The City Advertising and Promotion Commission, which uses a 3 percent tax collected from lodging, bars and restaurants to promote and advertise Eureka Springs, has been a point of contention in recent years. Pat Matsukis has been circulating a petition for a ballot measure in November that would allow voters to decide whether to keep or eliminate the CAPC.
Matsukis has proposed eliminating the CAPC and instead consider, at a later time, an across-the-board increase of 1 to 1.5 percent in overall sales tax to fund promotion of Eureka Springs while taking care of badly needed infrastructure repairs. [ESI July 24]. Ethan Avanzino, co-owner of the Wanderoo Lodge & Gravel Bar, pointed out the following possible consequences of revoking the CAPC and its taxing authority:
- Loss of advertising funds: Without the 3 percent tourism tax, we lose the ability to promote our city, which brings in tourists. Some locals may say that people hear about us from “word of mouth,” and we don’t need advertising. While that may have been the case 30-plus years ago, it is 2024 and what they don’t realize is that “word of mouth” is now social media/social media influencers. Social media, while signing up is free, costs money – whether it’s paying to have your content seen by more people in the algorithm, or paying a social media influencer to come to town. People do not gather in community as much like they used to (think Tupperware parties, sports games, block parties, etc.), there are not as many opportunities for “word of mouth” conversations. Those are now happening online, and we have to be just as good (if not better) in our online presence than any competing cities/towns in the region.
- Economic impact: Fewer tourists means fewer sales and less alcohol tax revenue, which are vital for maintaining infrastructure, parks, arts and other community services. This is where the petition to eliminate the CAPC does not make sense. Tourist dollars bring in more than just tax revenue for the CAPC; they bring in revenue for the city as a whole.
- Business decline: Reduced tourist spending would force local businesses to cut back, leading to layoffs and increased unemployment. Worst case, it would lead to even more businesses shutting down. If they thought the 15-plus empty storefronts in the downtown was bad…
- Unemployment and homelessness: Rising unemployment could lead to increased homelessness. Our town is already struggling with affordable housing for service industry workers, and an increase in homelessness would exacerbate this issue. Our community already has a decent sized population that relies on social services and nonprofits for assistance. This will increase and I don’t think those organizations are prepared for such an influx. If the petition gets on the ballot and passes, we need to be prepared to see panhandling by our friends and neighbors and ask ourselves how we will be prepared to support each other.
- Community well-being: The overall vibrancy and cultural events in our community will diminish. Since the CAPC gives out funding to individuals and organizations that produce events that bring tourists to town, there will be no funding for these events… no funding for Christmas, the Zombie Crawl, diversity events, arts festivals, the car and motorcycle events, etc.
- Property values may drop: Between the economy, homelessness, crumbling infrastructure with no funds to improve and the potential increased crime rate, etc., property values could drop.
- Documented decline: Numerous studies show the terrible decline of towns that eliminate the advertising and promotion tax.
- Lack of viability: No studies have shown that the proposal by Matsukis is viable. Her approach could leave Eureka Springs with no advertising dollars, no way to restore the CAPC, and no way to fix the disaster created.
- Difficult recovery: If we try to fix this disaster, it’s unheard of for people to vote for a new 3 percent tax. We would be lucky to get a fraction of this added back in future years. And it would be another two years before we have another election cycle to try and fix this. So, what would we do in the meantime?
- Limited personal impact: Retired locals would not face the same consequences as service industry workers, families, business owners and others who depend on Eureka Springs as a tourist destination. Many workers and business owners cannot afford to live within city limits, yet their livelihoods are tied to businesses located there. Their voices would not be heard in this petition or subsequent vote, which feels fundamentally unjust despite the realities of the voting process.
Avanzino said even if Matsukis’s proposal for an additional sales tax were put to a vote sometime in the future, there is zero guarantee that people would vote for an across-the-board tax increase. So, the CAPC tax could be revoked and no other tax put in its place. “This is akin to jumping off a building with no safety net,” he said.
Another concern he has is that the 3 percent CAPC tax cannot be reallocated for infrastructure or any other purposes, as appealing as that may be to some folks. It is strictly designated for marketing and advertising Eureka Springs. The state designates what Advertising & Promotion Commissions can use their tax dollars for and this is across the board for all A&Ps in Arkansas. The use of funds collected is outlined in AR Code § 26-75-606 (2019). Matsukis’s proposed 1 to 1.5 percent tax increase would have to be a sales tax, which would then be paid by every local resident, whereas right now, the CAPC tax is focused primarily at tourists by only being collected at hotels, bars, and restaurants.
“Anyone stating that Pat’s petition is merely to ‘get a conversation going’ or to discuss reallocating those funds is misleading you,” Avanzino said. “A petition is not necessary for a conversation. The petition clearly aims for the revocation of the CAPC and CAPC tax. If the goal is truly to spark discussion, the current conversations on social media and in the newspaper should suffice. Moving forward with the petition risks irreversible damage.”
The CAPC expressed deep concern about the revocation of this tax at their most recent meeting. Avanzino said almost every commissioner at the table has a business in town that feels the pulse of tourism and experiences the wave of the seasons. “These are the people we want to have sitting at the table making the decisions that will increase tourism because each of them has some skin in the game,” he said.
Avanzino advocates giving the CAPC administration and commissioners a chance to prove themselves. Some have yet to be confirmed because they were just voted in recently.
“If they fail, it is up to the citizens of Eureka Springs to hold them accountable,” Avanzino said. “These commissioners and the CAPC staff are all well aware of the PR work that they need to do to rebuild trust. I admire each of them for seeing and being willing to conquer that mountain they’re going to have to climb to rebuild the public’s trust.”
Avanzino said many business owners, service industry workers and locals, including hotels, bars, restaurants, shops, independent contractors, administrative assistants, retirees and families have spoken out against the petition. Laci Moffitt is hosting a Heart of Eureka meeting on Tuesday, August 6 at 9 a.m. at the Traveler’s Inn to discuss potential impacts of this petition and what local businesses and individuals can do.
“Laci and I are coordinating an advertising budget amongst businesses to ensure locals understand the importance of the CAPC and what is happening,” Avanzino said.