Van Buren officials deal with budget shortfall

While much attention has been paid to revenue problems that are plaguing the city of Fort Smith, its neighbor across the Arkansas River has largely dealt with its budgetary problems quietly.

But due to lower-than-forecast tax revenues, the Van Buren City Council voted unanimously Monday night (April 15) to move $250,000 in unrestricted capital reserves into the city's general fund to cover expenses.

The money will be used to cover necessities until the city sees relief from two new half cent sales taxes passed by the city's voters last year.

"We had to pull from capital improvements to keep payroll going, to pay vehicle insurance and pay worker's compensation," said Mayor Bob Freeman. "With this half cent that kicked in this past month (which will cover operations for some services, such as the police department), we'll start climbing out of that hole in June or July."

Freeman said this was the second time the city has had to dip into reserves since last year to cover a drop in revenue. But he said it was essential to keep the city running at a level expected by residents.

"You've got the needs and the wants. The needs – you need police protection, you need fire protection and water, sewer and garbage collection," he said. "Then you start getting into the wants, but you can't do all of the wants. And that's unfortunate."

Since the economy began dipping into recession in 2007, the city has fought to maintain services required to keep Van Buren on par with other cities of comparable size across Arkansas with regards to fire and police protection, according to Freeman.

He said without the sales tax vote last year, which funded the construction of a new fire and police department in addition to continuing operation, his recommendation to the city council would not have been to pull money out of reserves to cover necessary expenditures.

"We were just at that critical point. If the voters had not voted for this tax increase back in July, again it was just to catch us up, we wouldn't be talking about transferring from capital improvements, we would have been talking about who we are laying off and what departments," Freeman said. "It was getting to a critical point."

Even though the city will see relief once police and fire operations are no longer funded out of the general fund, the mayor says it does not mean the worst is over.

He has mandated that certain departments across the city freeze some non-necessary spending in order to save money, similar to the temporary hiring freeze put in place by the city of Fort Smith.

"We won't be hiring any policemen, we hired some firemen through grants – as the grants go away, we're picking that up through general, (but) we won't be hiring any additional firemen this year," Freeman said. "(Hiring additional city employees) will all depend on when things start to shape up. For this year, we won't be hiring anybody."

The city is also monitoring rising costs in healthcare premiums and retirement for city workers. Freeman said the city's contribution rate to the Arkansas Public Employees Retirement System is 14.24%, which is scheduled to increase to 14.88% starting July 1.

The city's contribution rates to the Arkansas Local Police and Fire Retirement System is 23.65% for the fire department and 18.26% for the police department.

"We do not know if these two rates are going to change mid-year or not," Freeman said.

In order to prepare for the rising costs in the area of healthcare, he said he would likely convene a study group to study the issue.

"I think we're going to pull together a working group (to explore scenarios) and how we are going to handle it," he said.

But he reiterated again that he expects the city to be on good financial footing and soon.

"I'm confident we'll start pulling out of this in the first couple of months of the summer – June, July. That's if fuel prices don't go through the roof."