Council Asks City Attorney to Draft Sales Tax Ordinance with a 65/35 Split

At its special meeting of May 8, 2008, the Eureka Springs Council voted to ask the City Attorney to prepare an ordinance to replace Ordinance 1120, so that one cent of a sales and use tax would be apportioned 65/35, with 65% going to the general operating fund, and 35% going to streets.

The administration opposed the allocation, arguing for the same 60/40 split that had brought the issue to the forefront earlier. As a matter of fact, it was while researching the 60/40 split that someone in the administration discovered that the city’s sales taxes had been improperly acted upon in previous administrations.

The improper actions dated back, the City Attorney said, to Ordinance 1120, passed in 1981. It was therefore imperative that Council repeal the improperly-enacted ordinances, he urged. The result was an apportionment that even the administration did not want.

Ordinance 1120 Apportionment Is Unsatisfactory

Ordinance 1120 had allocated 50% of the one cent tax to go to water/sewer improve- ments, 40% to streets and roads, and 10% to police and fire for equipment and purchases.

This allocation was clearly unsatisfactory, given the growth in the police and fire departments. A new ordinance would have to be enacted, everyone seemed to agree, and be approved by a vote of the people.

Ordinances Going back to 1120 Had not Been Properly Enacted

Ord. 1120, setting the 50/40/10 split, had been changed four times by ordinance, but these changes were considered illegal by Council and the administration alike.

The 50/40/10 apportionment had been ratified by a vote of the people, which clearly cannot be overturned or changed by ordinance alone. Yet the changes to 1120 had been only by ordinance.

The issue was not that the administration had called for an immediate repeal of four ordinances. The issue was that Council had been asked, as they had so often been asked before, to take action with no time for preparation, research or review.

City Attorney Consults with Muni League but Has no Documentation

The quick action was also backed by City Attorney Tim Weaver, who said he had consulted with Municipal League attorneys, both David Schoen and Mark Hayes, head attorney at the League.

Weaver had no written communication, however, so neither the questions as he formulated them, or the time frame in which he worked, was available for Council review.

The way questions are formulated frequently determines the outcome of an inquiry, leaving those outside the loop uncomfortable with whatever answers are given.

Nevertheless, repeal was enacted on a vote of 4-1, with Ald. Harrison opposing.

Harrison was concerned that a significant vote was being asked for with Council being given no time to look into the consequences. Unless some other source of income could be found, Harrison said, the City would have no general operating funds– hence no funds for payroll or other operating expenses.

Council Finds Money, City Attorney & Administration Reject Solution

Another ordinance, Ordinance 1386, had provided for a one cent tax that was not apportioned in any particular way. It had been properly enacted, and approved by a popular vote.

Ald. Rae Hahn and Kathy Harrison argued that these moneys, along with moneys currently in the general fund, would carry the City through until a regular election might be held in November.

The problem was that moneys from 1386 had been put into the capital account. Hahn and Harrison wanted to change where the moneys were deposited by ordinance, and transfer some $1.4 million from capital into general operating.

City Attorney Weaver argued that future moneys could be put into the general fund, but moneys that had already been deposited in capital could not be changed by ordinance.

Weaver offered no backup either from the case law or state statute.

City to Go to Special Election?

Given the outcome of this meeting, it very much looks like the City will have to go to a special election. It had been hoped that funds could be transferred under Ordinance 1386 so the City would be able to pay operating expenses until the time of the next regular election.

City Attorney Weaver said, “No.”