HOT SPRINGS -- The city of Hot Springs is projecting a revenue windfall from last year's passage of the casino gaming amendment, posing questions about how to allocate the additional tax receipts.
City Manager Bill Burrough recommended to the Hot Springs Board of Directors on Tuesday that the increase be set aside in a restricted fund for unfunded capital needs. He asked to form a citizens committee to prioritize those needs.
"I would like to form an ad hoc committee that could help with some of that prioritization," he said. "It's something I would like to have some community input on as we develop these particular projects."
The $2.16 million Hot Springs received last year from the 1.5 percent it levies on Oaklawn Racing Casino Resort's net games of skill revenue is projected to increase 69 percent under the amended tax formula. The city will receive 19.5 percent of the 13 percent tax applied to the first $150 million of annual net gaming receipts and 20 percent tax on net receipts over $150 million.
Fifty-five percent will go to the state general fund. The Arkansas Department of Finance and Administration said the new tax structure goes into effect July 1.
The $144 million that Oaklawn's games of skill netted in 2018 is the basis of the city's $3.65 million projection for the tax. The city expects Oaklawn's taxable revenue to increase once casino gaming is fully implemented. Live craps and blackjack began earlier this month, and a sportsbook is in the works. A 28,000-square-foot expansion of the gaming area is part of the $100 million build-out Oaklawn will break ground on next month.
A citizens committee formed in 2012 to rank the city's unfunded needs assigned a high priority to the demolition of the old St. Joseph's Hospital infirmary on the campus of the Arkansas School for Mathematics, Sciences, and the Arts. The committee estimated demolition costs of $1.7 million, but Burrough said tearing down the city-owned building will probably be a more than $3 million project.
The city said the school's heating and cooling systems are housed in the building. An agreement with the school requires the city to demolish the building within 16 months of the school removing the systems.
"We're probably still two or three years away from that project," Burrough said. "Right now the agreement is we will bring the building down."
Fire Department needs include a new ladder truck, which Burrough said will cost more than $2 million when fully outfitted.
"We could gobble up this $1.5 million in worthy projects without any organization, but I think we need more of a laser approach on things we know that are coming that we don't have the funding for now," Burrough said.
The Legislature recently passed a law allowing local governments to pledge casino tax revenue to debt issued for capital improvements, pending a local ballot referendum asking voters to approve the bond issue. The tax revenue could secure debt the same way local governments use advertising and promotion taxes to finance capital improvements.
Bob Wright, senior managing director for Crews & Associates, the city's financial adviser, told the board that the additional $1.49 million the city expects to receive could secure a $20 million debt issue. Pledging all of the projected $3.65 million would secure a $46 million bond issue.
"Instead of taxing your citizens, you're taxing one small sector," Wright said. "It gives you a good opportunity to put some money back into the community."
The 8 percent of the casino tax that Garland County will be entitled to is projected to double what it currently receives from its 0.5 percent share of net games of skill receipts. The $1.5 million in projected revenue is 108 percent more than the $720,000 the county received last year.
Metro on 04/11/2019