Proposed budget allocation changes not kosher with all Fort Smith directors
by January 29, 2025 6:07 pm 660 views
The Fort Smith Board of Directors have asked city administration to take another look at budget allocations in hopes of taking less money from city departments – especially the utilities department – to pay administrative costs.
Finance Director Andy Richards presented a draft cost allocation plan prepared by Landmark PLC during the board’s Tuesday (Jan. 28) study session. The Landmark study was conducted in 2024.
The purpose of the cost allocation plan is to provide a framework methodology for direct and indirect cost allocations for financial reporting and budgeting purposes to ensure costs benefiting multiple departments and funds are distributed fairly among each source based on the benefits received, Richards said.
The plan presented Tuesday included the development of updated funding allocation percentages of each program, which affect the city’s distribution of appropriations in the city’s budget and the allocation of costs, primarily general and administrative among the city’s departments and funds.
For example, the study found that in order to equitably distribute costs for such items as the mayor, city administrator and city attorney expenses in 2025, the city needs to increase expenses paid from the city’s general fund by $1.505 million, while reducing expenses paid by the street sales tax fund by $552,837, the street maintenance fund by $803,620 and sanitation by $362,454. However, the study showed water and sewer allocation would need to go up by $213,970.
“I thought we would get some relief to help the water and sewer fund by these new allocations, but I was surprised that wasn’t the case,” Richards said.
While Richards recommended implementing the new allocations suggested by the study, the board wanted more options that moved much more of the expense to the city’s general fund and kept monies in the department funds to pay for departmental expenses.
“The mayor, board, city administrator, city attorney and sustainability should strictly come out of the general fund,” said Director Kevin Settle.
Directors Christina Catsavis and Neal Martin agreed that more needs to come out of the general fund.
Directors agreed that keeping money in the water and sewer fund to pay those expenses rather than using it for allocations shows a commitment to the priorities to the consent decree and the 48-inch water transmission line, and focusing money to debt service. Settle said if the city were to fund the five areas he noted through the general fund, it would take $2.3 million more from the general fund. Of that, $1.2 million would stay in water and sewer.
Director Lee Kemp agreed that more allocations need to come out of the general fund, but cautioned about taking too much out of the fund. If the city were to take the $2.3 million out of the general fund as Settle suggested, it would leave just $8.4 million in the general fund’s reserve balance, which drops that reserve balance under 20%.
“We’ve got to work this problem. Going under the 20% or even going under this 22.4% feels like to me buzzers are going off, and I’m hearing ‘redline, redline.’ … We’re making cuts and we’re throwing good money after bad,” Kemp said. “It’s time to make some tough decisions.”
Interim City Administrator Jeff Dingman reminded the board that the point of the allocations is to justify and to right size those costs.
“We should totally review those justifications, but I think overall, we won’t see a significant difference than what we see here,” Dingman said.
Martin said the city needs to be aggressive in terms of allocations and he will not vote for the study’s suggested plan to be implemented if it is presented to the board as it is. Others on the board agreed more work is needed on the allocation method.