Fort Smith consent decree work could total $428 million in next 12 years

The Fort Smith Utility Department has prepared a consent decree capital improvement plan (CIP) calling for spending $428.068 million over a 12 year period in order to comply with a federal agreement to reduce sanitary sewer overflows.

“The Utility Department has developed the 12-year CIP as a planning tool to look at projects that are required for Consent Decree compliance. These projects range from large remedial measure projects, system capacity upgrades, and other required projects from the Consent Decree,” Water Utilities Director Lance McAvoy said in a memo explaining the CIP.

The Fort Smith Board of Directors is set to address the CIP in an upcoming board meeting.

McAvoy noted in a memo that although the department has submitted a 12-year CIP, the projects for 2024 are the only ones the department is seeking funding approval for in the coming year. He said it is important to note that some projects are multi-year projects and funding requested in 2024 may be for projects that extend to 2025 or later.

The CIP submitted calls for $26.432 million in projects in 2024. The consent decree-related projects for 2024 through 2035 will be funded from revenue set aside for the CIP and from the ⅝% sales tax voters approved in 2022.

In May 2022, Fort Smith voters passed 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 police department. Additional funds may come available from reimbursements from eligible projects through FEMA or other avenues, McAvoy said.

“Projects listed that may be approved by the Board of Directors for 2024 and that may not have funds available for implementation will be moved to future years accordingly,” McAvoy said, adding that moving projects back will have impacts on compliance and may result in stipulated penalties.

On Sept. 5, the BOD approved a resolution accepting consent decree stipulated penalties settlement with the U.S. Department of Justice (DOJ) and Environmental Protection Agency (EPA) of $800,000. In August 2022, the city received a formal demand from the DOJ on behalf of the EPA, for stipulated penalties in accordance with Section XII, Paragraph 115 of the 2015 Consent Decree. The request was for $2.5 million for penalty demand for hundreds of sanitary sewer overflows (SSOs) between January 2, 2015, and June 30, 2021; a handful of treatment violations of the City’s NPDES Permits for both P Street and Massard Water Reclamation Facilities; and the city’s failure to meet the deadline for completion of the 2015 Sanitary System Assessment remedial measures work under Section V of the consent decree, a memo on the regarding the resolution said.

The city entered into informal dispute resolution on Sept. 26, 2022, disputing the stipulated penalty demand included the stipulated penalties and the denial of several Force Majeure requests, which was in reference to the historic flooding of the Arkansas River in May 2019 and the COVID-19 pandemic.

On June 30, Fort Smith received an opinion letter from the DOJ that reduced the demand to roughly $2.342 million by addressing some of the disputed SSOs. On July 31, Fort Smith initiated formal dispute resolution. This city made a formal offer of $500,000 (21.253%) of the total to settle it all, City Administrator Carl Geffken said at the time the resolution was passed. The city and the DOJ agreed on a settlement of $800,000, which was slightly less than the stipulated penalty demand, which was $807,250, said City Administrator Carl Geffken at the time the resolution was passed.

Though the city has paid the settlement for the stipulated penalties, there are still issues involved with the consent decree that are outstanding. The city is still involved in negotiations for some relief in those.

“The settlement for the stipulated penalties really did remove the issues related to the past. Now we are focusing on the future,” Geffken said. “We want to work and are working with EPA, DOJ and ADEQ to say, what can we do to achieve the goals of the consent decree because we agree with the Clean Water Act.”

The goal now is to determine what the city can offer that is acceptable that achieves the goals of the consent decree knowing that the city needs additional time, he said.

“We are in technical discussion on a variety of things,” McAvoy said. “While those discussions are going on, it’s not like we’ve stopped and are not doing anything.”

The city has a “huge project” out for bid that will utilize revenues earned through the ⅝-cent sales tax so far. That project is expected to be over $10 million, McAvoy said.

“We have just completed a project on Midland Boulevard that removes 14 recurring sanitary sewer overflows (SSOs) that was done in house,” he said.

After years of failing to maintain water and sewer infrastructure to federal standards, the city entered into a federal consent decree with the EPA and 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.

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. If the city has to do what is demanded of the consent decree within the timeframe set to be in full compliance, it will cost the city well over $600 million in capital cost because of additional areas rated a four or five that have to be fixed within four years of detection and inflation, McAvoy has said.

On May 7, 2020, the EPA and the Arkansas Department of Environmental Quality (ADEQ) agreed that the city 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.

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.

The city now has until January 2032 to complete all consent agenda required improvements. Geffken said ideally the city can get that extended to 2042. As it stands, while it might be physically possible to complete all the necessary work before 2032, it would cost around $100 million to do so.

“It could be done if money were no object,” McAvoy said regarding completing the work by 2032. “But we would also have to have multiple teams from outside Fort Smith converge to do this.”

Geffken said the federal and state government is realistically listening to the city’s reasons for wanting additional time, and he is optimistic the city will get some additional time with requirements being met along the way.