Budgets, bonds top topics of Fort Smith board meeting
It was at the end of the Tuesday (July 7) Fort Smith Board of Directors meeting when Directors Cole Goodman and Kevin Settle made it clear that the board wants to begin sooner rather than later what is expected to be a tough 2010 budgeting cycle.
Goodman said during the Director’s Forum that “significant” potential budget problems meant the city board and staff should begin reviewing the budget before November. Settle quickly followed Goodman’s comment by reminding City Administrator Dennis Kelly and Finance Director Kara Bushkuhl of his request for an August “pre-budget” meeting.
Budget problems are potentially two-fold.
Within the next 2-3 years, elimination of state turnback funds to support the Fort Smith Convention Center might require a potential budget expenditure of as much as $1.5 million in 2011, and between $1.8 million and $2 million for subsequent years.
Also, recent sales tax collections suggest the possibility of a $500,000 loss in 2009 revenue compared to 2008, according to Deputy City Administrator Ray Gosack.
For the first four months of 2009, the city sales tax is down 1.03% compared to last year, and the sales tax is 3.67% below year-to-date budget projections. Year-to-date, the city’s portion of the county sales tax is down 0.75%, and the collections are 3.55% below budget projections.
“The actual revenue loss to the General Fund budget is $188,348 to date,” noted a recent memo from Kara Bushkuhl, Fort Smith’s director of finance, to City Administrator Dennis Kelly. “All departments have been asked to review expenditures very carefully and keep spending as low as possible. Depending on the next two month’s revenues, it may be necessary to adjust the 2009 General Fund budget.”
Potential financial hits ranging from $500,000 to $2 million from an approximate annual $40 million operating budget will require tough decisions, Gosack said.
Kelly said an August budget meeting would be planned.
With an upcoming $30 million bond issuance to pay for water and sewer system improvements, bond underwriters in Arkansas are lining up for a piece of the action.
The previous policy of the city of Fort Smith is to grant Little Rock-based Stephens Inc. 80% of the issuance and Morgan Keegan — a division of Birmingham, Ala.-based Regions Bank — the remaining 20%. But this year Little Rock-based Crews & Associates asked for some of the business.
Fort Smith businessman Philip Merry Jr. said Stephens is a good partner with the city and the board should send a “signal of thank you” by maintaining the 80/20 split.
Bob Wright with Crews said very few cities and government organizations have just one or two underwriters. He said with the tough economic market, the city needs all the help it can get on the bond issuance.
“This is not uncommon to share underwriting capabilities,” he explained.
Director Gary Campbell said the tough economic market is the reason now is not the time to change the rules, adding that the city is “not going to save money by dividing this up” further. He made a motion to keep the 80/20 split intact, with Director Don Hutchings seconding.
But Director Bill Maddox issued a substitute motion, giving Stephens 34%, Morgan Keegan 33% and Crews 33%. Kevin Settle seconded, but the motion failed 5-2.
Campbell’s motion was then approved 6-1, with Maddox opposing.