Aldermen in Eureka Springs plan to put a proposed sales tax increase on the Nov. 8 election ballot.
The extra 1 percent sales tax would bring in about $1.1 million a year and keep the city from having to raise water and sewer rates to pay for infrastructure improvements, said Mayor Robert "Butch" Berry.
Berry said Eureka Springs attracts more than a million visitors a year, and they should help pay for the work.
"Our local citizens are helping subsidize our visitors' stay here," the mayor said.
Eureka Springs currently has total sales tax rates of 9.375 percent on basic retail sales, 12.375 percent on prepared food and 14.375 percent on hotels. Those rates include state and city taxes.
By comparison, Little Rock's total sales tax rate is 9 percent on basic retail sales, 11 percent on restaurants and 15 percent on hotels.
Alderman James DeVito said he's "not real happy" about the proposed tax increase, but it's better than the alternative.
"It's a necessity in a town like Eureka, where you have aging infrastructure and increasing demand," said DeVito, who owns a restaurant. "You can only extract so much out of the 2,000 people that live here."
Alderman Mickey Schneider said more than 90 percent of the cost would be paid by visitors to Eureka Springs.
The Eureka Springs City Council tentatively approved an ordinance on Monday that would send the 1 percent sales tax proposal to voters in November, but aldermen decided to hold off on final approval until they hear back from the Arkansas Municipal League about the ballot wording.
The council can make any changes necessary at its next regularly scheduled meeting on Aug. 8 and still have time to get the measure on the Nov. 8 ballot, Berry said. The proposal passed unanimously on its first two readings Monday.
The proposed sales tax would apply to retail purchases across the board, including at restaurants and hotels. The council also plans to add a "sunset" clause that would end the tax after 10 years.
Under the proposal, three-fourths of the revenue generated by the sales tax would go toward sewer and water improvements with one-fourth going to the city's historic auditorium.
If the measure passes, Eureka Springs would have the second-highest city sales taxes in the state, according to figures from the Arkansas Department of Finance and Administration.
Residents of Eureka Springs now pay 2.375 percent in city sales taxes on all retail purchases. With the proposed increase, it would be 3.375 percent. The only Arkansas city that has a higher sales tax rate is DeWitt with 3.5 percent.
DeWitt Mayor Ralph Relyea said his city's tax is higher than others in the state because Arkansas County voters overwhelmingly approved a 1.5 percent sales tax to fund the DeWitt Hospital and Nursing Home in 2004 and again in 2012.
On top of those city taxes, the state has a 6.5 percent sales tax, and Carroll County -- where Eureka Springs is located -- has a 0.5 percent sales tax.
Arkansas also has a 2 percent tourism tax on lodging.
DeVito said he has gotten some "blow-back" from lodging owners because their sales tax rate will be 15.375 percent if the new tax passes.
Compared with other tourist towns, that's not out of kilter, DeVito said.
"I've really not had any blow-back from residents of the community because they understand that a penny sales tax doesn't affect them that much," he said.
Metro on 07/27/2016