Can a city in Arkansas use prepared-food sales tax revenue for police salaries instead of tourism promotion?
Plain-English summary
Representative Jack Ladyman asked the AG about Jonesboro's 2% prepared-food sales tax, which the city's Advertising and Promotion Commission collects. Some residents wanted to redirect the proceeds to police pay raises and other public safety needs. Three questions, three answers.
Question 1: What can the proceeds be used for under state law? Tourism and convention promotion. Specifically:
- Advertising and promoting the city.
- Constructing, equipping, and operating a convention center, including expansion or repair.
- Operating a tourist promotion facility for the convention center.
- Personnel, agencies, or administrative costs to conduct the commission's business.
- Funding the arts.
- Operating theme parks or other tourist-oriented or family entertainment facilities.
- Constructing, equipping, and operating city parks or public recreation facilities.
- Bond payments for any of the above.
That is the statutory list in A.C.A. § 26-75-606. Public safety is not on the list.
Question 2: Can proceeds fund "public safety efforts"? It depends what you mean. Under A.C.A. § 26-75-606(c)(3), the commission may enter into contracts for "actual services that are connected with tourism events or conventions." If the city provides public-safety services (security, traffic control) at a tourism event or convention, prepared-food tax proceeds CAN fund those specific services. But payment must be for "actual services" rendered at the event, not a generic transfer to the city's general budget for general police salaries.
Question 3: Can the city change or amend the tax short of legislative action? The AG split this answer:
- Legislative action by the city council: the tax ordinance can be altered or repealed only by a new ordinance the council passes (under A.C.A. § 14-55-401), or by voter referendum under Ark. Const. art. 5, § 1 and A.C.A. § 14-55-302.
- Legislative action by the General Assembly: the city council does not need state legislative permission to repeal or alter the tax ordinance, but it cannot repurpose the proceeds while the tax exists. The proceeds must be used for the statutory tourism purposes.
So the city has two practical options: (a) repeal the tax (giving up the revenue entirely); or (b) modify the tourism-related uses within the statutory list. Redirecting the existing tax to police pay raises requires either a state law change or repeal-and-replace with a different tax that funds public safety.
What this means for you
Mayors and city councils
If you are facing pressure to redirect prepared-food tax revenue to public safety, the legal answer is no, not without state legislative change. Your options:
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Pass a new general-fund tax. A separate sales tax (with voter approval), property tax adjustment, or franchise fee can fund public safety. Don't try to repurpose existing tourism tax revenue.
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Repeal and replace. If you want to convert the prepared-food tax into a public-safety tax, you need to repeal the existing ordinance and pass a new one. Voters can challenge by referendum, so coordinate communication.
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Use the contract authority for tourism-related public safety. § 26-75-606(c)(3) lets the commission contract for public-safety services at specific tourism events. This is a partial workaround for tourism-specific security costs but does not fund the general police force.
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Lobby for state-law amendment. If you believe the statute is too restrictive, ask the General Assembly to amend § 26-75-606 to add public-safety uses. This is a state legislative process, not a city decision.
Advertising and Promotion Commissions
Your statutory mission is tourism and convention promotion. Spending decisions are bounded by § 26-75-606's list. Document each expenditure against the statutory categories. If your city council pressures you to fund police salaries from your budget, point to this opinion: the AG explicitly says you cannot.
For tourism-event security contracts, document the tourism nexus carefully. The contract must be for "actual services" connected with a specific tourism event or convention. A general transfer to the city's police department (even one labeled "tourism support") does not satisfy the requirement.
Municipal attorneys
Audit your prepared-food tax expenditures. Any line item that is not on § 26-75-606's tourism list (or that does not satisfy the tourism-event contract test in § 26-75-606(c)(3)) is vulnerable to taxpayer challenge under the gift-clause doctrine (Ark. Const. art. 12, § 5).
If your city is contemplating reallocation, advise repeal-and-replace as the only safe path. Avoid creative interpretations of the statute; the AG's reading is the controlling enforcement position.
Police unions and public safety advocates
Prepared-food tax revenue is not available for general pay increases under current state law. If you want to use this revenue stream, your path is state legislative change to § 26-75-606. In the meantime, focus on general-fund mechanisms (other sales taxes, property tax adjustments, fees) for police pay.
If you are advocating for the existing prepared-food tax to be redirected by city council vote, this opinion is the authority blocking that approach. Your alternative is to seek an entirely different public-safety tax source.
Tourism industry
The opinion is good news for the existing tourism funding stream: the prepared-food tax is statutorily walled off from non-tourism uses. Convention centers, tourist facilities, arts funding, and parks remain protected. If a city council moves to repeal the tax in response to public-safety budget pressure, you may want to engage to defend the funding stream.
Taxpayers
A city's prepared-food tax can only fund tourism, conventions, parks, and similar promotion activities. If you see a city using the proceeds for general police salaries or other non-tourism uses, that is grounds for a taxpayer challenge.
Common questions
The mayor said the tax could pay for police "if they work tourism events." Is that right?
Partially. § 26-75-606(c)(3) does allow the commission to contract for actual services (including security) connected with tourism events or conventions. But the payment has to be for the specific event services, not a general police-budget supplement. The contract must show the tourism nexus.
Can the city use prepared-food tax money for fire department equipment that is shared between tourist areas and the rest of the city?
This is a fact question and the AG declined to opine on specific facts. A piece of equipment dedicated to tourism-event response (and used solely for that purpose) might qualify; equipment used generally citywide probably does not. The "actual services" requirement is the hurdle.
Voters approved the prepared-food tax with a campaign that emphasized tourism benefits. Can voters now override and redirect to public safety?
No, not unless the General Assembly amends § 26-75-606. Voters can refer the existing tax to a repeal vote, or reject a new tax, but they cannot redirect the proceeds to non-statutory uses. The legal limit is at the state level.
Why does state law restrict what city tax revenue can fund?
Because the prepared-food tax is a creature of state statute. The city can levy it only because state law authorizes it, and the statutory authorization comes with strings: the proceeds must serve the statutory purpose. Other taxes (general property tax, certain general sales taxes) come with broader authority.
The Advertising and Promotion Commission has a surplus. Can the city pull it into the general fund?
No. Surplus tourism revenue must continue to be used for the statutory tourism purposes. The AG's reading does not allow general-fund transfers from the commission.
Background and statutory framework
A.C.A. § 26-75-606 authorizes Arkansas cities to levy a prepared-food and beverage tax (often called a "hamburger tax" colloquially), with proceeds restricted to tourism and convention purposes. The Advertising and Promotion Commission, established by city ordinance, administers the proceeds.
§ 26-75-606(a)(2)(A) gives the commission discretion over specific uses within the statutory categories. § 26-75-606(c)(2)(B), (c)(3), and (c)(4) define and limit the permissible uses. The contract authority for "actual services" connected to tourism events comes from (c)(3); the prohibition on general-budget transfers comes from (c)(2)(B) and (c)(4).
City legislative authority over its own ordinances comes from A.C.A. § 14-55-401 (continuing-effect rule) and A.C.A. § 14-55-302 (referendum authority). Voters' referendum power is anchored in Ark. Const. art. 5, § 1.
The opinion is a fact-light analysis: it lays out the statutory framework but defers specific factual applications to the city and its counsel. The AG explicitly noted that the commission's specific decisions are "highly factual and based on the relevant circumstances and advice of local counsel."
Citations
- A.C.A. § 26-75-606 (prepared food tax)
- A.C.A. § 26-75-606(a)(2)(A) (commission discretion)
- A.C.A. § 26-75-606(c)(2)(B) (general-budget transfer prohibition)
- A.C.A. § 26-75-606(c)(3) (tourism-event service contracts)
- A.C.A. § 26-75-606(c)(4) (purpose limitation)
- A.C.A. § 14-55-302 (city referendum authority)
- A.C.A. § 14-55-401 (continuing effect of ordinances)
- Ark. Const. art. 5, § 1 (referendum power)
- Ark. Att'y Gen. Op. 2018-004 (commission discretion)
Source
Original opinion text
Opinion No. 2023-061
September 14, 2023
The Honorable Jack Ladyman
State Representative
2204 Doral Drive
Jonesboro, Arkansas 72404
Dear Representative Ladyman:
You have requested my opinion regarding a 2% sales tax that the City of Jonesboro's Advertising
and Promotion Commission assesses and collects on prepared food. You report that some of the
residents wish to use the proceeds of this tax "for pay increases and raises for city police and for
other public safety issues." You ask the following questions:
1. Under state law, what can the proceeds from a sales tax on prepared food be
utilized for?
Brief response: Proceeds from a sales tax on prepared food can be used "for
promoting and encouraging tourism and conventions."
2. Can the proceeds from a sales tax on prepared food be reallocated and/or
utilized for public safety efforts?
Brief response: The answer depends on what you mean by "public safety efforts."
Under A.C.A. § 26-75-606(c)(3), the commission may enter into
contracts for public-safety services related to "tourism events or
conventions."
3. Can a municipality change, amend, or alter the sales tax on prepared food in
any fashion, short of legislative action?
Brief response: No. If you mean legislative action by the city, the sales tax
ordinance cannot be altered or repealed unless the (1) city council
alters or repeals it with another ordinance or (2) voters reject it
through the referendum process. If you mean legislative action
by the General Assembly, the city council would not need
legislative approval to repeal or alter the tax by ordinance, but it
is not permitted to repurpose the proceeds due to the statute.
DISCUSSION
Under A.C.A. § 26-75-606(a)(2)(A), the City of Jonesboro's Advertising and Promotion
Commission determines the uses for the advertising and promotion funds collected. This decision
is highly factual and is based on the relevant circumstances and advice of local counsel. While I
am not a factfinder when issuing opinions, I can provide you with the legal framework the
commission and courts must use to assess these decisions.
Question 1: Under state law, what can the proceeds from a sales tax on prepared food be utilized
for?
Under A.C.A. § 26-75-606, proceeds from a sales tax on prepared food can be used "for promoting
and encouraging tourism and conventions" including:
- Advertising and promoting the city;
- Constructing, equipping, and operating a convention center, as well as any expenses for
expanding, repairing, or improving the convention center;
- Operating a tourist promotion facility for the convention center;
- Personnel, agencies, or administrative costs "necessary to conduct [the] business" of the
commission;
- Funding of the arts;
- Operating theme parks or other tourist-oriented facilities or family entertainment facilities;
- Constructing, equipping, and operating city parks or public recreation facilities, as well as
any expenses for expanding, repairing, or improving the city parks or public recreation
facilities; and
- Payment of principal, interest, fees, or expenses for bonds for these items.
Question 2: Can the proceeds from a sales tax on prepared food be reallocated and/or utilized
for public safety efforts?
The answer to your question depends on what you mean by "public safety efforts." Under A.C.A.
§ 26-75-606(c)(3), the commission may enter into contracts for "actual services that are connected
with tourism events or conventions." If the city provides public-safety services, like security, at a
tourism event or convention, proceeds from a sales tax on prepared food can be used to pay for
those services. But the payment must be for "actual services" and not just a payment into the
city's general budget.
Question 3: Can a municipality change, amend, or alter the sales tax on prepared food in any
fashion, short of legislative action?
No. If you mean legislative action by the city, the sales tax ordinance cannot be altered or repealed
unless the (1) city council alters or repeals it with another ordinance or (2) voters reject it through
the referendum process. If you mean legislative action by the General Assembly, the city council
would not need legislative approval to repeal or alter the tax by ordinance, but it is not permitted
to repurpose the proceeds due to the statute.
Assistant Attorney General Jodie Keener prepared this opinion, which I hereby approve.
Sincerely,
TIM GRIFFIN
Attorney General