Fort Smith board takes partial action on sales tax advisory committee

The Fort Smith Board of Directors approved a resolution Tuesday night (March 1) that commits them to creating a sales tax advisory committee for the city, while not actually creating a sales tax advisory committee.

Directors approved two ordinances Feb. 22 that will allows voters in the city the opportunity to vote on the continuation of a 1% sales tax in a special election during the Arkansas state primary election May 24.

The first ordinance approved by the board will renew a 0.25% sales tax that is evenly allocated between the city’s fire department and city’s parks and recreation department. Directors voted 5-2 to extend the tax eight years, with collections from Sept. 30, 2022, to Sept. 20, 2030. The 0.25% sales tax that is evenly allocated between the two departments is set to expire on Sept. 30. That tax generated $5.7 million in 2020.

The second ordinance will extend a 0.75% sales tax from Jan. 1, 2023, to Dec. 31, 2030, with 83.3% of the revenue going to federal consent decree work on the city’s water and sewer system, and 16.7% directed to the city’s police department. The 0.75% sales tax was approved to pay the debt incurred for water and sewer projects and those bonds will be paid in full during the third quarter of 2022. This means the sales tax will end on Dec. 31.

The board informally agreed during a study session Feb. 21 to form a sales tax advisory committee made up of Fort Smith citizens who would review sales tax revenues and the city’s spending of those funds. The board also informally agreed during the study session that if the 0.75% sales tax is approved by the voters in May, that there will be a three year freeze on sewer rates and if future boards opt to raise sewer rates any more than 3.5% after that three years, the sales tax would cease.

The resolution, which was passed unanimously Tuesday night, states that “in the interest of transparency related to the use of proceeds from such sales and use taxes, the City’s Board of Directors wishes to state its intention to formally create a Sales Tax Advisory Committee of Fort Smith residents to regularly review revenues and expenditures related to sales taxes collected by the City of Fort Smith.” It further states that the board intends to consider an ordinance creating the committee, its makeup, authorities and responsibilities on or before June 21.

City Administrator Carl Geffken said the resolution submitted Tuesday rather than an ordinance was in order to allow the board the chance to discuss the ordinance at an upcoming study session where they could get citizen input.

“It will allow us to determine what the board wants and what the residents want,” Geffken said.

Fort Smith Attorney Joey McCutchen, representing Citizens Against Unfair Taxes, addressed the board questioning the timing of when the ordinance will be passed in connection to when citizens would go to the polls. He said while the study session to get citizens input on the advisory committee sounds good, the ordinance needs to be passed well before the election.

“The citizens need details now. We need something in writing now. We come back to the trust issue. … I would prefer an ordinance right now that lines out who will serve on the committee, the breadth of the committee, the scope of the committee, the duties of the committee and the operations of the committee. Otherwise, at least the group I represent still has questions about whether this tax should be voted for or against,” McCutchen said.

He also said the group he represents still has questions about the sewer rate freeze that was not on the agenda Tuesday night.

“We need details on that. The people need details now, not a week before the election and certainly not a month after the election … so we know exactly what we are voting on,” McCutchen said.

Director Kevin Settle asked that the study session on the advisory committee be included in one of the next two upcoming study sessions and the ordinance be included on the agenda for the April 5 board meeting. Other board members agreed with that timeline.

“Regarding the rate cap and rate freeze, that’s in the enabling ordinance. … In the state law … it says the ballot is prescribed on what language it can have. By putting it in the enabling ordinance, then if the board goes against that enabling ordinance, it would open up the city to liability to say, ‘look you passed the ordinance and in that ordinance where you approved the sales tax, you said you would freeze the rates for three years and not increase the rates by more than 3.5% through the end of the sales tax.’ So it’s in that enabling ordinance when the ordinance had its vote,” Geffken said.

Director Lavon Morton asked for clarification that the rate freeze and increase cap are already in the city ordinance that the board has approved. Geffken said it was.

Section 9 of the ordinance passed Feb. 22, states that if the voters approve the 0.75% sales and use tax “the Board of Directors commits to freeze sewer rates at existing levels commencing June 1, 2022, so long as the city is meeting its rate covenant with holders of the City’s bonds secured by water and sewer revenues,” according to the ordinance included with the board’s agenda on the city’s website.

The minutes from the Feb. 22 meeting that would include the actual passed ordinance, which included amendments regarding the length of time the tax would be collected, are not yet posted on the city’s website. While the board did pass amendments to the ordinances regarding the length of time they would be collected, there was no discussion Feb. 22 on the rate freeze or the increase caps. That discussion was held at the Feb. 21 study session where the board’s preferences were noted.