In a 4-3 vote, the Fort Smith Board of Directors decided Tuesday to implement an annual $100 business license fee, with the exception of new businesses in their first year.

Fort Smith businesses already have to obtain business licenses and renew them each year. However, there has not been a fee to do so since 1994 when voters decided to replace the fee with the one-cent tax. The $100 fee is projected to generate approximately $480,000 a year for the city.

Ward 1 Director Keith Lau, Ward 2 Director Andre Good, Ward 3 Director Mike Lorenz and Ward 4 Director George Catsavis voted in favor of the fee. At-large Directors Tracy Pennartz, Kevin Settle and Don Hutchings voted against it. However, the board unanimously agreed to waive the fee for new businesses for one year. New businesses will have to obtain a business license for free and then pay $100 each year they renew.

The money will be in the city's general fund, which means it essentially can go anywhere with board approval. When the possibility of a business license fee was brought up during a budget hearing last week, Catsavis asked that the money be earmarked for the Police Department, which is short 13 positions and in need of equipment.

However, after Tuesday night’s discussion, the money will not be earmarked for the Police Department, although about 70 percent of the general fund, where the money will be, goes toward the police and fire departments.

Good, Catsavis and Hutchings voted in favor of earmarking the money for the Police Department, while Lorenz, Pennartz, Settle and Lau voted against it.

Pennartz said that, by definition, the general fund is supposed to be flexible and earmarking money within the general fund for a specific department would make the general fund lose its flexibility. Lorenz said that any more money going into the general fund will ultimately help the Police Department. Catsavis, however, stressed that he wanted a dedicated revenue stream for the Police Department that it can count on having each year.

Good said that if the city is going to collect the fee, then it needs to make sure it goes where it is needed most and the Police Department has not been receiving the funding it needs.

“They need equipment. They need bodies,” Good said.

The city already spends about $200,000 a year regulating businesses licenses, although it has not charged for them since 1994.

“We’ve lost a ton of money on this in the last 20 years,” Lorenz said.

Settle, who said he was not for a business license fee at all, added that he was concerned about putting the money in the general fund without allotting if for something specific because that means future boards can use it for what they want.

“Boards change. People change,” Settle said.

The $100 annual fee will be a flat fee regardless of a businesses’ size or number of employees.

The ordinance must be read on two more occasions, during which directors may decide to change their votes. Granted that no directors change their votes, the ordinance will go into effect 30 days after the third reading, City Clerk Sherri Gard said.