Fort Smith Board to pursue Van Buren true-up charge

“This is the craziest thing I’ve ever seen.”

That was City Director George Catsavis’s assessment on Tuesday night (Dec. 6) after more than 30 minutes of intense discussion about disputes in water payments between the cities of Fort Smith and Van Buren.

When the talking ended, directors voted unanimously to immediately pay Van Buren $30,000 in a rate adjustment for 2010 and to have city staff negotiate with Van Buren over the $834,000 that Fort Smith says is still outstanding for 2006 through 2009.

Tuesday night’s discussion was led by City Director Philip Merry Jr., who attempted to establish the crucial issues related to Fort Smith failing to perform a true-up for Van Buren’s 2009 water rate adjustments.

Each year, Fort Smith bills Van Buren for water based on projected usage totals. In the next year, Fort Smith has the option to conduct an audit, or true-up, of Van Buren’s actual water usage, determine how it differs from the projection, and bill Van Buren for the difference. Under the contract between the two cities, Fort Smith must provide Van Buren with the true-up results within a limited timeframe.

Van Buren recently agreed to pay Fort Smith for $581,000 in true-up adjustments for the years of 2006, 2007, and 2008. Fort Smith, meanwhile, owes Van Buren about $30,000 in true-up adjustments for 2010. But the cities are disputing the $253,000 true-up adjustment for 2009.

That’s because Fort Smith missed its August 2010 due date for submitting a true-up for 2009 rate adjustments. City staff were not aware that they had not met that requirement until Van Buren city officials informed them in July 2011.

According to Van Buren officials, the true-up failure constitutes a breach of the cities’ contract, and Van Buren is thus not obligated to pay the rate adjustments for 2009. Fort Smith city directors, meanwhile, have contended that Van Buren still owes the 2009 adjustments and should pay them.

City Attorney Jerry Canfield told the Board in the last regular meeting (Nov. 15) that he does not think any legal attempt to make Van Buren pay the $253,000 for 2009 will succeed, because of Fort Smith’s breach of contract.

In Tuesday’s meeting, Merry said he has reviewed the water contract between the two cities and does not see anything indicating that Fort Smith forfeits its right to collect the 2009 rate adjustments as a result of the failure to complete the true-up. Merry also suggested he doesn’t believe the explanation that the true-up date was missed because a city staffer overseeing the matter had left for another job.

Merry suggested that if the Board decides to pursue litigation for the 2009 true-up, it should consider hiring a different attorney for the case — “one who thinks we have a shot,” he said.

City Director Steve Tyler disagreed with Merry.

“I’m not for pursuing this legally,” he said. “I’m for ending this.”

Tyler said the city should abandon the 2009 adjustment and look to make sure the mistake doesn’t happen in the future.

“They’re saying they won’t pay the $253,000 for ‘09,” Merry responded, “and in the same breath they want more time — at no interest — to pay the rest. I don’t know how waiving this bill makes it better for the future.”

City Director George Catsavis asked Canfield why Fort Smith could not specify a due date and method of payment for Van Buren.

“[Van Buren has] no right to ask for three years or no interest,” Canfield responded. “But they do.”

Canfield said Van Buren justifies its request by saying the water rate adjustments are an unplanned-for item and that time is needed to raise the funds.

City Director Kevin Settle pointed out that Van Buren is the only city with which Fort Smith has a true-up agreement.

“For other cities, if our costs are higher than what was estimated, we eat that,” he said.

Settle called for changing Fort Smith’s policy in selling water to municipalities, saying that Fort Smith citizens should not have to cover the difference when other cities exceed their estimated water usage.

City Director Pam Weber said Fort Smith has had outstanding water bills from Van Buren since 2006. As a citizen and as a business owner, she said, she would never be allowed to get away with not paying her full water bill for five years, at no interest.

Weber read aloud a letter by Dr. Cole Goodman, a former city director. Goodman called Van Buren’s refusal to pay the 2009 true-up “unconscionable.”

“Contract users should be held accountable,” he wrote, “not given no-interest loans that our citizens have to cover.”

In his letter, Goodman also said he had heard a rumor that last year, when Van Buren Mayor Bob Freeman was running for reelection, a deal had been cut with Freeman to allow Van Buren leeway on water payments with no interest and no timetable.

Fort Smith City Administrator Ray Gosack denied the rumor, saying that not only did Van Buren not have a special deal, it was held to a higher standard than any other municipality Fort Smith sells water to, because of the yearly rate adjustments.

Merry proposed that city staff immediately send a $30,000 check to Van Buren for the 2010 rate adjustment and then negotiate to get the $834,000 that Van Buren owes for 2006-09.

The motion passed, 7-0.

BUDGET APPROVED
Directors also voted to approve the City’s 2012 operating budget.

Kara Bushkuhl, city finance director, told the Board that the 2012 budget is just under $99 million. The balance in the General Fund, she said, would go from $3.9 million to $3.1 million, due to raises for city employees, which the Board also approved on Tuesday.

Catsavis asked what would happen if the economy tanked in 2012 and the city received 20% less revenue than projected.

Bushkuhl said if that happens, staff would have to make more cuts in the budget. She said she meets monthly with Gosack to see whether revenues are still on track to match projections.

Settle said he would like to see a mid-year budget review for city directors in July 2012.

The budget passed 6-1, with Catsavis opposing.