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 whether Jonesboro could use proceeds from its prepared-food sales tax for police raises and other public-safety needs. The AG said A.C.A. § 26-75-606 limits the proceeds to “promoting and encouraging tourism and conventions.” That includes city promotion, convention and tourist facilities, the arts, certain entertainment and recreation facilities, and related bond costs.

The commission may contract for “actual services that are connected with tourism events or conventions.” The opinion gives security at such an event as an example of a public-safety service the tax could pay for. It distinguishes payment for those services from a payment into the city's general budget.

The city council may alter or repeal the tax ordinance by another ordinance, and voters may reject it through the referendum process. The AG said the council does not need General Assembly approval to alter or repeal the ordinance, but the statute does not allow it to repurpose the proceeds.

What this means for you

City officials and advertising and promotion commissions

The opinion assigns decisions about specific uses to the commission and says those decisions depend on circumstances and local counsel's advice. It provides a statutory list of tourism and convention uses. For public-safety spending, its example is a contract for actual security services at a tourism event or convention. The AG does not approve a general transfer for police raises.

Residents and public-safety staff

The AG addresses the proposal to use this tax for police raises by distinguishing actual services connected with tourism events or conventions from a payment into the general budget. He does not identify a replacement tax or recommend a funding plan for general public safety.

Common questions

Can the tax pay for security at a tourism event?
Yes. The opinion says the commission may contract for actual public-safety services, such as security, at a tourism event or convention.

Can the city put the proceeds in its general budget for police raises? The opinion says payment must be for actual services connected with tourism events or conventions, “not just a payment into the city's general budget.”

Can the city council change the tax ordinance?
Yes. It may alter or repeal the ordinance through another ordinance without General Assembly approval. That does not permit it to repurpose the proceeds contrary to A.C.A. § 26-75-606.

Background and statutory framework

A.C.A. § 26-75-606 governs the uses of the prepared-food tax proceeds. The AG quotes its tourism and convention purpose and lists permissible uses. Footnotes 2–4 cite the provisions governing that purpose, contracts for actual services, and the restriction on general-budget payments. Footnotes 5–6 cite the authorities for altering or repealing a city ordinance and for a referendum.

Citations

• A.C.A. § 26-75-606(a)(2)(A); § 26-75-606(c)(3)–(4)
• A.C.A. § 14-55-401; § 14-55-302
• Ark. Const. art. 5, § 1
• Ark. Att’y Gen. Op. 2018-004

Source

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

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.
   The Honorable Jack Ladyman
   State Representative
   Opinion No. 2023-061
   Page 2

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. 1 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” 2 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” 3 and not just a payment into the city’s general budget. 4

1
Ark. Att’y Gen. Op. 2018-004.
2
A.C.A. § 26-75-606(c)(4).
3
Id.
4
A.C.A. §§ 26-75-606(c)(2)(B), 26-75-606(c)(4).
The Honorable Jack Ladyman
State Representative
Opinion No. 2023-061
Page 3

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 5 or (2) voters reject it through the referendum process. 6 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

5
A.C.A. § 14-55-401 (“All laws, ordinances, resolutions, or orders, lawfully passed and adopted by the city or town council, not inconsistent with the Constitution or laws of this state, shall be, remain, and continue in force until altered or repealed by the council”). 6 ARK. CONST., art. 5, § 1, A.C.A. § 14-55-302.