Former Fort Smith director pitches sales tax plan to fund consent decree work

Voters in Fort Smith will on May 13 have the chance for the first time to adequately fund federally-mandated sewer system work and allow city leaders to “move on” to address other city issues, according to former City Director Lavon Morton.

Morton spoke Monday (April 28) to around 30 people gathered at a lecture hall in the Arkansas Colleges of Health Education to hear a presentation about a sales tax plan to raise $385 million in bonds to address the mandated sewer system work. Attending the presentation were City Directors Christina Catsavis, George Catsavis, Lee Kemp, and Neal Martin.

After decades of failing to maintain water and sewer infrastructure to federal standards, the city entered into a consent decree with the U.S. Environmental Protection Agency (EPA) and U.S. Department of Justice (DOJ) in late 2014. The consent decree, which began in January 2015, required the city to make an estimated $480 million worth of sewer upgrades in 12 years. That amount is now estimated to be as high as $800 million.

THE TAX PLAN
The Fort Smith Board of Directors on Feb. 21 approved the following tax package for the May 13 ballot:
• Reauthorizing a 0.75% sales tax first approved by voters in 2022 to pay for consent decree work and to pay bonds, with 0.125% used for the Fort Smith Police Department, and
• Renewing the 1% street tax but reallocating 0.625% for streets, bridges and drainage work, with the remainder of the tax to fund consent decree work and bonds.

The May 13 ballot also will include a third question asking residents to vote for or against issuing the bonds. If the measures pass, the city will issue bonds to fund up to $360 million in capital improvement projects. Debt would be payable over 30 years, though that time could be reduced if sales tax revenue grows, according to the city. If approved by voters, taxes would be in place until 2059.

All three measures on the ballot must pass for the city to issue the proposed $385 million in bonds, which would fund up to $360 million in sewer capital improvement projects

“What we’re trying to do is use the sales tax to fund the consent decree rather than just having to raise rates. The estimate is that 40% of the sales tax in Fort Smith that is collected is paid by people who don’t live in Fort Smith,” Morton said in an interview prior to his Monday presentation. “We’re trying to do this without any tax increase and without any rate increase other than the small 3.5% increase that the board passed in March.”

THE PITCH
Morton’s presentation pitch included the following points.
• The overall plan will result in an estimated $644 million in consent decree work, with about $360 million coming from the sales tax reallocation facing voters on May 13, and the refinancing of existing bonds in 2030 that will provide the remainder needed. The bonds to be refinanced will not cost the city more, because revenue is already in place supporting those bonds.

• The 1% street tax, which has been popular with Fort Smith voters, will be reduced, but not as much as some may think, according to Morton. The average annual street tax revenue since 2014 has averaged $19.61 million. The 5/8th cent from the 2024 street tax revenue of $29.5 million would have been $18.437 million, which is close to the average since 2014.

“That’s just a little over $1 million short compared to the average,” Morton said.

• Without the sales tax plan, the city may be forced to raise sewer rates by as much as 40%, which would move the bill for 8 CCF – the average for a Fort Smith residential customer – from around $68 a month to $98 a month.

“We really have just two ways to raise money for that (consent decree work); we can go with this sales tax plan, or we can raise rates. … That’s really the bottom line that the voter has to consider,” Morton told Talk Business & Politics.

‘AGGRESSIVE PLAN’
Morton praised the Fort Smith board for presenting to voters “an aggressive plan” to address the federally-mandated consent decree work and avoid a situation in which federal officials decide on sewer system rates without citizen input.

“I give this board credit … for agreeing to put this plan on the ballot so the voters have a chance to approve a plan that actually works, and for the fist time get the consent decree” out of the news every month “and focus on all the good things that are going on in Fort Smith,” Morton said.

Director Christina Catsavis said during the presentation that the board and city administration worked 18 months to develop the plan before sending it to voters.

Morton will present the sales tax plan at one more community meeting, which is set for 6 p.m., May 5, at the Fort Smith Senior Activity Center at 2700 Cavanaugh Road. As of this posting, no organized group has come forward to oppose the sales tax plan.