Can a city use its advertising-and-promotion tax revenue to fund economic-development services through a chamber of commerce?

Plain-English summary

State Senator Jane English asked three connected questions about how a city's advertising-and-promotion (A&P) tax revenue could be spent. Arkansas's A&P statute, Ark. Code Ann. § 26-75-606, sets out an explicit list of permitted uses (advertising and promoting the city, building/operating convention centers, paying related bonds) and an explicit list of prohibited uses (general capital improvements, general operations, general subsidies of civic groups or chambers of commerce).

The AG answered:

1. Are A&P uses limited to those in § 26-75-606? Yes. Subsection (c)(1) plainly directs that A&P-tax money "shall be used for the purposes described in subsections (a) and (b)" of the statute. Spending outside those purposes is barred.

2. Can A&P funds support "economic development"? Only if the specific economic-development activity falls inside the (a)/(b) permitted-uses list and outside the (c) prohibitions. There is no blanket "economic development" carve-out. The AG noted that the local A&P commission gets first-instance authority to make that fact-bound determination.

3. Can a city pay a chamber of commerce out of A&P funds for economic-development services? Qualified yes. Section 26-75-606(c)(2)(C) bars a general subsidy of a chamber, but (c)(3) lets the A&P commission "contract with such groups to provide ... actual services that are connected with tourism events or conventions." So a chamber can be paid for discrete contracted services that fit the statute's permitted purposes.

The AG also addressed Amendment 97 (Article 12, § 5(b)), which lets cities appropriate money to private entities for economic development. The AG explained that Amendment 97's general grant did not override § 26-75-606's specific limits on A&P money. A city could use other revenue under Amendment 97, but A&P-tax dollars stayed locked to the A&P statute.

Currency note

This opinion was issued in 2020. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: What does "general subsidy of the chamber of commerce" mean?
A: The opinion does not define "general subsidy" by payment structure. It says Ark. Code Ann. § 26-75-606(c) prohibits a general subsidy of a chamber, while subsection (c)(3) permits the commission to contract for actual services connected with tourism events or conventions. Whether a particular payment fits those terms depends on its facts.

Q: Could a chamber be paid to supply visitor guides or city maps?
A: Footnote 8 cites Op. Att'y Gen. 2010-114 as finding it generally permissible to use A&P funds to compensate a chamber for supplying city maps, visitor guides, and information; maintaining property listings; and answering industrial prospects' questions. This opinion does not approve a particular contract. It says the A&P commission must first decide whether the actual services meet the statute's permitted purposes and limits.

Q: Did Amendment 97 expand A&P spending power?
A: Amendment 97 authorizes cities to appropriate money to private entities for economic-development projects or services. The AG said that a particular agency's authority and a particular fund's permitted uses still depend on their governing law. For A&P funds, Ark. Code Ann. § 26-75-606 continues to limit spending.

Q: Who decides whether a particular chamber contract is permissible?
A: The local A&P commission, in the first instance. Ark. Code Ann. § 26-75-606(a)(2)(A) gives it authority to determine the use of the fund, subject to the (a)/(b)/(c) framework.

Q: What is the relationship between A&P spending and the city's general budget?
A: Subsection (c)(4) requires that A&P limits "be reasonably construed so as to provide funds for promoting and encouraging tourism and conventions while not allowing such special revenue to be utilized for expenditures that are normally paid from general revenues of the city." The fund is purpose-restricted, not slush.

Background and statutory framework

The A&P tax was a special revenue scheme codified at Ark. Code Ann. §§ 26-75-601 et seq. A city could levy a tax under § 26-75-602(a), and the proceeds were credited to a city advertising and promotion fund. § 26-75-606(a) listed permitted uses (advertising/promotion, convention center construction, tourism promotion facilities, bond payments). § 26-75-606(c) listed prohibitions: general capital improvements, general operating costs, and "the general subsidy of any civic group or the chamber of commerce." Subsection (c)(3) carved out an exception: an A&P commission could "contract with such groups to provide to the commission actual services that are connected with tourism events or conventions."

The AG's reasoning leaned on plain-meaning canons. Weiss v. McFadden, 353 Ark. 868, 874, 120 S.W.3d 545, 550 (2003), supplied the cardinal rule: construe a statute "just as it reads, giving its words their ordinary and usually accepted meaning." Brock v. Townsell, 2009 Ark. 224, 309 S.W.3d 179, reinforced that when a statute "conveys a clear and definite meaning, there is no need to resort to the rules of statutory construction."

The Amendment 97 portion (Ark. Const. art. 12, § 5(b)) addressed a separate, older constitutional rule that had barred cities from appropriating money to private entities. Amendment 97 created an exception for economic-development projects and services. The AG's earlier Op. Att'y Gen. 2017-003 had applied Amendment 97 to local government agencies that act as arms of a municipal corporation. The AG here drew the line: Amendment 97 lets a city appropriate to a chamber for economic development, but the specific fund being tapped still has to allow that use under its own governing statute. A&P money cannot fund economic development unless that development qualifies under § 26-75-606's tourism/convention framing.

Citations

• Ark. Code Ann. § 26-75-606(a), (b), (c)
• Ark. Code Ann. § 26-75-606(c)(1) (mandatory routing of revenue)
• Ark. Code Ann. § 26-75-606(c)(2)(C) (no general subsidy of chambers)
• Ark. Code Ann. § 26-75-606(c)(3) (contracting carve-out)
• Ark. Code Ann. § 26-75-606(c)(4) (interpretive rule favoring tourism use)
• Ark. Code Ann. § 26-75-602(a) (authorization to levy A&P tax)
• Ark. Const. art. 12, § 5(a), (b); Amendment 97
• Brock v. Townsell, 2009 Ark. 224, 309 S.W.3d 179
• Weiss v. McFadden, 353 Ark. 868, 120 S.W.3d 545 (2003)

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2019-063
February 7, 2020

The Honorable Jane English
State Senator
3 Great Oak Court
North Little Rock, AR 72116

Dear Senator English:

This is in response to your request for an opinion regarding the use of advertising and promotion (A&P) tax revenue funds for economic development. In this regard, you have provided the following background:

> Ark. Code Ann. § 26-75-606 explicitly states that all funds credited to a city's A&P fund may be used for various purposes, including advertising and promotion of the city, construction and improvement of a convention center, operation of certain tourist promotion facilities and facilities necessary for or related to a convention center, and payments associated with certain bonds. See Ark. Code Ann. § 26-75-606(a)(1)(A).
>
> Although Ark. Code Ann. § 26-75-606(a)(2)(A) states that "[t]he commission is the body that determines the use of the city advertising and promotion fund," subsection (c) states that certain uses are prohibited, including use of the revenues for general capital improvements, for the costs associated with the general operation of the city or county, or for the general subsidy of any civic group or the chamber of commerce. Nevertheless, Ark. Code Ann. § 26-75-606(c)(3) provides that "the commission may contract with such groups to provide to the commission actual services that are connected with tourism events or conventions."
>
> Additionally, Ark. Code Ann. § 26-75-606(c)(4) states, "The authorization and limitations contained in this subsection shall be reasonably construed so as to provide funds for promoting and encouraging tourism and conventions while not allowing such special revenue to be utilized for expenditures that are normally paid from general revenues of the city."

In light of the foregoing background information, you have asked the following questions:

1. Is a city's use of A&P funds limited only to those uses explicitly stated in Ark. Code Ann. § 26-75-606?
2. May A&P funds be used for economic development under Ark. Code Ann. §§ 26-75-601 et seq.?
3. May a city enter into a contract with a chamber of commerce to perform services related to economic development and pay for those contracted services with funds generated by an A&P tax?

RESPONSE

The answer to your first question is clearly "yes." Answers to your other two questions, on the other hand, will depend on the facts of a specific case. Regarding your second question, A&P tax revenue may be used to fund economic development only if the economic development in question falls into a category of permissible uses for A&P funds and does not violate any of the prohibitions on the use of A&P funds. As to your third question, a city may pay for a chamber of commerce's contracted services with A&P funds as long as the chamber performs actual services that fall into a category of permissible uses for A&P funds and that do not violate any of the prohibitions on the use of A&P funds.

DISCUSSION

Question 1: Is the city's use of A&P funds limited only to those uses explicitly stated in Ark. Code Ann. § 26-75-606?

Yes, the statute clearly delineates how a city may use its A&P tax revenue. Subsections 26-75-606(a) and (b) set forth a detailed list of permissible uses for A&P funds, while subdivision (c)(2) lists restrictions on how such funds may be used. Additionally, subdivision (c)(1) of the statute provides that, "All local taxes levied as authorized in § 26-75-602(a) shall be credited to the city advertising and promotion fund and shall be used for the purposes described in subsections (a) and (b) of this section." Under a plain reading of subdivision (c)(1), A&P funds must be used for one of the purposes listed in subsections (a) and (b) and that the use of funds for an extra-statutory purpose is prohibited.

Question 2: May A&P funds be used for economic development under Ark. Code Ann. §§ 26-75-601 et seq.?

It is unclear what the reference to "economic development" means. As detailed above, section 26-75-606 dictates how A&P funds may and may not be used. Thus, as a general rule, if the "economic development" in question falls into one of the categories of permissible uses for A&P funds set forth in subsections 26-75-606(a) and (b) and is not barred by any of the limitations set forth in subsection 26-75-606(c), then it is permissible to use A&P funds to pay for such economic development. Whether a particular economic development activity meets these requirements is a question of fact that can only be determined through a consideration of all the relevant circumstances. The A&P commission is given the authority to make this determination in the first instance.

Question 3: May a city enter into a contract with a chamber of commerce to perform services related to economic development and pay for those contracted services with funds generated by an A&P tax?

Arkansas Code section 26-75-606(c) prohibits a city from generally subsidizing a chamber of commerce, but it specifically allows an A&P commission to "contract with such groups to provide to the commission actual services that are connected with tourism events or conventions." Consequently, I believe the answer to your question is a qualified yes. A city may use A&P funds to pay a chamber of commerce for contracted economic development services as long as the chamber provides discrete services consistent with the requirements set forth in Ark. Code Ann. § 26-75-606.

Because you have specifically asked about economic development services, you may be wondering how the passage of Amendment 97 affects a city's ability to use A&P funds, if at all. As a result of Amendment 97, cities now have authority under Article 12, Section 5(b) of the Arkansas Constitution to obtain or appropriate money for economic development projects or services to private entities, including chambers of commerce. As I have previously opined, this authority also extends, generally speaking, to a local government agency that serves as an arm of the municipal corporation. However, whether financing economic development projects or providing economic development services is a proper function of a particular agency or a proper use of particular funds ultimately depends on any applicable statutes or other governing authority pertaining to the local governmental agency.

In this case, an A&P commission is plainly a local governmental agency. But because the governing statute, Ark. Code Ann. § 26-75-606, places clear restrictions on the use of A&P funds, a city may not engage in unfettered appropriations of A&P funds for economic development projects or services. Rather, payments to a chamber of commerce using A&P funds must be for contracted services that fulfill the purposes of (and do not violate any of the limitations on such funds as set forth in) Ark. Code Ann. § 26-75-606.

Sincerely,

LESLIE RUTLEDGE
Attorney General

1 Ark. Code Ann. § 26-75-606 (Repl. 2008).

2 Id. at § 26-75-606(c)(1) (emphasis added).

3 When statutory language is plain and unambiguous, the meaning of the statute must be determined from the plain meaning of the language used. See Brock v. Townsell, 2009 Ark. 224, *9, 309 S.W.3d 179, 186 (if the text "conveys a clear and definite meaning, there is no need to resort to the rules of statutory construction."); Weiss v. McFadden, 353 Ark. 868, 874, 120 S.W.3d 545, 550 (2003) (the cardinal rule of statutory interpretation is to "construe a statute just as it reads, giving [its] words their ordinary and usually accepted meaning in common language.") (internal citations omitted).

4 See also Op. Att'y Gen. 2011-005 (opining that a city A&P commission may only expend A&P funds for purposes expressly authorized by statute).

5 Ark. Code Ann. § 26-75-606(a)(2)(A).

6 Id. at § 26-75-606(c)(2)(C).

7 Ark. Code Ann. § 26-75-606(c)(3).

8 Cf. Op. Att'y Gen. 2010-114 (opining that it is generally permissible to use A&P funds as consideration for a chamber of commerce supplying visitors and newcomers with city maps, visitor guides, and information; maintaining listings of available properties; and answering industrial prospects' questions); Op. Att'y Gen. 2007-276 (opining that no provision of statutory or constitutional law would preclude a city's A&P commission from using A&P funds as consideration for a private entity's operating a city museum of history).

9 Article 12, section 5(a) of the Arkansas Constitution prohibits municipal corporations from becoming stockholders in, or obtaining or appropriating money for, private entities. However, Amendment 97 to the Arkansas Constitution provided an exception to this general prohibition. Now, under Article 12, section 5(b), counties, cities, towns, or other municipal corporations may obtain or appropriate money for a corporation, association, institution, or individual to finance economic development projects or provide economic development services.

10 Op. Att'y Gen. 2017-003.

11 Id.

12 See Ark. Code Ann. § 26-75-606(a) ("Any municipality levying a tax pursuant to this subchapter shall create by ordinance a municipal advertising and promotion commission ....") (emphasis added).