Convention Centers Can’t Wait for Legislative Session

Montine McNulty, executive director of the Arkansas Hospitality Association.

Arkansas’ hospitals and other industries have urgent concerns for the Legislature to address in the regular session that will commence on Jan. 11, including infrastructure and the preservation of the expanded Medicaid program.

But a key piece of the hospitality industry has needs that are more urgent than that.

“By the time it gets to the legislative session, it’s going to be too late,” said Steve Arrison, CEO of Visit Hot Springs. “They have the CARES Act money now. We need money now. We don’t need to wait for the legislative session.”

Arrison was referring to the federal Coronavirus Aid, Relief & Economic Security Act, which gave about $1.25 billion in pandemic-relief money to Arkansas. Last month, the Arkansas Legislative Council approved spending $48.5 million of that CARES money on grants to service and hospitality businesses in the state. Those included tourism, travel, recreation and hospitality enterprises.

But there’s a giant hole in the CARES funding: Publicly owned convention and event centers like the one that Arrison oversees, the Hot Springs Convention Center, aren’t eligible.

Tourism is the second-biggest business in Arkansas, and convention and event centers have played a huge role in economic development, said Montine McNulty, executive director of the Arkansas Hospitality Association. “They’ve been very important and instrumental in the development of travel and tourism in our state because they literally promote and bring in guests to our state,” she said.

But the coronavirus pandemic has put a stop to events and meetings that the convention centers were built to host and to the performances that routinely filled venues like the Simmons Bank Arena in North Little Rock.

In Little Rock, at least 239 events at facilities managed by the Little Rock Convention & Visitors Bureau have been canceled, resulting in a $2.2 million hit to the bureau’s budget. The LRCVB has laid off 30% of its staff permanently and an additional 10% remain on full or partial furlough, said Gretchen Hall, the bureau’s CEO.

In Hot Springs, 120 meetings have been canceled, and Arrison said 48% of Visit Hot Springs’ staff has been laid off. And it could be 2022 before the meeting business rebounds, he said.

And though the facilities are empty, debt must be serviced, utilities must be paid and maintenance must be continued.

Local governments have taken notice of the venues’ distress. Last week, the Pulaski County Quorum Court passed a resolution calling on the Arkansas CARES Act Steering Committee to endorse a $1.9 million grant to Simmons Bank Arena. And earlier last month, the Little Rock Board of Directors asked the state to give $3 million to the Little Rock Convention & Visitors Bureau, and the Hot Springs Board backed Arrison’s request for $1.5 million for the convention center and Bank OZK Arena.

About $71 million in pandemic-relief funds remains of the $1.25 billion allocated to Arkansas.

Stacy Hurst, chief of the state Department of Parks, Heritage & Tourism, said that private convention facilities will be eligible to apply for some of the $48.5 million in CARES money earmarked for service and hospitality businesses. The state is also allowing out-of-state owners of hotels tied to public facilities to apply for relief, she said, citing as examples the Embassy Suites in Hot Springs and the Embassy Suites Northwest Arkansas in Rogers.

But the needs are great, there’s not much money left and the clock is ticking on the remaining CARES Act funds, which have to be in the hands of recipients by Dec. 31.

“We are continuing to have conversations with cities and with counties about how they might help their convention and visitors bureaus,” Hurst said.

She noted that the state has set aside $150 million of CARES money to reimburse cities and counties in Arkansas for their pandemic-related expenses. “There may be an opportunity to reallocate some of those funds if they are not all claimed as reimbursement for cities and counties,” she said.

McNulty hopes Congress will approve a second coronavirus-relief measure, one that will also benefit publicly owned event facilities. “Surely, within a $2 billion or $3 billion federal bill, there will be some relief there for that type of facility,” she said. And Hurst said, “We do hear that quasi-governmental entities are being considered in the second round of relief.”

But Congress adjourned until after the presidential election without approving another aid package.

“Hopefully, we won’t have any chaos after the election and will be able to get back to business, McNulty said. “But you know, it takes time to implement major federal bills and do it correctly.” It may be December before a federal aid package is approved and January before it can be implemented, “which is a scary thought.”

She added: “It’s really something for the No. 2 industry that drives a lot of tax revenue for the state of Arkansas to be in this kind of situation.”

Chamber/AIA

Improving Arkansas’ infrastructure will be a top priority in the upcoming legislative session for the Arkansas State Chamber of Commerce and Associated Industries of Arkansas.

“We’re always focused on anything that will make Arkansas more competitive with surrounding states and attracting capital investment and economic development,” said Randy Zook, president and CEO of the Chamber and AIA. “And that starts always with infrastructure.”

Zook said the Chamber has been “intensely involved in Issue 1,” the proposed amendment to the state Constitution that would continue a 0.5% sales tax scheduled to end in 2023. If approved, the revenue from the tax would be spent on highways, roads and bridges.

“There are a lot of needs around the state,” Zook said, including improvements to Interstate 30 between Texarkana and Little Rock and Interstate 40 between Little Rock and Memphis.

(The state Supreme Court ruled on Thursday that money from the sales tax could not be used for any highway wider than four lanes, including interstate projects like the I-30 bridge crossing at Little Rock. Amendment 91 to the state constitution, which voters approved in 2012 to pay for roadway infrastructure, makes repeated references to “four-lane highway improvements.”)

Zook said the Chamber will also target broadband expansion in Arkansas. While companies have spent more than $1 billion during the last few years expanding fiber-optic and other broadband connections across Arkansas, “there’s still a significant amount of people who don’t have access to it,” Zook said. “We’re a rural state, and it’s difficult to cover everybody, … without some extra effort from the government.”

High-speed internet access is necessary for businesses and farmers to be competitive, he said.

The Chamber will also push for tax reform for businesses. “There’s some pretty esoteric stuff around what’s called the throwback rule for business conducted in states where there is not corporate income tax,” he said.

Under the throwback rule, if a company sells products in a state with no corporate income tax, such as Texas, “the associated profits are taxable in Arkansas even though the business was conducted in Texas or Florida,” Zook said.

The Chamber also will be monitoring the state’s unemployment fund, which was “well funded” after the Legislature used $165 million of the federal CARES Act money to support it, Zook said.

“If we continue to see job growth, which we’re seeing, and people get back to work rather than drawing on the unemployment insurance trust fund, it should be OK,” Zook said.

Hospitals

The No. 1 issue for the Arkansas Hospital Association will be preserving the Medicaid expansion, which provides health insurance to about 275,000 Arkansans.

The Medicaid expansion waiver that provides the coverage is set to expire at the end of December 2021.

“It’s very important that we keep Arkansans covered,” said Jodiane Tritt, the executive vice president of the AHA. “Those folks have access to care and most of them didn’t have access to care before.”

The AHA will urge the Legislature to approve the program so the state can craft the Medicaid agreement with the federal government for the waiver. After passing that hurdle, the Legislature would then need to provide the funding for the program.

“One of the most appealing parts of Medicaid expansion was the ability for the state to pay 10% of the cost of allowing coverage for those folks,” Tritt said.

The program also has saved hospitals millions of dollars annually in uncompensated care.

In January 2014, the Affordable Care Care’s centerpiece — known as the “individual mandate” — required Americans to have health insurance or face a penalty, but it also offered financial assistance in the form of tax credits for those who couldn’t afford it on their own.

The individual mandate survived a challenge at the U.S. Supreme Court. The same ruling made it optional for states to expand Medicaid, mainly with federal dollars, to households with incomes just above the poverty line — the working poor who earn too much for traditional Medicaid but too little to afford health insurance.

Most traditionally “red” states initially rejected the expansion option. But Arkansas accepted the federal money and developed a unique approach that used the federal dollars to buy private insurance for eligible Arkansans rather than covering them through the traditional state-run Medicaid program. This plan, known first as the “private option,” has been tweaked and renamed Arkansas Works by Gov. Asa Hutchinson.

When the private option first went into effect, the federal government covered the entire cost. But over the years, Arkansas was required to gradually absorb part of the cost, up to the maximum of 10%. That share comes from the Department of Human Services’ Division of Medical Services’ budget.

The Medicaid budget has to be approved by the Legislature each year and requires supermajority approval, meaning 75 of 100 members of the House and 27 of the 35 members of the Senate must vote yes for the appropriation.

The AHA also will keep an eye on the U.S. Supreme Court. On Nov. 10, the court will hear arguments on whether the Affordable Care Act is still constitutional since Congress repealed the tax penalty that was part of the individual mandate.

“If that lawsuit goes the other way” — that is, if the ACA is found to be unconstitutional — “we’ve got a big-time problem if the feds don’t allow us to have the same sort of federal and state match relationships,” Tritt said.