A just-passed lodging-tax increase in North Little Rock would be reduced by half under a proposal that will require City Council approval, Mayor Joe Smith said Thursday.
Scaling back the 1 percentage-point increase to one-half percentage point addresses concerns by city hotel owners that they would be at a competitive disadvantage with hotels in neighboring Little Rock.
The City Council approved the tax increase at its Monday evening meeting, despite opposition from a roomful of hotel owners, with some telling the council that they feared the added tax would cause a loss of business. The tax affects hotels and motels, bed-and-breakfast businesses, campgrounds and RV parks.
The tax increase is to take effect Jan. 1, along with a 1 percentage-point city sales tax increase that voters approved in a special election Aug. 8. The dual increases will move the total tax paid on lodging rentals to 15.5 percent, with Little Rock's at 15 percent.
Smith's new proposal to implement only a half-percent increase in the hotel tax, as it is more commonly called, would put the two cities at an equal tax level for lodging rentals.
Smith said he will file legislation to amend the hotel tax to the lesser amount for the City Council to consider at its next meeting, Nov. 13.
The lodging-tax increase is needed, Smith has said, to pay for one-third of the cost of a planned three-story building on city property at 600 Main St. in the city's Argenta downtown district. The North Little Rock Convention and Visitors Bureau will be on one floor as a tenant. The city's Downtown Development Board will own the estimated $4.8 million building, paying $1.6 million, or one-third, of its cost.
The building is to be near a planned $4 million downtown plaza that Smith is spearheading to be developed on city property on Main Street between Fifth and Sixth streets. The Visitors Bureau's move from offices in Burns Park to downtown will allow it to manage the plaza and its rentals for private events, which will produce bureau revenue.
Smith made his announcement about reducing the lodging tax increase Thursday afternoon at a special meeting of the North Little Rock Advertising and Promotion Commission, which oversees the Convention and Visitors Bureau. The meeting was to approve a purchase and sales agreement for the 600 Main St. property so all parties can sign leasing contracts.
The Downtown Development Board signed off on the agreement Monday, and the two private partners -- Taggart Architects and the Arkansas Automobile Dealers Association -- have already approved the agreement, Smith said. The City Council will have final approval.
Smith told commissioners that he looked at final figures Tuesday that assured him a one-half percentage point tax increase would be enough to build the city's share of the 600 Main St. building. The other one-half percentage point would have gone toward helping the Convention and Visitors Bureau promote hotels and tourist attractions.
"We felt like you all would rather be equal to Little Rock than to have the extra promotion," Smith said.
Commission chairman Major Patel and vice chairman Tom Roy had both spoken against the hotel-tax increase at Monday's council meeting, asking for at least a delay of the vote to allow for more discussion. The council voted 5-1 for approval with one absent and one abstention.
Patel is owner of the Hampton Inn-McCain hotel. Roy is vice president of finance for Frank Fletcher Companies, owner of the Wyndham Riverfront hotel.
"It sounds great," Patel said after Thursday's meeting. "We appreciate the mayor having listened to what we said on Monday."
Roy said the change "from a competitive standpoint, it's really big. We're very happy to see that change, for sure."
Frank Fletcher spoke out against the tax increase last week and again to the council Monday. He said he wasn't aware of the mayor's Thursday announcement until a reporter told him later in the afternoon. He said his concern had been being put at a competitive disadvantage with Little Rock's hotels.
"It's kind of what we asked for the other night," Fletcher said. "I didn't think they were considering it. I'm very, very happy for what I call the spirit of cooperation. All of us in the hotel business will greatly appreciate it."
Smith said after Thursday's meeting that he didn't think having a tax rate one-half percent higher than Little Rock's hotels would have made a difference to hotel guests.
"The thing that popped into my mind was, when I'm about to stay at a hotel, I've never in my life asked what the hotel tax was," Smith said. "I don't know if it would hurt their business. But, just the fact that a hotel salesman in another city could say, 'their [North Little Rock's] taxes are higher,' that could hurt."
Metro on 10/27/2017