Court decision may alter Fort Smith project plans

The Arkansas Supreme Court’s decision to uphold Amendment 89 could provide the Fort Smith Board of Directors more options in addressing sewer system improvements, expansion of the city’s fire department and other city projects.

Proposed Amendment 2, passed by voters (64% approved) during the November general election to became Amendment 89 to the Arkansas Constitution, had three key provisions.

First, it gives the Legislature permission to change interest rate caps on government bonds and loans with changing market conditions. Secondly, it eliminates a current below market interest rate cap on consumer loans and sets an interest rate cap of 17% on those loans. And finally, the amendment allows for energy savings financing. This would allow local government units to float bonds paid back by the savings from energy efficiency.

April Forrester of Jacksonville filed a lawsuit to overturn the Amendment, saying the language was confusing to voters and violated the Arkansas Constitution because it combined three issues into one amendment.

In a majority opinion released Thursday (June 23), the court said the ballot title of the amendment that was approved by voters last November "does not constitute a manifest fraud on the public." The court also said that another argument used by opponents of the proposal — that the three aspects of the amendment weren’t cohesively relevant to each other — was invalid.

For Fort Smith citizens, the ruling may mean the city could engage a long-term plan to address sanitary sewer issues, said Fort Smith City Administrator Ray Gosack.

The city remains under a mandate from the Environmental Protection Agency and U.S. Department of Justice to address significant problems with the sewer system during wet weather.

On June 9, 2009, Fort Smith voters approved the extension of a 1% sales tax to raise $30 million needed to cover water and sewer improvements mandated by the federal government. Costs of the improvements grew from $60 million to about $85 million. The tax extension pushed from June 2012 to December 2013 the end of the 1% sewer improvements tax approved in 2006.

Prior to Amendment 89, the city was limited in that it could not issue bonds if the interest rate rose 2% higher than the rate when voters approved the respective bond financing. Also, the IRS requires tax-exempt bonds to be spent within 2 years of issuance.

If voters are asked to again extend the sales tax to finance other mandated improvements, the city could request a larger bond package than just a two-year program. The city, for example, could ask voters to extend the tax to support bond financing for 6 years worth of work. With voter approval, the city would then stagger the issuance of bonds during the period to meet the 2-year IRS rule on tax-exempt bonds.

“Again, this is all contingent on voter approval, but It will let us demonstrate to the EPA and the Department of Justice that we have a plan for more than just two years worth of financing for those projects,” Gosack explained.

Gosack also said the flexibility provided under the new law could change how the Board of Directors considers overall financing for the sanitary sewer work, financing for a new fire station at Chaffee Crossing and new fire department personnel.

Expansion of the fire department is required to respond to growth at Chaffee Crossing and to maintain the city’s ISO 2 rating — a rating which helps lower insurance premiums for commercial and residential property in the city.

The city has previously estimated the cost at just short of $3 million to build and equip a fire station at Chaffee Crossing. It will cost about $900,000 a year to operate. In addition to the Chaffee Crossing upfront and annual costs, Fire Chief Mike Richards seeks to add 12 positions to the fire department to address the weakest part (43% personnel grade out of 100%) of the recent ISO review. The 12 positions are estimated to add $600,000 annually to the fire department budget.

Also, to address ISO report weaknesses in the coverage area by the city’s ladder and pumper trucks, Richards recommends the purchase of three new pumper trucks and three ladder trucks at an estimated cost of $4.305 million. The purchases would save $500,000 for equipping the Chaffee Crossing station because a 2005 model pumper truck could be reassigned to the new station.

“Again, this is all contingent upon their (board) decisions and voter approval … but the amendment provides us much more flexibility and more assurance that we can keep our projects moving along,” Gosack said.