Lodging tax goes to North Little Rock council

Mayor expects plan’s approval

Mayor Joe Smith expects the North Little Rock City Council to approve at its meeting Monday a 1 percentage point increase in the city lodging tax charged for stays at hotels, motels, RV parks and campgrounds.

The North Little Rock Advertising and Promotion Commission supported Smith's proposal April 25 to raise the tax from 3 percent to 4 percent, with city Aldermen Maurice Taylor and Charlie Hight among commissioners voting for the increase. The City Council has final approval, with legislation for the tax on Monday's agenda.

"Most of the time, they [aldermen] will call if they've got concerns," Smith said Friday. "I've not heard a word."

No public hearing is required to be held regarding a hotel tax, but anyone can comment on agenda items during City Council meetings. The meeting is 6 p.m. Monday at City Hall.

The lodging tax is coming in the same month the City Council is expected to call a special election for Aug. 8 to ask voters to increase the city's sales tax by 1 percentage point, raising that tax to 2 percent. The council is scheduled to set the special election at its next meeting in two weeks.

The total tax on a hotel stay in North Little Rock is now 13.5 percent: the 1 percent city sales tax, the 3 percent city lodging tax, a 2 percent state tourism tax, 6.5 percent state sales tax and a 1 percent county sales tax.

Raising both the hotel tax and, if approved by voters, the city sales tax, would mean a hotel stay in North Little Rock would carry a total tax of 15.5 percent.

The tax on a hotel stay in Little Rock is 15 percent. Little Rock has a 1.5 percent city sales tax and a 4 percent lodging tax, along with the same state and county taxes.

Revenue from North Little Rock's current 3 percent hotel tax is divided between the Advertising and Promotion Commission (2 percent) and city parks (1 percent).

The council's original legislation filed Tuesday only addressed the Advertising and Promotion portion being raised from 2 percent to 3 percent, while information put out by the Convention and Visitors Bureau last week showed the total tax going up from 3 percent to 4 percent.

After reviewing the ordinance, City Attorney Jason Carter filed an amended version Friday to include language that the council is authorized to levy an additional 1 percent on top of the now 3 percent total.

"We want to see if we can say this in a way that is more easy to understand," Carter said before filing the amendment. "It's important for compliance purposes that entities subject to the tax can readily understand the taxes that they have to pay."

Despite the close timing, the hotel tax request and the coming sales tax proposal aren't related, Smith said, because of who will be most affected and the city's different needs.

"That [lodging] tax is on visitors to the city, so 99 percent of the time it won't be anybody from the city of North Little Rock paying it," Smith said. "I don't think it's uncommon to ask a visitor to pay their fair share to a town that they spend four days in."

"The numbers I've been told during sales tax elections in the past is that 60 percent of sales-tax income comes from residents and 40 percent from outside North Little Rock," Smith said.

The lodging tax proposal is related to Smith's plan to create a downtown plaza with a water feature and a space for residents and visitors to gather and enjoy activities or relax. A stand-alone restaurant and retail stores are also in the plaza plans. The plaza is viewed as a miniature version of Fort Worth's Sundance Square Plaza, Smith has said.

The tax also will help fulfill the mayor's desire to move the North Little Rock Convention and Visitors Bureau from the Visitors Center in Burns Park to a planned building adjacent to the plaza. The bureau would then be able to manage the site. A visitors center would remain in Burns Park, just off Interstate 40.

"It's just an opportunity to take the Visitors and Convention Bureau to the next level and to be part of downtown, where it should have been for years," Smith said. "It's giving them an opportunity to manage our plaza and participate in its success."

The proposed sales-tax increase is needed because of the city's stagnant revenue while expenditures continue rising, Smith said.

One-half percentage point is to go toward general operations. The other half percentage point, which would expire in five years, would be designated for capital needs for improvements to streets and fire stations and for a new police and courts building. Each half percentage point is projected to raise $8 million annually.

City revenue in the past 10 years has grown by 0.3 percent on average annually, while expenses have risen by an average of 3.5 percent annually, according to figures prepared by the city's Finance Department. Without additional revenue, the city's projections show, the 2018 budget would have a $4.8 million shortfall, while the city's cash reserves would be at minus-$1.5 million within three years.

"If we don't do something, we're going to run into some financial difficulties," Smith said. "Doing nothing is not an option."

Metro on 05/07/2017

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