A proposal to raise taxes charged to hotel customers in Little Rock is now in the city Board of Directors' hands after the Advertising and Promotion Commission approved a resolution Tuesday recommending the increase.
Revenue raised from the proposed 2 percentage point increase in hotel taxes would fund improvements to the Arkansas Arts Center, the MacArthur Museum of Arkansas Military History and the city park in which both are located, according to Little Rock Mayor Mark Stodola.
The commission's unanimous support of the plan didn't come without some reservations.
While all commissioners said they understand arts and history amenities attract tourists, some said they are worried that hotel companies are being burdened too often with the costs of such improvements.
"This industry can't continue to carry the burden of all these projects," Commissioner Philip Tappan said, referring to the current proposal and a recent commitment to use a portion of the city's hospitality tax to fund an ongoing $68 million renovation of the Robinson Center.
"I think it's a wonderful project, and I support it wholly, but I know we are jeopardizing a sports arena or parks or fields or other things. There's got to be some leadership to come up with other funds and other sources [instead of] continuing to come back to this industry," Tappan said of the hotels.
Chairman Capi Peck said she was concerned that the commission was being asked to approve the deal so quickly. She first learned the details of the plan Monday from an Arkansas Times blog post, she said.
"I'm trying to wrap my brain around it. I want to be supportive, but I don't want to do anything in a hasty way and without all other types of funding having been explored outside this hotel tax," Peck said.
Stodola's proposal would affect hotel room rentals by increasing the hotel portion of the Advertising and Promotion tax. It would not change the 2 percent restaurant portion, often called the hamburger tax, that is charged on prepared food purchases.
The proposal would increase the hotel tax to the state maximum of 3 percent and add an additional percentage point for park improvements, which is allowed under state law. The overall tax paid by hotel visitors would increase from 13 percent to 15 percent, which includes all state and local taxes.
That could generate up to $37.5 million through a 30-year bond primarily for expansion and renovation of the Arts Center, but also for improvements to the MacArthur Museum of Arkansas Military History and the grounds at MacArthur Park.
Tappan asked that a commitment of private funds to match the public dollars be written into the commission's resolution Tuesday. But Stodola objected, saying bond lawyers drafted the resolution and he didn't want to add anything that might make the proposal improper under Arkansas law.
Arts Center Executive Director Todd Herman said he could verbally commit to the center's plans to raise private funds.
"We will certainly engage in campaigning, and the goal is to match those funds from the private sector to make the Arts Center what all of us want it to be, and what it can be, and how it will be most significant and impactful for this community," Herman said.
The mayor previously said the Arts Center was looking at an estimated $60 million expansion and that the hospitality tax revenue would likely raise about $35 million. That would leave at least $25 million to be paid with private funding.
Herman said after the meeting that it's important to remember that some private donations raised by the Arts Center would go toward building the center's endowment, which he said is crucial to ensuring the long-term success of any expansion.
The endowment is currently about $25 million. The goal is to increase that to $40 million, Herman said.
Both Herman and Arts Center Foundation Board Chairman Bobby Tucker are supportive of the plan to use revenue from the hotel tax paired with private funds to renovate and expand the existing arts facility.
The foundation previously also considered building a new structure in another location outside of the park.
Tucker said Tuesday that he had only communicated the current plan to the other foundation board members by email. The board had yet to meet to discuss the option, he said.
The Arts Center is run by a city board, but most of its funding comes from the independent foundation. The city owns the Arts Center building at 501 E. 9th St., while the foundation owns the art collection.
"Thus far, we do not have a formal budget, and we have not committed private funds to the project," Tucker wrote in an email to foundation board members this week.
Prior funding proposals for a new building included a sales tax increase -- which would affect everyone who buys goods in Little Rock, not just hotel visitors. The cost for new construction was estimated at $100 million.
The current renovation plan is to expand the Arts Center to 140,000 to 160,000 square feet. Other needs include upgrades to the air and heating system, lighting, and storage.
In the event no private funds are committed to the project -- a hypothetical that Tucker refers to as Scenario 1 -- the Arts Center could still be renovated solely with revenue from the hotel tax increase.
"If we just had the money from the bond issue, we would be able to renovate the existing building, maybe add a few square feet -- under 10,000. We would not see substantial changes to the building, and it would consist mostly of overall systems upgrades and target intervention to enhance visitor experience," Tucker said. "Basically, it would bring us all up to current standards. We're going to be up for re-accreditation in 2016. These are things we just, we've got to do them."
As for where the private donations for the project would come from, that hasn't been determined.
"That's something the foundation needs to talk about. We are not committed to any plan yet. We haven't even met yet to discuss this," Tucker said.
No date has been set for the Board of Directors to take up a vote on increasing the hotel tax. The matter would have to be approved by voters before a 30-year bond could be taken out to fund the improvements.
Larry Carpenter, a member of the Advertising and Promotion Commission and owner of the Holiday Inn Presidential hotel in Little Rock, said several hotel owners have told him they are against the tax increase.
Bill Spencer, general manager of the Little Rock Marriott, declined to comment after Tuesday's meeting. The general manager of the downtown Doubletree hotel couldn't be reached Tuesday.
Despite the opposition, Carpenter said he ultimately decided to support the tax increase plan.
"I'm ready to let the voters decide ... personally, me as a hotelier, we want to share our part and see that this is a worthy investment of those dollars," Carpenter said.
Metro on 11/18/2015