Can a city's hotel and restaurant tax pay for referees and equipment at a school basketball tournament held in a public gym?

Currency note

This opinion was issued in 2013. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Plain-English summary

State Senator Eddie Joe Williams asked whether a city's Advertising and Promotion (A&P) tax revenue, the "hamburger tax" on hotel and restaurant sales, could be used to pay referees at a school-district-sponsored basketball tournament, and separately whether it could fund athletic equipment for the school district.

The opinion couldn't give a flat yes or no, since A&P spending decisions are fact-specific and courts defer heavily to an A&P commission's own reasonable interpretation of the governing statute unless that interpretation is "clearly wrong." But applying the statute's authorization for spending on the "operation" and "equipping" of "public recreation facilities" located in the city, the opinion concluded a court would likely uphold a commission's decision to pay referees at a tournament held in a school-owned gym (treating referee costs as part of "operating" the facility for the event) and to buy equipment that becomes part of that same facility. Funding athletic equipment unconnected to a public recreation facility, by contrast, was far less clearly authorized under the statute.

Background and analysis (as of 2013)

Arkansas's Advertising and Promotion Commission Act lets a city that levies the A&P tax spend the resulting fund only as authorized in A.C.A. § 26-75-606(a) or (b), subject to the limits in subsection (c), which bars spending the tax on general capital improvements, general city operations, or general subsidies to civic groups. The A&P commission itself "is the body that determines the use of" the fund, and its interpretation of the statute gets considerable judicial deference unless clearly wrong.

The opinion focused on subsection (b)(2), which lets A&P funds be spent on the "construction, reconstruction, repair, maintenance, improvement, equipping, and operation of public recreation facilities in the city," and reasoned through three questions for the referee scenario: whether providing referees is part of "operating" a facility during a tournament (yes, since running the tournament itself is part of operating the facility, and referees are integral to running the tournament); whether a school-owned gym open to the public for the tournament counts as a "public recreation facility" (likely yes, given it's publicly owned and the event is open to the public); and whether the facility is "in the city" (assumed yes on the facts presented). The opinion noted the outcome could shift if a civic group or chamber of commerce played a significant role in the tournament, since the statute specifically bars using A&P funds as a "general subsidy" for such groups, and flagged (without resolving) a separate constitutional question about donations of public money to private entities if any private party were involved. For the equipment question, the opinion applied the same "equipping" language from subsection (b)(2): equipment that becomes part of the public recreation facility itself is likely covered, but equipment unconnected to such a facility isn't clearly authorized by any provision of the statute, including the general "advertising and promoting" clause in subsection (a).

Citations and references

Statutes (as they stood in 2013):

• A.C.A. §§ 26-75-601 to -619, the Advertising and Promotion Commission Act
• A.C.A. § 26-75-602, authorizing the municipal hotel and restaurant tax
• A.C.A. § 26-75-604, the city advertising and promotion fund
• A.C.A. § 26-75-605, requiring a city levying the tax to create an A&P commission
• A.C.A. § 26-75-606(a), permitted general uses of A&P fund revenue (advertising, convention centers, bond payments)
• A.C.A. § 26-75-606(b), permitted use for construction, equipping, and operation of public recreation facilities in the city
• A.C.A. § 26-75-606(c), statutory limits barring use for general capital improvements, general city operations, or civic-group subsidies
• Ark. Const. art. 12, § 5, prohibiting cities from donating public money to private entities

Cases:

• Brookshire v. Adcock, 2009 Ark. 207, courts defer to an administrative agency or commission's reasonable interpretation of a statute it administers
• Magness v. State, 2012 Ark. 16, statutory words are given their ordinary, plain meaning
• City of Ft. Smith v. Bates, 260 Ark. 777 (1976), the constitutional bar on donating public money doesn't limit a city's power to pay consideration under a valid contract

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

Opinion No. 2013-103
December 18, 2013
STATE OF ARKANSAS
THE ATTORNEY GENERAL
DUSTIN McDANIEL
The Honorable Eddie Joe Williams
State Senator
401 Cobblestone Drive
Cabot, Arkansas 72023
Dear Senator Williams:
This is my opinion on your questions about uses of revenues from a tax levied
under the Advertising and Promotion Commission Act (the "Act").1 The Act
authorizes a municipal tax, sometimes referred to as the "hamburger tax," on hotel
and restaurant sales (the "A&P tax").2 Tax revenues are deposited in a municipal
advertising and promotion fund (the "A&P fund").3 A city levying the A&P tax
must create a municipal advertising and promotion commission (the "A&P
commission").4
Your questions are:

1. Can Advertising and Promotion taxes be used to compensate referees
   during a basketball tournament sponsored by the local school district?
2. Can Advertising and Promotion taxes be used to fund athletic
   equipment for a local school district?
   1 A.C.A. §§ 26-75-601 to -619 (Repl. 2008, Supp. 2013).
   2 See A.C.A. § 26-75-602 (Supp. 2013).
   3 See A.C.A. § 26-75-604 (Repl. 2008).
   4 See A.C.A. § 26-75-605 (Repl. 2008).
   323 CENTER STREET, SUITE 200. LITTLE ROCK, ARKANSAS 72201
   TELEPHONE (501) 682-2007 •FAX (501) 682-8084
   INTERNET WEBSITE • http://www.ag.state.ar.us/ The Honorable Eddie Joe Williams
   State Senator
   Opinion No. 2013-103
   Page 2
   RESPONSE
   Answers to your questions will depend on the facts and circumstances of
   individual cases as they arise. Thus I cannot render an opinion applicable in all
   instances. Additionally, governing law does not provide unequivocal answers to
   your questions even if one assumes favorable facts. Legislative clarification is
   warranted. In my opinion, however, absent extraordinary facts, it is more likely
   than not that a court would defer to an A&P commission's determinations to use
   A&P tax revenues to (i) pay referees at a school district-sponsored basketball
   tournament held at a school district-owned sports facility in the city, or (ii) fund
   athletic equipment that is part of such a facility. An A&P commission's authority
   to fund athletic equipment that is not part of a "public recreation facility" is even
   less clear.
   Law Applicable to Both Your Questions
   A statute both authorizes and limits uses of A&P tax revenues.5
   5 A.C.A. § 26-75-606(a), (b) (permissible uses) and (c) (limits) (Repl. 2008); see generally Op. Att'y Gen.
   2011-005 (A&P commission may spend amounts in A&P fund only as authorized in A.C.A. § 26-75-606(a)
   or (b), and only if not barred by A.C.A. § 26-75-606(c)). The statute provides:
   26-75-606. Use of funds collected.
   (a)(1)(A) In the manner as shall be determined by the municipal advertising and promotion
   commission, all funds credited to the city advertising and promotion fund pursuant to this
   subchapter shall be used for the:
   (i) Advertising and promoting of the city and its environs;
   (ii) Construction, reconstruction, extension, equipment, improvement, maintenance, repair,
   and operation of a convention center;
   (iii) Operation of tourist promotion facilities in the city or the county where the city is
   located if the city owns an interest in the convention center or facility, and facilities necessary
   for, supporting, or otherwise pertaining to, a convention center; or
   (iv) Payment of the principal of, interest on, and fees and expenses in connection with bonds
   as provided in this subchapter.
   (B) The commission may engage such personnel and agencies and incur such administrative
   costs as it deems necessary to conduct its business.
   (2)(A) The commission is the body that determines the use of the city advertising and promotion
   fund.
   (B) Pursuant to this section, if the commission determines that funding of the arts is
   necessary for or supporting of its city's advertising and promotion endeavors, the commission
   may use its funds derived from the hotel and restaurant tax. The Honorable Eddie Joe Williams
   State Senator
   Opinion No. 2013-103
   Page 3
   Whether A&P tax revenues may be used for a proposed purpose is a question that
   turns on the facts and circumstances of the case.6 The statute provides that the
   A&P commission "is the body that determines the use of the city [A&P] fund."7
   An A&P commission has wide discretion to determine whether the statute permits
   (3)(A) The commission may purchase, own, operate, sell, lease, contract, or otherwise deal in or
   dispose of real property, buildings, improvements, or facilities of any nature in accordance with
   this subchapter.
   (B) If the commission is dissolved, the city shall assume the authority under subdivision
   (a)(3)(A) of this section.
   (b)(1)(A) Any city of the first class that may levy and does levy a tax pursuant to this subchapter
   may use or pledge all or any part of the revenues derived from the tax for the purposes
   prescribed in this subchapter or for the operation of tourist-oriented facilities, including, but not
   limited to, theme parks and other family entertainment facilities or for the retirement of bonds
   issued for the establishment and operation of other tourist-oriented facilities, including, but not
   limited to, theme parks and other family entertainment facilities.
   (B) These revenues shall be used or pledged for the purposes authorized in this subsection
   only upon approval of the commission created pursuant to this subchapter.
   (2) Funds credited to the city advertising and promotion fund pursuant to this subchapter may be
   used, spent, or pledged by the commission, in addition to all other purposes prescribed in this
   subchapter, on and for the construction, reconstruction, repair, maintenance, improvement,
   equipping, and operation of public recreation facilities in the city or the county where the city is
   located if the city owns an interest in the center or facility, including, but not limited to, facilities
   constituting city parks and also 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 commission for the purpose of such payment.
   (c)(1) All local taxes levied as authorized in § 26-75-602(a) shall be credited to the city
   advertising and promotion fund and shall be used for the purposes described in subsections (a)
   and (b) of this section.
   (2) The taxes shall not be used:
   (A) For general capital improvements within the city or county;
   (B) For the costs associated with the general operation of the city or county; or
   (C) For general subsidy of any civic group or the chamber of commerce.
   (3) However, the commission may contract with such groups to provide to the commission
   actual services that are connected with tourism events or conventions.
   (4) The authorization and limitations contained in this subsection shall be reasonably construed
   so as to provide funds for promoting and encouraging tourism and conventions while not
   allowing such special revenues to be utilized for expenditures that are normally paid from
   general revenues of the city.
   6 See, e.g., Op. Att'y Gen. 2008-121.
   7 A.C.A. § 26-75-606(a)(2)(A). The Honorable Eddie Joe Williams
   State Senator
   Opinion No. 2013-103
   Page 4
   a proposed use.8 And an administrative body's interpretation of a controlling
   statute is given considerable deference and will not be overturned unless clearly
   wrong.9
   Question 1 - Can Advertising and Promotion taxes be used to compensate
   referees during a basketball tournament sponsored by the local school district?
   The part of the statute I deem most likely to be interpreted as authorizing this use
   is the provision that allows A&P tax proceeds to be used for "operation of public
   recreation facilities in the city...."10 The relevant inquiries are thus (a) whether
   providing referees for a tournament held in a facility is part of "operating" the
   facility, (b) whether a school district-owned11 sports facility such as a high school
   basketball gymnasium, where I assume for purposes of this opinion the
   tournament will be held, is a "public recreation facilit[y]" within the Act's
   meaning, and (c) whether the facility is in the city.
   I believe providing referees for a tournament held in a facility is part of
   "operating" the facility. Certainly conducting a tournament in a facility is part of
   operating it, and providing referees is an integral part of conducting a tournament.
   I know of no authority squarely addressing the question of whether a school
   district-owned sports facility such as a high school basketball gymnasium is a
   8 See, e.g., Op. Att'y Gen. 2002-101 and 2008-121, and opinions cited in the latter.
   9 See, e.g., Brookshire v. Adcock, 2009 Ark. 207 at 4, 307 S.W.3d 22 ("administrative agencies are better
   equipped by specialization, insight through experience, and more flexible procedures than courts, to
   determine and analyze legal issues affecting their agencies").
   10 A.C.A. § 26-75-606(b)(2).
   11 The law allows an A&P commission to spend A&P tax revenues on "public recreation facilities in the
   city or the county where the city is located if the city owns an interest in the ... facility ...." A.C.A. § 26-
   75-606(b)(2); see also A.C.A. § 26-75-606(a)(1)(A)(iii) (identical restriction on using money A&P tax
   revenues for "[o]peration of tourist promotion facilities"). I recently opined that the statute's ownership
   requirement applies only when the facility is located outside the city. Op. Att'y Gen. 2012-101. Hence the
   statute permits an A&P commission to support an in-city public recreation facility owned by a third party
   that is a public body. But see infra note 16 regarding private recipients. The Honorable Eddie Joe Williams
   State Senator
   Opinion No. 2013-103
   Page 5
   "public recreation facilit[y]" within the Act's meaning.12 But words in statutes are
   construed just as they read, giving them their ordinary and usually accepted
   meanings, and legislative intent is gathered from the plain meaning of the
   language used.13
   Is a sports facility such as a high school basketball gymnasium a "public" facility?
   I have assumed that the facility is owned by the school district, a public body. And
   I further assume that events scheduled at the facility, including the contemplated
   tournament, are open to the public.14 I therefore conclude that, absent
   extraordinary facts, such a facility is likely "public."
   Is a school district-owned sports facility such as a high school basketball
   gymnasium a "recreational" facility? I stated on another occasion that
   visiting a museum would appear to be consistent with the following
   definitions of the term "recreation":
   12 My predecessors and I have rendered opinions on spending A&P tax revenues to renovate and repair a
   high school's bleachers and concession stand area (Op. Att'y Gen. 2007-221) and "on ... athletic
   facilities" in general (Op. Att'y Gen. 2005-176). These opinions were expressly (with respect to the former)
   or impliedly (with respect to the latter) to the effect that the "public recreation facilities" part of the statute
   did not authorize the expenditure because the city had no ownership interest in the school facilities. As
   discussed above, however, I now deem the ownership requirement not to apply to public recreation
   facilities located in the city. See supra note 11. The opinions were further to the effect that, depending on
   the facts and circumstances, the expenditures might nonetheless be permissible under A.C.A. § 26-75-
   606(c)(4), which provides that subsection (c) "shall be reasonably construed so as to provide funds for
   promoting and encouraging tourism and conventions," notwithstanding that the proposed use was not one
   clearly and expressly authorized in A.C.A. § 26-75-606(a) or (b). More recently, however, I have rejected
   the interpretation of A.C.A. § 26-75-606(c)(4) underlying those opinions and have opined that A&P tax
   revenues may be used only as expressly authorized in A.C.A. § 26-75-606(a) or (b), and only if not barred
   by A.C.A. § 26-75-606(c). Op. Att'y Gen. 2011-005; accord Op. Att'y Gen. 2012-101. I reaffirm the more
   recent opinions here and restate my conclusion that A.C.A. § 26-75-606(c)(4) does not in and of itself
   authorize any expenditure of A&P tax revenues.
   13 E.g., Magness v. State, 2012 Ark. 16, 3-4, 386 S.W.3d 390.
   14 See Op. Att'y Gen. 2012-101 (a state university-owned performing arts facility with performances
   generally open to the public is likely "public" for purposes of this provision of the Act). The Honorable Eddie Joe Williams
   State Senator
   Opinion No. 2013-103
   Page 6
3. refreshment by means of some pastime, agreeable exercise, or
   the like. 2. a pastime, diversion, exercise, or other resource
   affording relaxation and enjoyment.
   Random House Webster's Unabridged Dictionary (2d ed. 1999).15
   Attending or participating in games and other activities likely to be held in a
   school district-owned sports facility such as a high school basketball gymnasium
   is likewise probably "recreational" within those definitions.
   I therefore conclude that, absent extraordinary facts, a school district-owned sports
   facility such as a high school basketball gymnasium likely is a "public recreation
   facilit[y]," as that term is used in the Act.
   Whether such a facility is "in the city" is self-evident and I assume for purposes of
   this opinion that it is.
   It is accordingly my view that, absent extraordinary facts, it is more likely than not
   that a court would defer to an A&P commission's determination that using A&P
   tax revenues to pay referees at a school district-sponsored16 basketball tournament
   held at a school district-owned sports facility in the city is within the meaning of
   15 Op. Att'y Gen. 2007-276.
   16 School district sponsorship of the tournament is an important fact underlying your question. The statute
   prohibits using A&P tax revenues for the "general subsidy of any civic group or the chamber of
   commerce." A.C.A. § 26-75-606(c)(2)(C). Any significant involvement in the tournament by any civic
   group or chamber of commerce might compel a different conclusion. With respect to the possible
   involvement in the tournament of any private party, you should also be aware of a potential constitutional
   issue. Because the third-party prospective recipient of A&P tax revenues in your question, a school district,
   is a public body, a constitutional prohibition on donating public money to private entities likely does not
   come into play. See Ark. Const. art. 12, § 5 (prohibiting cities from "obtain[ing] or appropriat[ing] money
   for ... any corporation, association, institution or individual"); compare, e.g., Op. Att'y Gen. 2007-276
   (A&P commission probably may not donate to private entity operating city history museum), with, e.g., Op.
   Att'y Gen. 2012-066 (county probably may donate to city). The constitutional prohibition also does not
   apply to payments that are consideration under a valid contract. See, e.g., City of Ft. Smith v. Bates, 260
   Ark. 777, 544 S.W.2d 525 (1976) (Ark. Const. art. 12, § 5, does not limit city's power to give consideration
   under contract); see also A.C.A. § 26-75-606(c)(3) (permitting A&P commission to contract with civic
   group or chamber of commerce for certain services). The Honorable Eddie Joe Williams
   State Senator
   Opinion No. 2013-103
   Page 7
   the phrase "operation of [a] public recreation facilit[y] in the city" and thus is a
   permissible use of A&P tax revenues.
   Question 2 - Can Advertising and Promotion taxes be used to fund athletic
   equipment for a local school district?
   You have provided no factual context for this question. The facts that might be
   present in a given case are so varied and uncertain that I cannot answer your
   question in a way that would apply across the board. I will, however, discuss in
   general how an A&P commission and its counsel might consider proposals to fund
   athletic equipment for a school district.
   I reiterate that any use of A&P tax revenues must be authorized by A.C.A. § 26-
   75-606(a) or (b), and that nothing in A.C.A. § 26-75-606(c), particularly
   subsection (c)(4), authorizes any use of A&P tax revenues independently of
   A.C.A. § 26-75-606(a) or (b).17
   Which provisions of A.C.A. § 26-75-606(a) or (b) might authorize the proposed
   use? In my view, the most likely is the one discussed in my response to your first
   question, which allows use of A&P tax revenues not only for operation but also
   for "equipping" of public recreation facilities within the city.18
   As the statute expressly permits equipping of a public recreation facility,19 it is my
   view that, absent extraordinary facts, it is more likely than not that a court would
   defer to an A&P commission's determination that using A&P tax revenues for
   items that equip a school district-owned sports facility in the city comes within the
   meaning of the phrase "equipping ... of [a] public recreation facilit[y] in the city"
   and thus is a permissible use of A&P tax revenues.
   17 See supra note 12.
   18 A.C.A. § 26-75-606(b)(2).
   19 I discuss in my answer to your first question the determination of whether a facility is a "public
   recreation facility" and my assumption that the facility is located in the city. The Honorable Eddie Joe Williams
   State Senator
   Opinion No. 2013-103
   Page 8
   The statute does not, on the other hand, clearly authorize using A&P tax revenues
   to buy athletic equipment that does not equip a public recreation facility.20 The
   statute does permit the use of A&P tax revenues for "[a]dvertising and promoting
   of the city and its environs...."21 One might conceive of extraordinary facts under
   which it could be permissible to fund athletic equipment under this authorization
   but the possibility is remote in my estimation.
   Assistant Attorney General J. M. Barker prepared this opinion, which I approve.
   Sincerely,
   Attorney General
   DM/JMB:cyh
   20 A predecessor in this office opined that, depending on the facts and circumstances, A.C.A. § 26-75-
   606(c)(4) might authorize an A&P commission to use A&P tax revenues to purchase football uniforms for
   a public school team. Op. Att'y Gen. 2002-310. As discussed above, I have rejected that interpretation of
   A.C.A. § 26-75-606(c)(4). See supra note 12.
   21 A.C.A. § 26-75-606(a)(1)(A)(i).