The Fort Smith Board of Directors tasked City Administrator Carl Geffken and staff to find $275,000 in cuts to the general fund to pay for 1% cost of living adjustment (COLA) raises for the city’s close to 900 employees.
Step raises were off the table for another year after the city abandoned them in 2016. The cost of instituting this time around would have been around $525,000, bringing the overall need from the general fund to $800,000 to institute both increases. The board discussed the budget during Monday nights (Dec. 5) final budget hearing.
Geffken and staff submitted a balanced budget to the Board with just a $13,000 surplus of revenues over expenditures. The budget did not call for raises of any kind, but City Director Tracy Pennartz said she would be on board with the COLA if Geffken could come back to the Board with $275,000 in cuts. The other directors agreed.
A general fund reduction of $275,000 translates to an overall budget reduction of about $464,000 since other aspects of the document would be affected in the cuts.
While the city may be able to find those reductions in a number of locations, overtime pay would be a likely candidate for the chopping block as the city has approximately $2.3 million budgeted for next year. However, nothing will be set in stone until after the first of the year. Geffken recommended the Board approve the budget as-is and allow staff to reconvene for a budget amendment “early in 2017.” The Board agreed, though they did recommend one additional cut of $33,000, bringing the overall surplus to $46,000.
The cut funding would have paid half the salary of a second administrative position at the River View Hope Campus, which will open in the fall of 2017 to serve the city’s homeless population. City Director Mike Lorenz said he did not feel the need for a second position had been justified “considering the facility has yet to open” and the responsibilities were not clear as of the first night of budget meetings last Tuesday (Nov. 29).
With flat sales tax revenue – the city had to revise 2016 budget expectations downward by about $1.5 million in August – additional revenue sources were also a topic of Board conversation. Franchise fees offer a little wiggle room in that regard as the city charges 4% against an allowable-by-law max of 4.25%.
The city of Van Buren recently raised AOG’s rates to the max-allowable, resulting in a response from Shannon Mirus, AOG’s senior vice president of general counsel, who told Talk Business & Politics that any rate increases would “pass through” to customers.
The Board seemed aware these types of fee increases could pass on to Fort Smith residents as well, showing reluctance to go there.
“Until we have a balanced budget for one year, I am not going to raise fees,” Pennartz said.
Fort Smith residents have already seen significant increases in sewer rates to fund the U.S. Environmental Protection Agency and Department of Justice’s $480 million consent decree against the city for violations of the federal Clean Water Act.
By January 2017, the average bill of a Fort Smith customer for sewer will total $47.91, up from $19.63 prior to the hike. Making matters worse, Interim Utilities Director Bob Roddy of the consulting firm Burns & McDonnell — fielding a question from City Director Andre Good at the Dec. 1 budget hearing — confirmed “at some point in the future, it is my opinion you will have to look at water (rates) as well.”
While no such increases are being budgeted in 2017, the possibility echoed a similar discussion the Board had with Roddy in October.
THE CONVENTION CENTER SUBSIDY
Also Monday night, the Board looked at the subsidized Fort Smith Convention Center. The facility operates in the black thanks to a yearly contribution from the city of about $770,000.
Operational expenses exceeded revenue in 2016 by about $433,000. Despite a record year for revenue, the facility remains a liability, though Tim Seeberg, Chief Operating Officer (COO), answering an inquiry from Pennartz, said the Center could likely withstand a reduction in next year’s subsidy of about $100,000, but that was running the facility “rubber band tight with a piece of gum on it.”
Operations of the convention center were the focus of a Nov. 8, 2011, special election that saw a 1% prepared food tax plan rejected by 62.7% of Fort Smith citizens who voted. The vote ended about three years of study on how best to fund the center that was expanded in the late 1990s. A 1% prepared food tax was estimated to raise about $1.8 million annually.