The Honorable David Rainey State Representative Post Office Box 642 Dumas, AR 71639-0642
Dear Representative Rainey:
You have requested my opinion regarding the following scenario:
The City of Dumas has three separate sales taxes which were authorized by the voters of the City of Dumas as follows:
1) A one (1) cent sales tax, which was passed by the voters for the specific purpose of building a new municipal complex that houses the City's police department, ambulance service, jail, court system, etc. The tax secures a bond issue. The tax will sunset when the bonds are paid off; and
2) A two (2) cent sales tax, which was passed by the voters for the specific purpose of building a new municipally owned hospital. The tax secures a bond issue. The tax will sunset when the bonds are paid off; and
3) A one-half (1/2) cent sales tax, which was passed by the voters for the specific, limited purpose of funding capital improvements within the City of Dumas and funding the operation of the Dumas Police Department. This tax does not secure any bonds and does not sunset.
The City of Dumas has been notified by Wal-Mart that it plans to build a Super Center in the City of Dumas. Wal-Mart has also stated that once the Super Center is operational, it will close the existing Wal-Mart stores in Dumas and McGehee.
The closure of the McGehee Wal-Mart store will result in a loss of sales tax revenue to the City of McGehee. The location of the Super Center in Dumas will result in an increase in sales tax revenue to the City of Dumas.
The City of McGehee is requesting that the City of Dumas enter into an interlocal agreement to share some of the sales tax revenue from the new Wal-Mart Super Center.
In light of the foregoing scenario, you have posed the following questions:
1) Can the City of Dumas lawfully enter into an interlocal agreement to share sales taxes with another city when the sales taxes were passed by the voters of the City of Dumas for certain specific purposes?
2) Can the City of Dumas lawfully enter into an interlocal agreement to share sales taxes with another city when the sales taxes have been pledged as security for bonds, which have been sold to various bondholders?
RESPONSE
It is my opinion that the answer to both of these questions is "no," under the stated facts, because a tax levied for one purpose may not be used for any other purpose without violating Article 16, Section 11 of the Arkansas Constitution.
Please note that I have attached a copy of Attorney General Opinion No.2005-044 which sets forth the governing principles of law upon which this opinion is based. I will not restate the analysis, but instead refer you to the previous opinion for guidance.
Assistant Attorney General Elisabeth A. Walker prepared the foregoing opinion, which I hereby approve.
Sincerely,
MIKE BEEBE, Attorney General
MB: EAW/cyh