The Honorable Art Givens State Representative 301 Brookwood Rd. Sherwood, AR 72116

Dear Representative Givens:

This is in response to your request for an opinion regarding Arkansas Code of 1987 Annotated 26-75-601, et seq. You have asked, specifically, whether a city may, under this existing law, create by ordinance an "advertising, Publicity and Promotion Commission" and utilize all or part of the authorized tax proceeds for the construction and maintenance of parts and recreational facilities. You state that you are considering legislation in this regard, but would prefer to avoid additional legislation if these activities are possible under current law.

With regard to the creation of an "Advertising, Publicity and Promotion Commission," it should be noted that any city levying a tax pursuant to A.C.A. 26-75-601, et seq. must create an "advertising and promotion commission," the composition of which is specified under 26-75-605. (See also A.G. Opinion No. 88-191, copy enclosed.) Additional legislation would be necessary in order to alter either the purpose or the composition of the commission.

A review of the existing legislation is necessary in order to fully address your inquiry involving the use of the tax proceeds.

Section 26-75-602 states in pertinent part that cities of the first class may levy a tax of one percent (1%) ". . . upon the gross receipt or gross proceeds from the renting, leasing, or otherwise furnishing of hotel or motel accommodations for profit in the city, or upon the gross receipts or gross proceeds of restaurants, cafes, cafeterias, and other establishments. . . ." A.C.A.26-75-602(a)(1)(A). The authorized percentage of tax for cities of the first class "in which is located a national park" is three percent (3%). A.C.A. 26-75-602(a)(1)(B). Any first class city "a portion of which has been designated as an historic district and is included in the National Register of Historic Places" may levy a two percent (2%) tax. A.C.A. 26-75-602(a)(1)(C). And any first class city "in which is located a city park of (1,000) acres or more" may levy an additional tax of one percent (1%).

With regard to use of the funds collected, 26-75-606(b) states that cities authorized to levy either a 2% or a 3% gross receipts tax may pledge all or any part of the revenues ". . . for the operation of tourist-oriented facilities including, but not limited to, theme parks and other family entertainment facilities." Parks and recreational facilities could fall within this category. It must be recognized, however, that this provision only applies to cities with a national park and cities in which a portion has been designated as an historic district. A.C.A. 26-75-602(a)(1)(B) and (C).

Section 26-75-602(b) should also be noted wherein the additional 1% tax is authorized for cities with a city park of at least one thousand acres. Revenues form this additional tax must be used for the "promotion and development of city parks and recreational areas."

It thus appears that revenues from the gross receipts tax may be used for parks and recreation facilities, depending upon the city's particular category under the act. Otherwise, the language of Section 26-75-606(a)(1) will be controlling wherein it states:

All funds credited to the city advertising and promotion fund pursuant to this subchapter shall be used for advertising and promoting the city and its environs or for the construction, reconstruction, extension, equipment, improvement, maintenance, repair, and operation of a convention center in the city, and facilities necessary for, supporting or otherwise pertaining to, a convention center, or for the payment of the principal of, interest on, and fees and expenses in connection with, bonds as provided in this subchapter in the manner as shall be determined by the city advertising and promotion commission.

It is my opinion that use of the funds for the construction and maintenance of parks and recreational facilities is not, as a general matter, authorized under this section.¹

In conclusion, A.C.A. 26-75-602(b) and 26-75-606(b) must be referenced to determine whether the particular city in question falls within the categories specified therein. Since, in my opinion, A.C.A. 26-75-606(a) does not generally authorize the use of these tax revenues for the construction of parks and recreational facilities, additional legislation may be necessary for cities not covered by Sections 26-75-602(b) and 26-75-606(b).

The foregoing opinion, which I hereby approve, was prepared by Assistant Attorney General Elisabeth A. Walker.

Sincerely,

Steve Clark Attorney General

¹ As to the pledge of gross receipts tax revenues to the payment of principal and interest on bonds, see A.C.A. 26-75-606(b) and 26-75-613.