Consent decree costs could rise to $650 million; Fort Smith officials hope for more time

While some members of the Fort Smith Board of Directors believe there is little hope the city can meet demands of the consent decree the city is under for its water and sewer infrastructure, others are saying the picture is not quite as bleak as it appears.

After years of failing to maintain water and sewer infrastructure to federal standards, the city entered into a federal consent decree with the United States Environmental Protection Agency (EPA) and U.S. Department of Justice (DOJ) in late 2014. The consent decree required the city to make an estimated $480 million worth of sewer upgrades over the course of 12 years. In June, Fort Smith Director of Utilities Lance McAvoy told board members that because of inflation and the actual state of the city’s sewer system, that number could be closer to $650 million. He said he did not have an exact estimate because there are still too many unknowns about work needed at this time.

At a study session Tuesday (Aug. 24), McAvoy said in 2015, it was estimated that 25% of the city’s sewer system would have to be replaced. The city still has 16 more subbasins, many of which are in the older part of the city, and is already finding that it will be closer to 32% of the city’s sewer system that needs replacing, he said.

“And that is going to drive the cost up,” McAvoy said.

The department also has evaluated the system on a two-year, six-hour storm for wet-weather overflow. McAvoy said he has heard the DOJ will require a five-year storm evaluation, which will add about $58 million more to the cost. Add in that when the total was first estimated, inflation was estimated to be 2% while it is now at 5%, and the cost gets even higher, he said.

Over the past six years, the city has spent approximately $127 million in capital costs for required improvements. That does not include work done prior to the consent decree, work still needed, or the operation and maintenance program the city has implemented that will outlive the consent decree, McAvoy said.

The city spent about $200 million on storage tanks and equalization basins to reduce wet weather sanitary sewer overflows, which are the basis for the consent decree requirements.

Funding for consent decree work to date has come in part from water and sewer bill increases, which are up 167% since 2015. Funding for water and sewer work also comes from bonds supported by sales tax revenue and revenue from wholesale water buyers.

“I don’t know what twilight zone these federal officials are in. They are asking us to do something unprecedented of any other city, and still they want more,” said Director Kevin Settle. “There is a point where we have to say that our citizens cannot do any more.”

Settle suggested the city request the DOJ and the EPA to come to Fort Smith and see what realistically can be done by the city, the utility department and the citizens to meet the deadlines required. Directors Neal Martin and Andre Good agreed.

“Our efforts are going nowhere. Maybe like Kevin said, we need to knuckle down and get them here,” Good said.

Director Lavon Morton disagreed, saying that until the city can convince the State of Arkansas it was doing all it could, persuading the federal government would be “next to impossible.” He said the city is consistently only spending 30% of the money it has noted in its plans for yearly consent decree work.

“Our first task should be to convince our own state officials to take a fair minded look at this. … Then we can talk to the DOJ,” Morton said. “We have COVID. That is a reason, but we’ve hardly spent any money at all in 2021. If I read this correctly, it’s less than $1 million. How do you make a plausible argument that you are really trying if that’s the result?”

On May 7, 2020, the EPA and the Arkansas Department of Environmental Quality (ADEQ) agreed that the city has proved that the sewer improvement program will be “inordinately expensive, accordingly, qualified for an additional five years of implementation time.” The city received an additional five years added to the 12 in the order to implement changes. Because almost six years have passed, that means the city has 11 years to complete the improvements, said Paul Calamita, with Richmond, Va.-based AquaLaw, the firm hired by the city to help with legal relief.

Along with the five year extension, the EPA and ADEQ agreed to provide additional flexibility with certain interim program deadlines that will allow Fort Smith the ability to stretch out expensive system improvements over the whole of the remaining program implementation schedule, according to the update to the decree provided by the city in 2020.

An attempt by the city to remove the category four and five lines, which according to McAvoy may not need to be repaired for many years, was blocked by U.S. District Judge P.K. Holmes III, Calamita said. He believes that decision is appealable because of legal issues. If that decision were to be reversed on appeal, it could save the city between $100 million and $150 million.

City Administrator Carl Geffken said the appeal was filed. The court had until July 26 to file an answer. They requested an extension, which was granted, but the deadline for their answer is Wednesday (Aug. 25).

There is also the chance agencies involved will grant some reprieve due to the COVID pandemic and the historic flooding of the Arkansas River in May 2019 that caused significant damage to some of the city’s sewer system. The city estimates they will receive an additional three extra years for each of those events. Since the pandemic is still ongoing and the city still has not received Federal Emergency Management Agency (FEMA) funds due them, Morton said he believes the city should get four additional years to finish consent agenda work for each event. That would give the city 17-19 years from 2021 to complete the needed repairs and replacements, which will spread the cost out more, Morton said

“It’s not all gloom and doom here. It’s not good, but there are some positives, especially if we can convince Arkansas that we are really trying,” Morton said.

He said the next step the city needs to do is to provide the board with an assessment of the cash flow moving out of utilities and how much the city has available in every avenue, so the directors can see how much is available and what is needed. Then better plans can be made, he said.