North Little Rock's predominant hotel owner said a proposed 1 percentage point increase in the city's lodging tax would hurt hotels and that a planned downtown plaza will be more trouble than it's worth.
Frank Fletcher, owner of the Wyndham Riverfront Hotel and its two restaurants at 2 Riverfront Place in downtown, said last week that he is leading an effort against raising the proposed tax on hotel room rentals and other lodging venues because the total tax on a hotel stay will become half percentage point higher than competing hotels in Little Rock.
The North Little Rock City Council is to vote at its 6 p.m. meeting Monday on whether to approve the lodging tax increase from 3 percent to 4 percent. A lodging tax doesn't need city voter approval. The North Little Rock Advertising and Promotion Commission recommended the increase in April by a 6-1 vote.
Added to current city, county and state taxes, and the 1 percentage point rise in city sales tax set for Jan. 1, the tax on any lodging rental would be 15.5 percent. Little Rock's total is 15 percent.
"We're going to lose business," Fletcher said of North Little Rock hotels. "We may lose 10 [percent] to 20 percent of business to [Little Rock] hotels across the river. You can't say there isn't a ton of competition there. And I don't think any new hotels are going to come to North Little Rock if they're not going to be competitive.
"What if there is a job loss in our city's hotels?" Fletcher said. "Why wouldn't there be a job loss if there is less business?"
Mayor Joe Smith countered Fletcher's comments Friday by saying the 4 percent lodging tax will be the same as Little Rock's. Also, the extra half percent from the city's newest sales tax will expire in five years, he said.
"We're catching up with what Little Rock is charging for its hotel tax," Smith said.
City voters approved the increase in the city sales tax from 1 percent to 2 percent in an August special election. That tax, and the hotel tax, if approved, will take effect Jan. 1.
While a public vote isn't required to raise the lodging tax, voters could petition for a referendum on the increase. The petition period will be 30 days if the council approves an emergency clause attached to the tax legislation, or 60 days if the emergency clause fails.
Fletcher's other argument against the lodging tax increase is that it is partly tied to Smith's plans for a downtown plaza on Main Street between Fifth and Sixth streets. The city is to be a one-third owner of a proposed office building, 600 Main St., in order to move the North Little Rock Convention and Visitors Bureau to downtown, where it can best manage and maintain the new public plaza.
The 24,000-square-foot, three-story office building close to the plaza is projected to cost $4.8 million, Danny Bradley, Smith's chief of staff, said last week. The city would pay one-third of that cost, or about $1.6 million, which the new lodging tax would help to finance. A city Downtown Development Board would borrow the money for the building and charge rental fees to pay off the debt, City Attorney Jason Carter said.
The downtown plaza, Smith said Friday, is estimated to cost $4 million -- $1 million more than estimates from a year ago. A conceptual design was released a month ago, providing a more definitive look at the plaza's features and cost.
Fletcher said that while he's not against the planned office building, he is critical of the downtown plaza and that a portion of the additional lodging tax concerns the Convention and Visitors Bureau's move to manage the space.
Fletcher said the public needs to know the plaza's construction and operational costs, how that will be paid and the plaza's projected revenue and expenses.
There is about $2 million set aside from city property sales, Smith said, that will pay for the plaza's creation in the downtown historic Argenta District. The new city sales tax isn't connected to the plaza, he said, and neither will the lodging tax go specifically for plaza operations.
The source of the remaining money needed to build the plaza will be determined "probably in the next month," Smith said.
"It's a public park," Smith said. "The management of the plaza will be done by the Visitors Bureau, so there won't be overhead of added personnel. We will have no heating, no air conditioning, no roofs to worry about, just electricity and running the [fountain] pumps and the lights. I don't anticipate it being a lot.
"Any revenue from the plaza [from private rentals], which we hope will be plenty, will go to the Convention and Visitors Bureau," he said. "That will go toward the electric bill and water bill and any cleanup costs."
Bob Major, the Convention and Visitors Bureau's executive director, said Friday that the bureau is planning to pay $147,000 annually toward an expected 15-year loan on the office building, with another $46,000 budgeted for insurance, utilities, janitorial services and other costs. Another $25,000 is budgeted in reserve.
The new lodging tax will generate about $328,000 extra annually, he said.
The additional revenue will allow the bureau to assist in promoting local hotels; for directional signs to attractions, lodging and restaurants; and pay expenses toward hosting conventions and groups, Major said.
"Hopefully, with this half a percent above Little Rock's rate, we feel like we're going to give a whole lot back to hotels to help secure some of these leisure travelers and groups," Major said.
Major called the planned plaza "such an enhancement to downtown, it's going to spark growth and interest in Argenta."
Smith said the plaza and the need for the extra hotel tax are "all about generating economic development."
"What we're doing now is creating a city that our children and grandchildren will refuse to leave," Smith said. "That's what economic development is all about. If I was a hotel and restaurant owner, I would be down here high-fiving us instead of trying to be so unprogressive."
Metro on 10/22/2017
Print Headline: Hotelier opposes NLR tax plan; Wyndham owner, city disagree on effects of increase