The other adds a second penny on the same rentals that is dedicated solely to parks, as state law allows. In all, with other state and city sales taxes, the sales tax on a hotel room in Little Rock would rise to 15 percent.
The board also will consider calling a special election Feb. 9 on issuing bonds supported by the taxes, which should produce about $1.25 million per penny.
Approval of these taxes by the City Board would mean they take effect regardless of whether voters approve the bond issue. If voters don’t approve the bond issue, the taxes will still be collected, with 1 cent going to the Little Rock Advertising and Promotion Commission and the other penny going to the city parks department.
Note: The ordinance notes that the one cent for parks is allowed under state law for “any city of the first-class in which there is located a city park of 1,000 acres or more.” This specific tax will go to improve the city owned building occupied by the Arkansas Arts Center in MacArthur Park, which is much smaller than 1,000 acres. But the ordinance notes that the statute applies because Little Rock is a first-class city “that contains Fourche Bottoms Park, a city park of more than 1,000 acres.”
Mayor Mark Stodola indicated to me Tuesday that he has an amendment coming to the tax ordinances that would cap contributions from the new taxes for the Arts Center at current revenue levels and specify that growth in revenue would go to other purposes, both at the A&P Commission and general city parks use. This is aimed at addressing concerns raised about devoting all of a city tax levy to a single institution. (Actually, the proposal, while mostly aimed at the Arts Center, will include some renovation money for the MacArthur Museum of Arkansas Military History in MacArthur Park as well.)
Stodola unveiled the Arts Center plan last week. The bond issue would raise almost $35 million for what is envisioned as a $60 million project, if private fund-raising for the rest is successful. The ordinances make no provision for a change in the tax should the private fund drive fall short. The Arts Center has made no specific or firm commitment to a $25 million contribution, though several supporters have indicated to me that they have some optimism about “lead gifts” from at least one foundation and other private contributors.
The special election falls less than a month before the March 1 primary election and there will be an additional cost for holding a separate special election. Government officials frequently schedule special elections for dedicated tax ideas such as these under the theory that supporters can be targeted and larger general election turnouts might be more inclined to reflexively oppose tax increases. This particular tax has reportedly polled well, primarily because it would not be a levy on voters, but on city visitors. The ordinances calling for the taxes explicitly mention that they will not apply to restaurant sales, as the other advertising and promotion “hamburger taxes” do.