Fort Smith board approves 2011 budget, 5% water rate bump

The Fort Smith Board of Directors on Tuesday (Dec. 7) voted 7-0 to approve a $269 million budget for 2011 that includes increased revenue from a 5% water rate increase that was also approved Tuesday.

Estimated revenue for 2011 is $269.5 million, with $72.2 million from tax collections, $60.1 million from water, sewer and other fees and charges and $99.3 million carried forward from capital projects not completed in 2010.

Expenditures proposed in 2011 total $224.55 million, about $16 million less than estimated expenses in 2010 and almost $50 million less than expenses in the 2010 budget approved in December 2009.

The 5% water rate increase was approved in a 5-2 vote — Directors George Catsavis and Kevin Settle opposed the increase — to help cover cover a 110% debt covenant threshold on about $15 million in debt service requirements. The city is now below the threshold, and City Finance Director Kara Bushkuhl has warned that remaining below the threshold will endanger the city’s credit rating. (Link here for more detail about the 2011 budget and the rate increases.)

Estimates provided by Fort Smith Utilities Director Steve Parke show the 5% increases would result in a monthly increase of $1.40 for water and sewer use of 5 ccf (each); a monthly increase of $3.02 for 10 ccf; and a $6.31 monthly increase for 20 ccf.

Other rate adjustments are expected to be considered in March or April when a comprehensive rate analysis study is completed.

However, state law prevented the board from approving a sewer rate increase. The law mandates a 10-day public notice period prior to raising the rate. The board voted to place the 5% sewer rate consideration on its Dec. 21 regular meeting agenda.

City Director Don Hutchings reminded the audience that the $1.7 million target needed to bring the city back within its debt covenants will be reached with about $1.2 million in personnel and operating cuts and the remainder from rate increase revenue.

“I just want people to know that most of the shortfall will be made up through cuts,” Hutchings said prior to the vote.

Although Catsavis and Settle voted for a budget that included revenue from the water rate increases, they voted against the rate increase.

“I understand the conflict, but the budget was good. … But I think the water and possible sewer rate increases are going to be a burden to the citizens. I think that we should look internally before we ask the voters for any more rate increases,” Settle said when asked about his votes.