In a meeting Tuesday afternoon, the Little Rock Board of Directors received an update from City Finance Director Sara Lenehan on the “promises kept” by the 3/8 Cent Capital Sales Tax, which city residents passed in September 2011 and took effect in 2012. Mayor Frank Scott Jr. also told directors that on March 10, he will present “specific numbers” to the board on how the proposed “Lift Little Rock” sales tax would impact city departments and projects.
Through its “Lift Little Rock” campaign, Scott’s administration hopes to encourage the Board of Directors and Little Rock voters to approve a permanent 1 percent sales tax for the city, which Scott said would act as a dedicated source of funding for improvements to public safety, quality of life and infrastructure. After the board receives more specific information on the proposed sales tax on March 10, Scott said his team will address directors’ concerns and present an ordinance for their approval shortly after.
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If the board eventually passes the ordinance to add the sales tax initiative to the ballot, Scott said he hopes to bring the issue before voters “no later than September.” If the permanent 1 percent sales tax is approved, the city would not pursue a renewal of the 3/8 cent sales tax, which will remain in effect through Dec. 31, 2021.
In her presentation, Lenehan shared several capital projects funded by the 3/8 cent sales tax that have been completed, including the $4 million construction of the new Southwest Fire Station, new equipment and vehicles for the Little Rock Police Department and equipment for the city’s Code Enforcement department. Lenehan also highlighted several capital projects currently “in progress” that are funded by the 3/8 cent sales tax, including $67.5 million in street resurfacing and maintenance throughout the city by the Public Works department, the renovation of the McFadden Building at 615 West Markham into the new LRPD Police Headquarters, $10 million allocated to the expansion of the Little Rock Port Authority, and upgrades to the city’s park system.
Lenehan said that of the $195.8 million in improvements set aside by the 3/8 cent sales tax, all projects have been completed or are in progress, with the exception of the city’s renovation of the courts portion of the LRPD headquarters, which she said would hopefully be completed through the proposed penny sales tax initiative.
Lenehan added that though sales tax revenue had been projected to grow at a rate of 2 percent per year over the 10-year course of the 3/8 cent sales tax, actual revenue has “fallen short of expectations.” She said the city attributes this in part to the “erosion of the local tax base through internet sales,” but with the implementation of Act 822 in July 2019, which requires online retailers to charge sales tax on purchases made in Arkansas, revenue growth during the last two and a half years of the 3/8 cent tax is expected to improve. Because of the revenue shortfall, however, Lenehan said the allocated funds to projects that have not been completed yet will “likely receive” about 95 percent of the initial allocation.
Little Rock currently has a 1.5 percent local tax rate, in addition to a 6.5 percent state sales tax rate and a 1 percent county sales tax rate for a 9 percent total tax rate. Because the current 3/8 sales tax does not expire until Dec. 31, 2021, if voters were to pass the proposed “Lift Little Rock” 1 percent sales tax this summer, there would be a one-year period in which the local tax rate would increase from 1.5 to 2.5 percent for a total 10 percent tax rate. After the 3/8 cent sales tax expires on the last day of 2021, the local tax rate would then decrease to 2.125 percent or a total 9.625 percent sales tax rate. The impact of the proposed 1 percent “Lift Little Rock” sales tax would be 5/8ths of a cent or 0.625 percent after the 3/8 cent sales tax expires.
Lenehan said the “Lift Little Rock” sales tax would never expire, and it would generate around $50 million per year, a figure that she said is based on “the last couple years of history.” Because of projected revenue falling short in previous years, Lenehan said the city will not “try to project a growth rate” in its funding allocations, should the 1 percent sales tax be passed.
“Instead, that [revenue] growth would be utilized to hopefully cover the increased costs as things go on, but would not be committed upfront,” Lenehan said.
Scott said he wanted to use Tuesday’s meeting to present directors with information on what the proposed “Lift Little Rock” sales tax could provide for the city, giving them time to provide input about projects or issues they’d like addressed by the new sales tax or to share questions and concerns about the proposed initiative. He said he will present estimated “specific” numbers for the funding of individual city departments and projects at the board’s agenda meeting on March 10.
Scott said that addressing the city’s infrastructure needs and improving quality of life are key to attracting two important demographics for the future of the Little Rock: millennials and people reaching retirement age.
“Individuals that are a part of the millennial generation, as well as our elder brothers and sisters who now have discretionary income as they’re beginning to retire, they are now choosing where they want to live first based on quality of life amenities, so we have to turn our heads to how do we focus on investing in our city’s growth, focusing on quality of life and place,” Scott said.
While Ward 1 director Erma Hendrix said she’s in full support of the “Lift Little Rock” initiative, other directors shared concerns about how funding from the proposed 1 percent sales would be allocated.
Ward 6 director Doris Wright said she would want to ensure that part of the funding generated by the sales tax would be used to support the operating costs of the improved facilities. Wright said she would also want a portion of the sales tax revenue to support affordable housing in the city.
Ward 3 director Kathy Webb and Ward 4 director Capi Peck both said they thought some of the revenue from the 1 percent sales tax should be used to further improve the city’s transit system, as access to high quality public transit is an important factor when millennials and retirees are choosing where to live.
Vice Mayor and ward 7 director B.J. Wyrick said she felt her ward had a greater need for improved streets and drainage than the other wards.
“I look forward to the information that you’re going to bring forward to us [on March 10], I just don’t want ward 7 to be left out,” Wyrick said. “And you live there,” she continued, addressing Scott, “so you oughta…”
“You won’t have to worry about ward 7 being left out,” Scott said, interrupting Wyrick.
“You heard that?” Wyrick asked her fellow directors, laughing. “Guaranteed, right?”
“Guaranteed,” Scott replied.
Ward 2 director Ken Richardson said he didn’t think the board should be using the meeting to discuss individual projects in specific wards, but focusing on the “conceptual framework” of the sales tax instead.
“From a standpoint of human capital development, I have some questions about this,” Richardson said. “I’m concerned about us addressing public safety in a way that’s beyond couching it within the narrow confines of more police and [a] bigger jail. One definition of insanity is doing the same thing over and over again and expecting different results. I don’t care if we put the Taj Mahal in the city: If we don’t deal with the perception and reality of public safety, it’s not going to make any difference.”
Richardson instead suggested the city invest in restorative justice, employment training and addressing other “social ills” that are impacting “certain parts of the city” where residents can “least afford a sales tax increase,” adding that in his opinion, “sales taxes are regressive in nature.”
Scott will present a more detailed outline of how the estimated annual $50 million in revenue from the Lift Little Rock sales tax initiative would be allocated to individual city departments and projects at the board’s agenda meeting at 6 p.m. on March 10.