NLR council studies adding tax

North Little Rock City Council members Thursday debated whether to add another city sales tax or reinstate a garbage-collection fee to aid a dreary budget forecast.

Mayor Joe Smith called the hour-long meeting to give aldermen an overview of the five-year city budget projection his office released three weeks ago.

The prognosis shows the city continuing to use its cash reserve to balance its annual budget, funds that would then be depleted by the end of 2017. The forecast estimates that expenditures would increase 2 percent annually while revenue would grow by only 1 percent.

“If we change nothing, by the end of 2017 our fund balance will be eliminated and we will go directly into a $3.7 million deficit in 2018,” Smith said.

The budget projection includes charts showing that a $20 monthly sanitation fee would raise $5.5 million annually, while an additional 1 percent city sales tax would provide $16 million yearly.

North Little Rock voters approved a 1 percent city sales tax in March 2000 when officials used the elimination of sanitation fees as an incentive to voters, a move that cost the city about $3 million annually in revenue at the time. The sanitation cost to the city now is $5 million, Smith said.

Alderman Linda Robinson said that she would prefer adding another 1 percent sales tax over reinstating the sanitation fee because, “Not only would North Little Rock residents pay, but the people coming into the city would pay,” she said.

“A penny sales tax would be something everyone could participate in,” Robinson said. “Some folks are not able to afford an extra $15-$20 [sanitation fee] a month.I don’t know how much I’d have to spend [in sales tax] every month for that penny to equal out to $20.”

The Washington, D.C.-based Tax Foundation on Tuesday released a report saying that Arkansans pay the second-highest combined state and local sales tax rates on average in the nation. State officials disputed those findings, referring instead to a census-based report that ranks Arkansas 38th for total state and local taxes per capita.

Aldermen Murry Witcher and Maurice Taylor said that retail opportunities increasing in other cities would probably take away from shoppers traveling to North Little Rock, meaning sales-tax revenue likely will decrease.

Smith told aldermen that city staff will be working to reduce expenditures so that “we will be able to look you in the eye and tell you we have cut our budget as much as we can.”