New state law bans cities from releasing HMR tax info

City Attorney Kit Williams issued his final overdue HMR tax report to the Fayetteville Advertising and Promotion Commission in July.

» Read the final report (PDF)

The public will no longer be given details about how much hotel, motel and restaurant taxes businesses pay each month, now that a new state law is in effect.

Act 1102, sponsored by Rep. Micah Neal, R-Springdale, exempts HMR tax records from disclosure under the Arkansas Freedom of Information Act.

“It’s nobody’s business what individual businesses’ gross sales are every month,” Neal told Arkansas Business earlier this year.

The new law means the Fayetteville Advertising and Promotion Commission can no longer post annual totals of payments made by individual hotels, motels and restaurants.

Neal, who owns Neal’s Cafe in Springdale, said it’s too easy for a competitor to calculate a business’s gross receipts from those reports, and that the information should be sealed.

The change also means the commission is prohibited from distributing its monthly list of businesses that are behind on HMR tax payments.

State Rep. David Whitaker, D-Fayetteville, asked Attorney General Leslie Rutledge whether the new law would prohibit cities’ attempts to collect unpaid taxes and prosecute business owners who fail to make payments.

Rutledge’s office said the change should not effect local prosecutors.

“…it seems likely that some officials will require access to exempt information in order to pursue collections,” Rutledge stated in a June 24 opinion.

However, City Attorney Kit Williams in a July 1 memo (PDF) said Act 1102 doesn’t make it clear whether pursuing collections in court is tantamount to opening records to the public.

“Since this issue has yet to be considered and decided by the Arkansas Supreme Court, there is no clear and final answer to this question,” wrote Williams.

Williams advised the city to stop releasing further reports, but told the prosecutor’s office to continue its efforts to recover unpaid HMR taxes. The office, Williams said, has collected $800,000 in overdue HMR taxes since 2001.

Understanding HMR taxes

Legislation created the Advertising and Promotion Commission in 1977 with the passage of the Hotel, Motel, Restaurant (HMR) tax in Fayetteville. The 2 percent tax is split equally between the city’s Parks and Recreation Department and the A&P Commission. The parks money is used for parks maintenance, operations and for capital improvements. The self-reported numbers do not include retail or liquor sales.

By state legislation, all HMR funds shall be used:
1. for advertising and promoting the city and its environs
2. for the construction, reconstruction, equipment, improvement, maintenance, repair, and operation of a convention center
3. for the operation of tourist promotion facilities in the city
4. for personnel and agencies necessary to conduct the business of the A & P commission

HMR funds can also be used for:
1. for funding the arts
2. for operation of tourist-oriented facilities
3. for construction, reconstruction, repair, maintenance, improvement, equipping and operation of public recreation facilities and for the payment of bonds.

Taxes shall not be used for:
1. general capital improvements within the city
2. costs associated with general operation of the city
3. general subsidy of any civic group or chamber of commerce

Source: Arkansas Code / § 26-75-606 – Use of funds collected