A room full of business owners, residents and others made the case during a public meeting Tuesday, Aug. 6, at the Travelers Inn conference room to reject a petition drive that could lead to the abolition of the Eureka Springs City Advertising and Promotion Commission and the 3 percent tax that supports it.
The meeting, organized by the Heart of Eureka alliance of local business owners, was held in response to a petition being circulated by local resident Pat Matsukis with the goal of placing a proposal on the November general election ballot that would allow Eureka Springs voters to vote on whether to eliminate the CAPC. The commission is supported by a 3 percent tax collected on restaurant and lodging sales in the city.
According to Arkansas state law, any municipality that levies an advertising and promotion tax must create a commission to oversee how that tax revenue is spent. State law also outlines specific uses for that tax revenue. Matsukis has suggested that the advertising and promotion tax could be replaced by a smaller citywide sales tax of 1 to 1.5 percent. Such a tax would have to be approved by voters, and state law governs the amount of sales tax a city may levy.
At Tuesday’s meeting, several speakers said the impact of abolishing the CAPC would be devastating to the city’s tourism industry and in turn to its overall economy.
Sandy Martin, chairman of the Mayor’s Task Force on Economic Development, pointed out that in addition to paying the advertising and promotion tax, lodging and restaurant customers also pay city sales tax.
“So it’s important to understand what the real economic impact is of the collections,” Martin said. “You can imagine, with this kind of revenue, what kind of services would have to be eliminated or reduced. … Think of what is provided by those funds that are critical to our life — critical to our life, beyond tourism.” Martin said tourism generates more than $47 million a year in gross revenue in Eureka Springs — more than $21,500 per resident.
“That’s hard to make up,” she said, adding that an additional 1 to 1.5 percent sales tax “ain’t coming close. It won’t even come close if 50 percent of the tourism revenue is lost.
“So it’s a double whammy when you’re taking away the CAPC and the A&P revenue from the city, and transit, and you’re going to end up tacking on another tax and starting to impact all these things that we all depend on for our lives. So it’s not a good idea.”
Martin also said a decline in the city’s tourism revenue could have serious consequences in terms of unemployment.
“There’s about 3,900 employees that work in the hospitality industry in Carroll County,” she said. “Twenty six hundred of those, over 2,600 of those, are in Eureka Springs.”
Martin compared the potential employment crisis to what the city experienced during the COVID-19 pandemic.
“We know how hard it was to get and keep and attract employees,” she said. “And at that point, there were PPP loans. There were individual supplementary COVID checks that we all received, and that helped a lot, that let people live through the devastating period of COVID. That doesn’t exist this time around. So there won’t be any help … and you can kind of see the trickle-down.”
‘THIS REFERENDUM IS CRAZY’
Jack Moyer, general manager of the Basin Park and Crescent hotels, said the CAPC helps Eureka Springs compete with much larger markets in the tourism industry.
“I have shared thoughts regarding the efficiency of the CAPC, but I have been solid in support of continuing to have a brand always out there,” Moyer said.
Moyer said Eureka Springs’ businesses “create the magic” and the CAPC tells people about it.
“We create the magic,” he said. “They tell people about it. That’s sort of what I think we have to protect and preserve.”
Moyer also pointed out that revenue from the advertising and promotion tax funds upkeep of the City Auditorium and a website, noting that “it wasn’t that long ago that we had plastic on the windows,” of the Aud.
Moyer said maintaining a website is not free.
“It’s not free for the city of Eureka Springs digital commerce section to be competitive with Hot Springs, Kansas City, Mo., et cetera, et cetera, et cetera. You need funds to be able to present the brand message. And if you remove those funds, what happens? The Wild West of communication out to the real world. … So I think this referendum is crazy.”
Moyer said he advised Mayor Butch Berry that he should contact Matsukis, listen to her concerns and ask her to halt her petition efforts.
“And that did not work,” Moyer said.
Moyer said he expects Matsukis to get the number of signatures required to place the issue on the November ballot.
“So everybody is just going to have to rally around,” Moyer said. “My guess would be the election will be significant in favor of continuing with the tax, but I absolutely wouldn’t take it for granted because this messaging that’s out there, from Pat, is not accurate.”
Moyer said replacing the advertising and promotion tax with an additional city sales tax won’t be automatic.
“If that (advertising and promotion) tax goes down, you’re down for a year at least,” he said. “You can’t just invent local taxes. They have to be enabled by the state to be enacted by a local ordinance.”
Moyer said Matsukis’ proposal doesn’t just create an opportunity to “have a conversation” about the future of the CAPC.
“We’re not just having a conversation here,” he said. “You read the referendum. It says ‘to remove the ordinance,’ right, that enacts the city advertising promotion and the tax. If people vote yes, that tax stops. That tax stops, you’re looking at a year, two, maybe more to put something in its place.”
‘TSUNAMI’
CAPC executive director Mike Maloney said he was pleased with the turnout at Tuesday’s meeting. Maloney said the economic impact of abolishing the CAPC and eliminating the advertising and promotion tax would be disastrous.
“It’s not just a trickle- down,” he said. “It’s a tsunami. So please don’t let it happen.”
Heart of Eureka’s Laci Moffitt said more meetings on the subject will be scheduled.
