City finance directors seek more tax disclosure

story by Ryan Saylor
rsaylor@thecitywire.com

Finance directors at cities across Arkansas have longed for more detailed reporting of sales tax revenues and they could soon get their wish thanks to a state agency change in response to legislation filed by Sen. Uvalde Lindsey, D-Fayetteville.

According to Paul Young, finance director at the Arkansas Municipal League, until now, the budgeting process for municipalities has been a shot in the dark due to a lack of sales tax reporting requirements at the Department of Finance and Administration.

"Essentially, (cities) get a number and they had no reliable way to know the sources of that revenue nor how to understand how it fluctuated or how for to forecast for the next year," Young said. "It was sort of based on guesswork."

Tracy Winchell, communications manager for the city of Fort Smith, said the city's finance department had asked for the more detailed information because of the challenge of forecasting without knowing which sectors were doing well or were seeing decreases.

"The more information you have, the better forecast you're going to be able to make. Right now, we're blind," she said.

Originally, SB 825 was introduced to change the reporting requirements, but Young said it met an intense amount of opposition.

The primary concern for some business leaders was a requirement in the bill that would report tax revenue for specific businesses to the cities in which they collect sales taxes. Business owners said providing such data would make sales numbers public, causing them to lose a competitive advantage.

But Young said such a concern was unfounded.

"Frankly, I didn't agree," he said, adding that information would have remained confidential.

An agreement reached with the DFA will now provide similar data, Young said, though the information would not be broken down by business.

"Cities are going to get a report that provides an explanation of total sales tax receipts every month, (along with) a business category as opposed to specific sources," he said.

Winchell said having such a system in place was important as Fort Smith works on developing the 2014 budget later this year.

"It helps us forecast what sales tax revenues are going to be like," she said.

But even with the change formulated by the DFA, not all finance directors are pleased.

Wyman Morgan, director of finance and administration at the city of Springdale, said without a breakdown of businesses and the taxes they pay, the city has no way of knowing if the tax collections from individual businesses are accurate.

"I don't have any confidence that we're getting the sales tax we should," Morgan said. "We don't have the ability to find out if one business is paying to Springdale or not."

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Due to the compromise reached with the DFA, Young said SB 825 has essentially been "killed" since the DFA made the requested changes, which did not require legislative action. The bill now sits in the Senate Committee on Revenue and Taxation.

Young said similar legislation may return in a future session.

"We've asked for it to be referred for further study — maybe have a little more discussion and dialogue and leave the proposal out there for further discussion — but for this particular session, it's dead,” according to Young.

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