Fort Smith Board faces many options on water fee increases, timelines

The Fort Smith Board of Directors were given lots to consider – including a hoped for change to state law – during two study sessions this week about what residents might or might not need to pay on their water bill.

At the regular board study session Tuesday (Feb.14) the board chose to not consider a water rate study until the end of April because of Act 605, which was passed in the 2019 Arkansas General Session. Then at a special called study session Thursday (Feb. 16), the board agreed that discussion of potential changes in water fees needed to be spread out, split up and include those whom the fees will impact the most.

On Aug. 16, 2022, the board unanimously passed a resolution halting the bidding of any water project that might require a water rate study to be performed under Act 605, and to halt any water rate study until such time as the Board of Directors approved the study to move forward. Act 605 requires Fort Smith to prepare and submit a water rate study to the Arkansas Natural Resources Commission (ANRC) on or before June 30, 2026. It also requires the city to adopt the rates as submitted by the water rate study in a period of one to two years dependent on the total rate increase as a percentage. If the rate increase is less than or equal to 50%, the rates are to be adopted within one year, whereas a rate increase greater than 50% may be spread out over two years.

There is talk in the Arkansas Legislature to amend or repeal Act 605. So while Utilities Director Lance McAvoy brought up the need for a water rate study because of planned projects, the board agreed to put off any discussion of a water rate study until the end of April, after the regular legislative session ends.

The last water rate study was completed in 2010 and the rates adopted in 2011. The rates adopted at that time were to meet the needs based on the study conducted in 2010. McAvoy said a water rate study should be conducted once every five years to account for growth, aging infrastructure, inflation, and other factors.

“Since the last study, the City has entered into a Consent Decree, survived the historic 2019 Flood and global pandemic, and now faces record inflation and supply chain challenges. The City is also moving towards larger growth and demand for new infrastructure to supply water and sewer services. The City has already seen industrial growth as many of the industries have expanded their facilities to remain in Fort Smith. ACHE is continuing to grow as more students and services are added. With the FMS mission coming to Fort Smith, housing will grow at even a faster rate. Water infrastructure will need to expand including the completion of the new 48-inch transmission line and increased production capabilities at the Lake Fort Smith Water Treatment Plant. This is a huge investment for the City that will also carry it forward for decades to come. All of this is on top of the aging infrastructure that needs to be replaced, maintained, or refurbished to continue to supply the current citizens with safe clean drinking water,” McAvoy said in a memo on the matter.

The proposed water rate study would provide rate increases for in-town customers, out-of-town customers, and contract water users. McAvoy said the majority of the issue that needs to be addressed is out-of-town users do not have rates that take into account the extra expense in getting water to them. He also said rates to towns who buy water from Fort Smith needs to be researched to make certain the rates are covering the burden on Fort Smith.

Thursday night, the board heard from McAvoy again. This time regarding water fees.

“In 2022 the City’s Internal Auditor brought several concerns and findings of fees that either didn’t exist, were not being collected, or had not been updated in several years. Although some of these fees did not exist due to the direction provided by past board of directors, both the city administrator and the water utilities management agreed that all fees should be reviewed. This review includes looking at current fee structures and addressing which ones should be increased or left the same, and what fees should be added to the fee schedule. Additionally, once the fee schedule is updated those fees will need to be collected in the appropriate manner,” McAvoy said in a memo.

A summary of fees given to the board showed an extreme jump in many fees. Deposits are suggested to go from $50 for all accounts – residential, residential renter, commercial and industrial – to $175 for residential, $225 for renters, $850 for commercial and $24,000 for industrial.

During discussions Thursday, McAvoy said the list of fees included in the packet was a list of all potential fees, what charges were in cities across the state, and potential suggestions
(“every possible fee”) for the board to consider. As Russ Bragg, senior vice president of supply chain at OK Foods, said, “This is like a Sears Roebuck catalog of what they could have.”

After all directors weighed in on their concerns – a fee for paper bills, high increase in deposit for industrial customers, and more, City Administrator Carl Geffken said his suggestions was that the list of potential fees be split into residential, commercial and industrial and then subcategories within those groups. Those could then be brought individually to the board during separate study sessions.

“The board can take as long as they want on this. If they need a year to look at all of these, six months, whatever it takes,” Geffken said.

Several homebuilders attended the meeting to express their concern over the proposed steep increases for builders, as well as industrial, commercial and residential customers.

“The city is proposing 200-300% utility cost fee increases on water taps, sewer taps …,” homebuilder Rocky Walker said before Thursday’s meeting. “So it’s going to hurt low-income, homeowners, small businesses, big businesses. They’ve done it to everybody. Inflation is 8%, it’s not 200 or 300%.”

Those attending were relieved of some of their concerns after hearing the director’s discussions, but still wanted the city to listen to their concerns before making changes to all the water department-associated fees.

Director Lavon Morton suggested the city staff meet with homebuilders and other residential, commercial and industrial stakeholders to see what could be fair.

“When you are considering the fees, which most of us agree there needs to be some correction and increase to some, I ask you to make sure the sum of all the parts do not outweigh the whole,” Bragg said. “Look at what would be a reasonable man’s standard.”