House Rules Committee

Jan. 18, 2023

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Rep Vaught:Representative Ray, you are recognized to present House Bill 1024. Please state your name for the record, and then you may begin.


HB 1024: Allowing entertainment districts in cities without an A&P Tax (passed)

Rep Ray: Okay. Thank you, Madam Chair. And good morning– I guess good afternoon now, committee members. I appreciate the opportunity to present House Bill 1024. This bill essentially would untangle the requirement that entertainment district– or that local governments have to have an advertising and promotion tax in order to have an entertainment district. So by way of background, in 2019 the law was passed to allow for entertainment districts where a city or a county could set up an entertainment– sorry, a city or a municipality could set up an entertainment district. There were several requirements in that bill. It has to be zoned for commercial use. There have to be a number of restaurants, tap rooms, that sort of thing present to set one up. And then there’s a requirement that the city has to levy an advertising and promotion tax.


Rep Ray: This is sometimes– and I’m sure most people here are familiar with that, but in case there are some who aren’t, this is sometimes referred to as the hamburger tax. It’s a tax that’s levied in an ad valorem fashion on prepared food. So you pay it when you buy a meal at a restaurant or you pay it on lodging or hotel rooms. In my opinion, it simply doesn’t make sense for a local government to have to levy any sort of tax, let alone an advertising and promotion tax, in order to set up an entertainment district. I’m familiar with at least one instance here in central Arkansas where an advertising and promotion tax was passed, and one of the big arguments in favor of trying to pass the tax was, “Well, we need to go ahead and pass this tax because someday we may want to set up an entertainment district.” The argument wasn’t that they wanted or needed an advertising and promotion tax, it was that they may want to set up an entertainment district at some point.


Rep Ray: So over time, my hope is that by untangling these two things, it would lead to fewer cities wanting to pass A&P taxes. I’ve spoken with the Municipal League about this bill, and they don’t have any opposition to it, which I think is a personal first for me. But I do want to mention one last thing on this, and I’ll be happy to try and answer any questions. Some of you may have gotten an email saying that this bill was for the purpose of expanding public drinking. That’s simply not the case. This bill doesn’t change who can drink alcohol. It doesn’t change when people can drink alcohol. It doesn’t change where people can drink alcohol. It is agnostic on the subject of alcohol. I view this as a bill that simply gets rid of an unnecessary taxing requirement. And that’s why I’ve brought this bill here to you today. And with that, I’d be happy to answer any questions.


Rep Vaught: Thank you, Representative Ray. Are there any questions? Representative Jean, you’re recognized?


Rep Jean: Am I on? Yeah. I can hear myself now. Are you doing this for any entity, or are you doing this because you were just home one night and you wanted to do this? [laughter]


Rep Ray: I don’t remember if it was day or night, [laughter] but no, Representative Jean, I’m not doing this bill at the behest of any entity. I was notified by– I was unaware of this requirement until a friend of mine who lives in a city where they were trying to pass an A&P tax notified me about it, and we talked about it at length and decided that the requirement really didn’t make sense, and it was just going to lead to more unnecessary taxes. And as you know, that’s something that I’ve always felt pretty strongly about. And that’s why I brought the bill.


Rep Jean: Okay, thank you.


Rep Vaught: Representative Wardlaw, you’re recognized for a question.


Rep Wardlaw: Thank you, Madam Chair. I remember this bill coming through this committee in 2019. I’m jogging my memory here and I don’t remember why that requirement was put there. Can you remind us why they actually had the requirement, or does ABC know why that requirement was there in the first place? I mean, I’d just like to understand the history and why the tax was there in the first place.


Rep Ray: Sure. I’m not aware of the reason that was included initially. I asked Mr. Wilkerson from the Municipal League if he was aware, and he told me that he wasn’t sure why it was ever included in the first place.


Rep Wardlaw: Can we hear from Doralee on that, please?


Rep Vaught: Yes, can you please come to the table and identify yourself for the record, and then you may answer Representative Wardlaw’s question.


Chandler ABC: Doralee Chandler, director of Alcoholic Beverage Control. I don’t have an exact answer for you, Representative Wardlaw. I do remember when I was here in 2019 and that bill was being pushed through, and it was being pushed through to promote entertainment. And so I can only surmise that that’s why they included the advertising and promotion taxes, to promote the entertainment aspect of it. But Senator Garner and I did not have any specific discussions regarding why he included that in the bill.


Rep Wardlaw: Follow up?


Rep Vaught: Yes.


Rep Wardlaw: So this was Senator Garner’s bill that required a tax.  I’m jogging my memory. I’d just like to remember [crosstalk]–


Chandler ABC: Senator Garner was the Senate sponsor of this bill when it ran in 2019.


Rep Wardlaw: Thank you. Thank you, Madam Chair.


Rep Vaught: Are there any other questions? Thank you for your coming to the table. We have Mr. Larry Page signed up to speak against the bill. You’re recognized. Just introduce yourself for the record and then you may begin.


Page: Madam Chair, members of the committee, I’m Larry Page. I’m director of the Arkansas Faith and Ethics Council. I believe I can answer your question why the A&P tax was included, and I hope to develop that. And I’ll try not to take too much time. I would say one thing, the bill if it passes will change where people can consume alcohol. Clearly, they will be in many, many cities and towns allowed to walk around in the public with open beer and with mixed drinks. So yeah, it does really, in time, will fundamentally change where people can consume alcohol. First of all, I want to concede, I don’t believe the purpose in this bill is to increase public drinking. I take Representative Ray at his word. I believe he’s really looking at a tax. But regardless of what the intent may or may not be, the unintentional consequences will be, in time, a dramatic increase in public drinking, and I think that’s problematic. And by the way, I wanted to add, I’d heard it said that entertainment districts would only be for wet areas. That’s not true. In 2021, the bill was passed, Act 874, which actually authorized entertainment districts in dry counties. And it was unfathomable to me how that issue could be approved when people in those counties had voted to be dry. I understand private clubs, they’re in the dry counties. I get that. But allowing people in a dry county to walk around with drinks, it flies in the face of the sentiment of those people and those communities that voted to be dry. It was inexplicable to me.


Rep Vaught: Sir, you’re not speaking on the bill. Can you please speak to this bill?


Page: The bill?


Rep Vaught: Please.


Page: I’m sorry.


Rep Vaught: Could you please speak to this bill? Because you’re speaking about a bill that’s passed; it’s not actually touching this bill. If you would just–


Page: Okay, I can get there. It’s also been stated that the Municipal League doesn’t oppose this bill. Well, that’s hardly a ringing endorsement. They were all over the bills in 2019 and 2021 supporting this. So I find it kind of odd that they’ve chosen to be neutral on this bill when it’s clearly about an entertainment district, which they had championed in the past. Listen, we’ve always been concerned about public drinking. I make no apologies for that or bones about that. But you know something, we’re in pretty good company. It’s been over half a century, I think, since we had laws in this state against public drinking. Do you know of any time the public has raised a hue and cried to your predecessors to legalize public drinking? “We got to have that.” No, they haven’t. They haven’t done it. I think that the vast majority of Arkansans are okay with prohibiting public drinking. And I think the record reflects that. And ask any law enforcement officer in Arkansas what they think about public drinking. I think you can guess what their answer would be on that issue. Now, along comes 2019, and we get the bill from Senator Garner that authorizes entertainment districts. And among the criteria is, in fact, that an A&P tax be assessed on them. You have to ask yourself, why did the sponsors– and I know there were more than Senator Garner. Why did the sponsors of that bill want an A&P tax?


Page: It sort of on the surface doesn’t make a whole lot of sense, does it? Well, I think I know why they did. They required that as a prerequisite. And did they do it in some willy-nilly fashion where they just threw that in or was there rhyme and reason to what they were doing? I believe there was a good rhyme and reason to why they did that, and I’ll try to develop that for you. I think those sponsors knew that a city that imposes an A&P Tax is going to be pretty concerned about the quality of that city, about its attractiveness, about its appeal, about how that city can upgrade and add to its amenities, because that’s what the A&P tax, after all, is intended to do. Let me just read a partial list of the things the A&P tax can fund: advertising and promotion of the city, construction improvement, maintenance, and operation of a convention center, operation of tourist promotion facilities in the city or county where the city is located, funding of the arts, operation of tourist-oriented facilities, including but not limited to theme parks and other family entertainment facilities. I think that there are basically two kinds of cities and towns that want an entertainment district. Those that want public drinking for the sake of that alone, and those that want to add to the attractions and the appeals that its city makes in order to draw people there to bring in tourists, to bring people in who will enjoy the city who will actually expend funds for recreation and for dining. Now, the first city wants the public drinking. The second city wants the entertainment district to enhance that attractions. Now, which of those two cities is going to provide the best in law enforcement?


Page: Which of those two cities is going to provide the best code enforcement, and which of those two is likely to impose the A&P Tax? Yes, the second city that really wants an entire package to improve its vibrancy, its economic health, and all of that. The second city wants more than just the public drinking district, it wants an entertainment district to make its city better. I’m going to close here, folks, with a few comments left and I’ll finish. The first city is content to just have people be able to walk around and drink. The other city really wants to improve itself in a number of ways. The A&P tax as a prerequisite for an entertainment district, I think makes a lot of sense, and I think that’s why it was included in the 2019 bill. Now, within this context of House Bill 1024, an A&P Tax is not detrimental. In fact, it is and can be and should be an asset. Now, is it too much to ask– is it too much of an honest burden to ask a city or town to impose an entertainment district in order to have– oh, excuse me, to have an A&P tax in order to have an entertainment district? I don’t think so. I think it’s a benefit. And so I would encourage you to consider this drastic change being made to this bill and understand that there is a logical sequence in connection to an A&P Tax and an entertainment district. Thank you so much. I’ll be glad to entertain any questions.


Rep Vaught: Thank you, sir. Representative Eubanks?


Rep Eubanks: My question’s for Representative Ray. Representative Ray, does your bill prevent a city from instituting this tax?


Rep Ray: No, sir.


Rep Eubanks: It required them to have one.


Rep Ray: That’s right. If a city wants to pursue an A&P Tax, they’re certainly free to do that. If they want to pursue an entertainment district, they can have that debate either; it just simply untangles the two.


Rep Eubanks: Thank you.


Rep Vaught: So, Representative Ray, I have a question. Since you’ve looked into this, doesn’t a city have to pass some ordinance saying that they want to have an entertainment district, or they’re just not going to pop up everywhere all over the state, right? They have to initiate something within their city councils, is this correct?


Rep Ray: Yes, that’s correct. That’s in, that’s on Page 2, I believe line 30 of the original legislation.


Rep Vaught: Thank you. Are there any other questions? Thank you, Mr. Page. You’re welcome to leave the table. I appreciate you for being here. Mr. John Wilkerson. Did I say it right? Just a second. Yeah. You’re recognized. Please state your name for the record, and then you may proceed.


Wilkerson (Mun. League): John Wilkerson, General Counsel of the Arkansas Municipal League. To clear confusion, when Representative Ray asked about the bill, I had to say, “We don’t have a position formally.” We now have a position. We are for this bill. We’ve had a lot of– I mean, we’ve seen across the state a lot of success with these entertainment districts, especially with cities and towns or cities that are trying to revitalize their downtown areas. We’ve seen that across the state. And to your point, actually, Russellville, I think, tonight is going to hear the ordinance to determine whether they are going to have an entertainment district. So you’re right. It’s not just as a pop-up out of nowhere. We like this untangling. It makes a lot of sense to us. The A&P tax, I think Miss Chandler is probably right, it just made sense at the time. I don’t remember any thought going into why we did that specifically. But it makes a ton of sense to us to like Representative Ray said to untangle this and allow another tool in the chest for cities to revitalize their downtowns.


Rep Vaught: Will you take any questions?


Wilkerson (Mun. League): Of course.


Rep Vaught: Does anyone have any questions? Thank you, Mr. Wilkerson. Thank you. Next, we have Mr. Luke McCoy. Please state your name and who you’re with for the record.


McCoy: Thank you, Chair and committee. Luke McCoy of the Family Council.  First of all, I want to say that the Family Council, too, trusts Representative Ray’s purpose of the nill. No one should be surprised if he’s trying to get rid of a tax or some other burden and I appreciate Representative Ray. We’ve been colleagues, friends for probably more than a decade now, so I find myself in a unique situation. But nonetheless, I wanted to share a few brief things. And this will be very quick. Some of it will be sort of what was stated earlier by Mr. Page and others. But if HB 1024 is passed, it would make it possible– keyword possible– to create an entertainment district in cities and towns that do not levy Advertising and Promotion Tax. And if HB 1024 is passed, it does nothing to prevent a city as was previously mentioned from instituting, or passing, or levying an A&P tax. HB 1024 if passed doesn’t remove any real incentive or create any barrier to creating an advertising promotion tax, which I believe is Representative Ray’s purpose as he stated. So nonetheless, I think it’s naïve to say that the passage of this bill is not going to expand alcohol in any way. And we would encourage you to not support this bill. And that concludes my comments.


Rep Vaught: Are there any questions? Seeing no questions, thank you.


McCoy: Thanks.


Rep Vaught: Is there anybody else here in the audience that would like to speak for the bill, against the bill? Seeing no more, would you like to close for your bill?


Rep Ray: Sure. Thank you, Madam Chair. I appreciate everybody’s patience on this. I would just close by saying the folks I have in mind when I put this bill together are families who go out to a restaurant to enjoy a meal together once a week. We’ve seen a lot of inflation in the last year. We have the third highest combined state and local sales tax in the country already. If a city is going to pursue an entertainment district, they’re going to pursue an entertainment district. I just don’t think it makes sense that they ought to have an extra tax on people on top of the taxes that everybody already pays in order to have that. And so with that,  I’ll leave it to the will of the committee.


Rep Vaught: What’s the will of the committee? I have a do pass and a second. All in favor say aye. Opposed no. Your bill is passed. Congratulations.


Rep Ray: Thank you, Madam Chair, and committee.


Rep Vaught: Next, we have House Bill 1028 by Representative Charlene Fite. You’re welcome to present your Bill. State your name for the record and then you might begin.


HB 1028: Strengthening language to help prosecute child sexual abuse (passed)

Rep C Fite: Thank you, Madam Chair. I’m Charlene Fite. I represent District 24, parts of Washington and Crawford County. I’ve been in the House for 10 years and this is the first time I’ve been to Rules Committee, so new experience. According to the National Center for Missing & Exploited Children, in 2021 alone, there were more than 29 million reports of suspected child sexual exploitation reported by online platforms. Several months ago, I was invited to a meeting with the Morgan Nick Foundation, which is headquartered in Alma, and a local attorney regarding changing the Arkansas code to match what’s used by national groups that work to eradicate child sexual abuse.


Rep C Fite: Currently, we use the term child pornography. It is much more accurate to call it what it is: child sexual abuse material. It is evidence of a crime. Sexual abuse of a minor. A child can not consent. Therefore, the print or online depiction is evidence of a crime against that child. Sexual abuse materials or CSAM is the term used by the National Center for Missing & Exploited Children started by Adam Walsh’s family. It’s used by RAIN and by other national groups. States are now moving to use the same words. This broadens the term to be more applicable to criminal activities. I had presented this bill as an interim study, and it went before the Judiciary Committee and passed easily there. I pre-filed it. There has been no known opposition. I gave you a letter from my local prosecuting attorney. Other prosecuting attorneys have spoken with me of their support and feel that this will help in prosecuting the horrible people who commit these crimes against our children. And with that, I would appreciate a good vote.


Rep Vaught: Are there any questions? Seeing no questions, nobody has signed up to speak for or against the bill. Is there anybody that would like to speak for the bill, against the bill? Seeing none, would you like to close for your bill?


Rep C Fite: I am closed. Thank you.


Rep Vaught: What’s the will of the committee? Motion do pass and second. All in favor say aye. Opposed say no.  Congratulations, your bill has passed.


Rep C Fite: Thank you, Madam Chair. Thank you.


Rep Vaught: Seeing no further business, this committee is now adjourned.