At Mayor Joe Smith's urging, North Little Rock's Advertising and Promotion Commission on Tuesday approved recommending a 1 percentage point increase in the city's lodging tax to help pay for pending development downtown.
The tax increase will need approval by the eight-member City Council to take effect. Aldermen Maurice Taylor and Charlie Hight also are on the Advertising and Promotion Commission, as is Smith. Both supported Smith's motion in a 6-1 vote.
The proposal came the day after the City Council informally agreed to move forward with a 1 percent sales tax that is planned to go before voters Aug. 8. The council is set to officially call for the sales-tax special election at its May 22 meeting.
If voters pass the sales-tax increase and the council passes the lodging-tax increase, the levy on hotel and motel rooms would rise by a combined 2 percentage points. Hotels, motels, bed-and-breakfast businesses and the city's three RV parks and campgrounds all collect the Advertising and Promotion Commission's current 3 percent lodging tax.
When combined with the current 1 percent city sales tax, 1 percent Pulaski County sales tax, and the state's 6.5 percent sales tax, plus a 2 percent state tourism tax, the total tax assessed on North Little Rock lodging is now 13.5 percent. That would rise to 15.5 percent if the hotel and sales taxes are increased.
The money from the increased hotel tax would help the city share in the construction of a proposed three-story building to be adjacent to a planned $3 million downtown plaza along Main Street between Sixth and Seventh.
Smith's plan would move the North Little Rock Convention and Visitors Bureau offices to the ground floor of that building, from where it would manage and maintain the plaza. The city Visitors Center in Burns Park, which draws about 12,000 visitors per year, would remain in Burns Park.
Taggart Architects, which will oversee the plaza's design, is to relocate to the third floor of the new building from 4500 Burrow Drive. Another company yet to be announced, Smith said, would occupy the second floor of the downtown building. The city would pay for one-third of the building's cost, which is still to be determined, Smith said. The city also would own a parking lot behind the building for plaza events.
"We're going full steam ahead," Smith said. "We're doing all we can do to make our city special and to entice people to live here, work here and play here."
Advertising and Promotion Commission Chairman Manoj Patel, owner of the Hampton Inn-McCain hotel, and commission member Tom Roy, chief financial officer for Wyndham Riverfront hotel, both said their biggest concern about raising the lodging tax is competing with hotels in other central Arkansas cities. Roy cast the only no vote on Smith's proposal.
"When bigger groups and conventions come in, they look at everything," Roy said, referring to taxes and fees added to a hotel's room rate. "We compete with hotels on the other side of the river [Little Rock] when our total tax is higher than theirs. I'm not against the project. Our concern is about being competitive."
Little Rock's Advertising and Promotion tax on hotels is 2̶ ̶p̶e̶r̶c̶e̶n̶t̶, 4 percent,* and its restaurant tax on prepared food is 2 percent. The city sales tax is 1.5 percent. North Little Rock's restaurant tax is 3 percent; it would not be affected by the proposed lodging-tax increase.
Patel said the city's tax rate "does matter" to conventions, which can end up being billed $2,000-$4,000 for a block of rooms.
"A big company does look at every penny that is added onto their stay," Patel said.
In response, when Smith made his motion, he included a review of the tax's impact on hotels' business after 18 months.
The downtown square is aimed to become a "mini Sundance Square," Smith told the commission, a reference to Sundance Square Plaza in downtown Fort Worth.
The Fort Worth plaza features two fountains and a wall mural of a cattle drive and is a popular gathering place in the center of the Sundance Square business and entertainment district.
Smith mentioned other developments planned near North Little Rock's plaza. Centennial Bank has an option to buy city property at Main and Bishop Lindsey Avenue to build a multistory bank branch. (Seventh Street becomes Bishop Lindsey Avenue east from Main Street). A 162-unit, $16 million apartment development is scheduled to break ground June 1 just southeast of the planned plaza.
With so many partners and developers on board, Smith said, adding the hotel tax at the same time the city will seek a sales-tax increase can't be helped.
"I can't change the timing," Smith said when asked after the meeting. "These are things that need to be addressed now. To partner with willing developers is a bonus. I've learned that when someone wants to develop something, they're ready to go. We have to have that [additional] penny lodging tax to pay for things."
Metro on 04/26/2017
*CORRECTION: Little Rock charges a 4 percent tax on hotel and motel room rentals. A previous version of this article misstated Little Rock’s tax rate.