Morton: Consent decree tax plan ‘reasonable,’ with ‘no plan B’

The Fort Smith Board of Directors, bond underwriters, and federal officials agree that a sales tax reallocation plan to pay for required consent decree work is a “reasonable” and responsible plan. Now the question goes to Fort Smith voters.

A May 13 special sales tax election for the City of Fort Smith will include ballot items to change the city’s sales tax uses to pay for $385 million in bonds to meet a federal mandate that requires the city to fix and maintain the city’s sewer system.

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 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, said Josh Buchfink, public relations manager for the City of Fort Smith.

A POSSIBLE EXTENSION
“Even the government said this is a reasonable plan. It’s the best plan we have seen from Fort Smith,” said former City Director Lavon Morton, who presented information on the sales tax issue during a public forum Thursday (April 17) at the Fort Smith Public Library.

Morton said representatives from the EPA and DOJ told city officials in December, after having looked at the proposal for many weeks, the plan looked feasible and they would recommend to their bosses that if voters approve the measure that the city be given 10 more years to fulfill its consent decree requirements. That would allow the city until 2036 to complete the necessary improvements, Morton said.

Bond underwriters also have told the city the plan is feasible, Morton said.

“I will tell you no one will buy any bonds from Fort Smith unless we have the sales tax to back it up,” he said.

A positive vote on the sale tax initiatives will allow the city to keep sewer rates as low as possible, Morton said.

‘NO PLAN B’
The Fort Smith board approved a 3.5% sewer rate increase that begins in June. The ordinance included 3.5% increases each year through 2030. Morton said the financial plan presented to the DOJ is continue that 3.5% increase each year through 2036, through the end of the consent decree.

“If the votes fail, the city has to come up with $12 million more than what is generated under the existing plan. That would mean a 40% rate increase would need to happen right now,” Morton said.

A 40% increase would raise rates on 5ccf users by $17 month and $34 a month on 10ccf users, he said.

Some attending Thursday’s meeting were concerned about money that will be taken from the city’s street’s program with the proposed plan. Under the proposed plan, it is estimated the city will still collect $18.4 million a year for streets, bridges and drainage, Morton said. The average collection in the past is approximately $19.6 million, he said.

“But as the economy improves, and there is a lot good going on, there will be an increase in commerce and an increase in sales tax,” Morton said. “There is no Plan B. I don’t know what the plan will be if this fails. … The best plan is to pass this, and then hold the city accountable for this.”

The city has two more community meetings on the sales tax ballot scheduled:

• 6 p.m. April 28 in the large conference room at Arkansas Colleges of Health Education, 7000 Chad Colley Blvd.
• 6 p.m. May 5 at the Fort Smith Senior Activity Center, 2700 Cavanaugh Road