City seeks 0.75% sales funding for public safety, .25% for streets

It has been 37 years since Pea Ridge residents voted in the current 1% city sales tax. That tax, approved by voters, was authorized by Resolution No. 105 and is allocated to each city department in a prescribed percentage.

Now, city officials are contemplating asking the voters for an additional 1-cent sales tax with three-fourths allocated to public safety and one-fourth to a capital improvement bond for streets. The one-quarter tax would sunset.

Discussed for years by city officials, the question was discussed in the February 2020 City Council meeting with Kevin Faught, senior vice president of Stephens Public Finance, presenting information to city officials.

Faught again appeared before the Council Tuesday, March 16, 2021, explaining options on the tax question which he proposed being sent to the voters in a special election in July. In 2020, council member Ray Easley was opposed to the tax saying it would deter new businesses coming into the city.

Several other cities in Benton County collect a city sales tax with both Rogers and Bentonville collecting 2%.

Pea Ridge receives a portion of the 1-cent county sales tax that goes into City General coffers, according to city clerk Sandy Button. The amount received is based on population.

"All of our sales tax goes into the general fund," Button explained, adding that for the 1984 sales tax, "the citizens actually voted on every single department that was in the issue for the vote."

Over the past 10 years, tax revenues have increased as business in both Benton County and the city have grown.

In 2011, the city's portion of the county sales tax was $37,292 in January and $63,049 in February. In 2021, the city's portion of the county sales tax was $117,238 in January and $133,823 in February.

The largest portion of the revenue from the current city sales tax, 40%, is allocated to the Street Department. The next largest percentage, 24%, is allocated to the Police Department. The remainder of the tax is divided among other departments as follows: Administration, 10%; Fire Department, 5%; Ambulance, 7%; Parks and recreation, 6%; Library, 5%, and court administration, 3%.

Council members were presented with three ordinance drafts to propose the sales tax and call for the election. One proposal was to split the revenue of the 0.75% sales and use tax equally between the Police and Fire Departments or to Public Safety. That question was discussed during a recent Committee of the Whole, again Tuesday during the Council meeting and is to be the topic at another Committee of the Whole meeting Tuesday, March 30.

Discussion between council members questioned the wisdom of specifying which department is to receive the funds.

Faught told city officials that over the past 12 months, collections on 1% through February were $1,021,989 and he anticipated the 0.75% bringing in $766,492.

"Public safety gives you more leeway to work with," Mayor Jackie Crabtree said.

"Any time we go out of town, we pay that town 9.5% tax," Button said. "Why would we want to give that away. It doesn't make sense to me."

City attorney Shane Perry said fixing the percentages for the revenue in a ordinance, theoretically 50-50 may make sense now, but could be a hindrance in the future.

"Do we want to get locked into percentages?" Perry queried.

Faught said of all the communities he's helped with sales tax, none have allocated the departments to which the revenues go. "I can't think of any city I've worked with that has done that... it's just a general operation and maintenance tax that flows into general fund."

"I'm just the lawyer," Perry said, "but I worry about hog-tying future councils with percentages because none of us can predict how things are going to go in 10 years."

"It seems to me that it undermines the process of the political process," Perry said.

"Let's have another Committee of the Whole and think about how we want to word this," Crabtree recommended. "I don't want to hamstring us with something ... nor pit department heads against each other nor against the council."

It was agreed to meet at 6 p.m. Tuesday, March 30, for a City Council Committee of the Whole meeting.