The Fort Smith Board of Directors on Tuesday (Dec. 5) passed the 2018 budget with two new revenue streams that will affect individuals and businesses in the city to a combined estimate of $1.025 million.
A newly imposed $100 business license fee on the city’s more than 5,000 businesses is expected to raise $471,000 annually while the city will raise franchise fees for utility companies to the maximum allowable amount of 4.25% from the current 4%. The move, according to Fort Smith Finance Director Jennifer Walker, is expected to generate $554,000 in new revenue.
While the franchise fees will fall directly on the companies that pay them, A.C.A. § 14-200-101 (b) (2) states that “Nothing in this section shall limit the authority of the public utility to collect from its customers residing in each municipality an amount that equals the franchise fee assessed by the municipality on the public utility.”
The statute allows a company like Arkansas Oklahoma Gas Corp., for example, to pass through all additional charges to customers.
The two revenue streams passed at 4-3 each but failed to get the five votes needed to avoid second and third readings. That means a director can change his or her vote before the revenues become permanent through second and third attempts.
On the business license fee, Directors Tracy Pennartz, Don Hutchings, and Kevin Settle opposed. Pennartz said she was “troubled” by the estimated $200,000 cost the city loses in expenses each year to keep a business registry and considered dropping the registry altogether to cut out the expense. Settle and Hutchings believed the business license fee and the franchise fee rate increases were added burdens on small businesses and Fort Smith residents already strapped by 167% increases in the sewer rates as a result of the city’s federal consent decree for violations of the 1973 Clean Water Act.
Director George Catsavis voted against the franchise fee increase but for the business license fee, swapping roles with Pennartz. Catsavis, a local business owner of George’s Restaurant, did not favor an increase that would pass through to citizens, but he confirmed his vote on the business license fee, telling Talk Business & Politics during intermission that “something was better than nothing.”
Catsavis also favored earmarking all additional funds (business license/franchise fee) to the Fort Smith Police Department, but the revenues, as they currently stand, will go to the General Fund only. Approximately 70% of the fund goes toward funding the city’s police and fire departments. Catsavis also favored the fee on a late amendment by Director Mike Lorenz to waive the fee for first-year businesses.
Stephen Edwards, Melissa Woodall, and Kelly Procter-Pierce spoke out against the business license fee on Tuesday, reminding the board that a previous voter-approved sales tax had been passed under the “sell” it would be in lieu of business license fees and that a move to incorporate would further mar the city’s reputation as not being business-friendly.
City directors face a number of General Fund revenue issues including a potential $20 million shortfall in old (before 1983) local police and fire pension plans as well as a shortage of officers and overrun of critically aging equipment in the police department.