A proposal by Fort Smith City Director George Catsavis to add a new property tax exemption to offset sewer bill increases has been labeled “irresponsible” by a state legislator and has drawn opposition from at least one City Director.
Catsavis said in a recent interview with Talk Business & Politics that one of his priorities for the next four years if re-elected would be to attain “an additional homestead exception for the citizens of Fort Smith to help offset the sewer increase that has taken effect, which has hurt a lot of people financially, especially our senior citizens and the working people.”
Catsavis said he would like his fellow Board members “to help with this issue and bring some relief to many.”
This isn’t the first time that Catsavis has proposed the Board seek relief measures for Fort Smith residents caught in the upswing of sewer rates as a result of a $480 million federal consent decree for the city’s decades-long violations of the federal Clean Water Act. Rates have already started to climb from their $19.63 monthly average in April 2015. By January 2017, they will clock in at around $47.91.
Catsavis also said he believes even a $150 increase in the homestead exemption could go a long way in providing relief ($12.50 per month). He also blames the increase in sewer rates for a doubling of cutoffs.
“I have checked with the water department, and water cutoffs have jumped from around 400 a month to 800 a month since the sewer increase has taken effect, which tells me people are really struggling,” Catsavis said. “As of now, we have a $350 homestead exception for property owners. Even another $150 exception would help many, especially our senior citizens most of whom are on fixed incomes.”
Catsavis continued: “I know all the city directors have had a lot of feedback from people concerning this issue, and I personally have had many calls from people, who say they just can’t afford it and are having to do without the basics just to survive. I have even heard from business owners that they have had to cut back staff just to pay their water and sewer bills.”
Property taxes are assessed on one-fifth the appraisal value of a home. In Fort Smith, the median home price is $105,800 versus a state average of $109,100. Using the median, Fort Smith homeowners pay 0.0525 millage on the 20% assessed value ($21,160) for a total tax value of $1,110.90 per year minus the $350 homestead exemption for a total of $760.90 to the taxpayer. Taxes across the state vary based on the appraised value of the home and the individual county of residence’s millage rate.
While Catsavis is confident the idea of a further homestead exemption that goes beyond the statewide $350 credit is an idea worth considering, he does not have an ally in fellow City Director Mike Lorenz or Arkansas Senator Jake Files, R-Fort Smith. Lorenz told TB&P in an email that he was “in no way supportive of what Director Catsavis” proposed in the initial article.
“We have enjoyed unnaturally low sewer rates for 30 years and now we are all paying the price,” Lorenz said.
Lorenz’ mother is one of the senior citizens affected by higher rates, he explained, adding that she lives on a fixed income and that he pays her utility bill.
“The increase has been a minimal effect on her bill, which remains barely $30 per month up from the mid to low $20 range last year, but the effect on my household has been significant with five of us in the home, so I don’t agree with his argument in principle much less that there is any relationship between property taxes and sewer rates,” Lorenz said.
Lorenz also said he had spoken to people in surrounding cities and states “that pay well more in water and sewer than Fort Smith after the increases, not to mention our good sanitation rates.”
Speaking even more strongly against the homestead exemption idea, Sen. Files called it “irresponsible” to suggest.
“I look at it two ways: one, is it good tax policy; and two, is it something able to be passed in Little Rock?” Files said. “In terms of tax policy: who wouldn’t be for it in Fort Smith, but across the state, to carve out a small section of people for something they’ve been found guilty of, even if the citizens didn’t do anything – how do you tell West Memphis, Texarkana, Jonesboro, or Little Rock, that we’re going to expect them to pay more in taxes to pay for us? It’s easy to campaign on, but there is effectively no way it would pass based on those facts and tax policy in general.”
Files is aware some might look at exemptions, such as the individual income tax exemption that exists for Texarkana, Ark. — an Arkansas-Texas border town — as an example of “why can’t we,” but reminded that it was “because they compete with Texas.” To offset, the city raised their sales tax.
“When Oklahoma talked about going to no income tax, I looked into what an exemption might mean for Fort Smith as a border town. To do that you would have to offset it by increasing the sales tax by two cents, and the likelihood of us going to a 12-cent sales tax on goods and services is hard for anyone to swallow,” Files said.
Files added: “The exemptions that have passed have gone towards job creation and other related purposes, because we’re trying to lower the tax burden for manufacturers and employers, for the money they pay towards creating jobs and being an important part of the Arkansas economy. We’ve turned away exemptions for a lot of small non-profit groups.”
Files warned that state government “can’t just say yes on every single thing like that or you end up with a tax code like we have right now — swiss cheese, with loopholes all through it. You would think somebody in office has a little greater understanding that something like this would never fly. It is irresponsible. No city in Arkansas is going to be able to enact something like that based on the facts here. We do have to be forward-thinking and help the citizens of Fort Smith, but you’re not going to do that by suggesting something that has no likelihood of passing.”