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Hope Star - Hope, AR
  • Revenue roller coaster getting response

  • The sudden shortfall in sales tax revenues which hit Hempstead County in April, affecting each city within the county and the University of Arkansas Community College at Hope, is the result of a problem which the Arkansas Municipal League is taking a lead to address.
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  • The sudden shortfall in sales tax revenues which hit Hempstead County in April, affecting each city within the county and the University of Arkansas Community College at Hope, is the result of a problem which the Arkansas Municipal League is taking a lead to address.
    Hempstead County officials learned in May that because of a “rebate” paid on new construction under a change in state tax law in 2013, the county will face a shortfall this year in sales tax revenue between $175,000-190,000.
    In all, according to Hempstead County Treasurer Judy Flowers, the sales and use tax “rebates” paid out by the Arkansas Department of Finance and Administration will total more than $700,000 for the year.
    When budget time comes around, we will be taking that into consideration,” Flowers said Monday. “That original $500,000 hurt us a bunch.”
    She said the impact extends, as well, to the dedicated ¼ cent sales tax collected for the county by the state for the maintenance and operations funding of Hempstead Hall on the University of Arkansas Community College at Hope campus.
    The original 3/4-cent sales tax for construction of Hempstead Hall has been discontinued with the retirement of the construction debt on the facility; but, the maintenance and operations tax is continuing.
    Even though the sales tax stopped, there was the continuing ¼ percent that remained for maintenance, and they didn't get any of that,” Flowers said.
    The impact for the City of Hope, to date, has been to create a revenue shortfall of about $150,000, according to City Finance Director Debbie Hall.
    That is what we know of because in the one month, we received nothing, and I, also, couldn't find out ow much we would have gotten that month,” Hall said.
    The “rebates” apply only to new construction and are available for one year only on taxable amounts in excess of $2.500, she said.
    The rebates are also only for businesses,” Hall said.
    Page 2 of 3 - And, according to both officials, DFA refuses under color of law to disclose who received the rebates.
    That combination of frustrations is beginning to surface statewide, according to Arkansas Municipal League Executive Director Don Zimmerman.
    While Zimmerman's organization deals only with issues related to municipal government, the overlap in this instance has been expressed in two resolutions which the AML membership adopted in its summer conference in June.
    One resolution calls upon the Arkansas General Assembly to amend state law and require DFA to pay municipalities 100 percent of the taxes collected within each municipality. Part of that push stems from an argument that city tax revenues should be used for city services and infrastructure, rather than having those funds apportioned from a countywide disbursement.
    In Hempstead County, the cities of Hope, Blevins, Patmos and Washington collect local sales and use taxes. All but Blevins collect at a 1.0 percent rate, which Blevins collects at 1.5 percent. Hempstead County collects at a 2.0 percent rate.
    We don't support the rebate system the way it is now,” Zimmerman said.
    He said the Arkansas Chamber of Commerce wanted the rebate period extended from the original six months after purchase to three years after purchase.
    We said, 'No, we don't want to extend it at all,'” Zimmerman explained. “The six months is still a problem because they can come out of the blue.”
    And, while no-one can learn who has sought any given rebate, Zimmerman and Hall have noted that a change in the administration of the 2013 law provides for DFA to give, at least, a hint to the affected cities and counties.
    There is now a directory to go to online to review the category of business in which the rebate was made,” Zimmerman said.
    He said DFA contends that to go any deeper will give away a business' competitive advantage.
    I think that is a weak argument, because you see reports all the time on hotel/motel taxes in municipalities, but those are all collected locally,” Zimmerman said.
    Page 3 of 3 - Hall noted that the system is misleading.
    Our sales tax system used to be pretty predictable,” she said. “Several years ago, it went bonkers; sometimes, it will be way up, sometimes way down, and sometimes, nothing.”
    Hall said the Arkansas Government Finance Officers Association is also looking into the issue.

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