Fort Smith seeks way to ease subsidy of convention center

FORT SMITH -- City directors discussed Tuesday the need for a dedicated funding source to supplement revenue for the city's convention center, and talk turned to a prepared-food tax.

The discussion during the study session was to be over whether to cut 10 percent from Fort Smith's $777,000 subsidy of the convention center.

The subsidy comes from the city's general fund, which pays for most of the city's departments. Directors said the general fund budget is tight, and the money helping pay for the convention center is needed elsewhere.

Several directors said they believed the convention center should have its own money source, which would relieve the burden on the general fund.

"I truly believe that in order for our convention center to move forward, we need that dedicated funding source," City Director Tracy Pennartz said. "And it's going to come from a prepared-food tax."

The city tried in 2011 to pass a 1 percent prepared-food tax with the estimated $1.8 million from the tax going to the convention center. Voters rejected the tax proposal in a special election 5,619-3,341.

It appeared directors on Tuesday wanted to talk more about a separate money source for the convention center than about cutting the subsidy. When Mayor Sandy Sanders asked directors if they wanted to add the 10 percent cut to next Tuesday's voting session agenda, none responded.

They also didn't make a decision on a prepared-food tax but said they wanted to continue the discussion at later meetings.

The study session started with a presentation of convention center operations by General Manager Tim Seeberg and Claude Legris, executive director of the Fort Smith Advertising and Promotion Commission, which took over operation of the convention center in 2011.

Seeberg told directors the convention center has set revenue records each of the past four years.

Last year's revenue was almost $789,000, but expenses totaled $1,459,558. The city's subsidy to the convention center was nearly $671,000.

Pennartz told Seeberg the convention center should add to the expense side of the ledger the estimated $115,000 the convention center doesn't have to pay each year for water, sewer and sanitation service.

According to the city's 2018 budget, the convention center is estimated to generate $689,000 in revenue and $1.635 million in expenses.

Legris said the purpose of the convention center wasn't to make a profit but to spread its financial impact around town to the restaurants, caterers and hotels that will gain from the business the center brings to town. There were 248 events at the convention center last year.

The convention center presentation showed the economic impact of one event -- the two-day Battle of the Fort volleyball tournament held in January 2017 -- was estimated at more than $921,000, with nearly $24,000 in local taxes.

City Director Mike Lorenz said there isn't a lot of competition in cities for privately owned convention centers because they don't make money.

"Where the money is, the profit margin is, are the caterers, the restaurants, the hotels," Lorenz said. "That's where your profit margin is. The center supports hundreds of businesses around town."

The convention center's presentation showed 18 of the larger events held last year had an overall impact of $7.8 million on the community and a tax impact of more than $208,000.

The city owns the convention center but the Advertising and Promotion Commission operates it.

When directors set the prepared food tax special election in 2011, they also entered into the agreement with the commission to run the convention center. Under state law, the commission was the only entity authorized to spend the tax money, which was intended to foster tourism.

While the special election failed, the agreement the commission operate the convention center remained intact.

NW News on 04/11/2018

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