Fort Smith Board set to vote on broad water rate increase

Proposed broad water rate increases are once again on the Fort Smith Board of Directors agenda – this time at a special meeting called for Thursday (July 11). The increase proposes a “holistic look” that would bring higher rates to all types of users.

The board has postponed making a decision on a rate increase that Utilities Director Lance calls necessary since early in the year, wanting more information and making sure citizens have details on the proposed new rates.

After a water rate study presentation by David Naumann, Burns & McDonnell April 9, an ordinance calling for the first two years of water rate increases was placed on the agenda for the April 16 board meeting. The ordinance was tabled at that meeting and placed on the agenda for the May 21 meeting. The ordinance was again tabled at that meeting in order for there to be more public meetings on the subject, which were held May 30 and June 1.

“The water rate increases for the first year are needed to cover both operating cost and debt service ratios needed to comply with the bond covenants,” McAvoy said.

According to a memo on the plan from McAvoy, proposed changes to the rate structure include:
• Taking the residential rate structure from three tiers to four tiers, and consolidating the industrial rate from two tiers to one tier;
• Establishing rates for contract water users north and south of the Arkansas River; and,
• Establishing a surcharge of 1.5 times the normal rate for retail customers outside the city limits.

For a customer using 3ccf of water in a month, which is what the majority of customers billed use, rates would go up about $2 a month beginning Aug. 1. The original plan tabled in April had the new rates beginning July 1.

A water bill for 3ccf of use is $11.81, and with fees and taxes added it’s $13.37. Proposed rate increases would bring that bill to $13.98 or $15.75 with fees and taxes, according to city information. A second round of increases, proposed to start Jan. 1, would increase bills to $19.05 or $21.30 with fees and taxes.

If the proposed rate increase were to be implemented, it will double water revenue coming into the utility department, Geffken said.

“The largest number of bills we send out are for 3 ccf use. Those bills (after the second increase) would be paying $85 more a year. That will give us sufficient funds to do all the work I just outlined (and) also allow us to raise rates on our contract users. … It would double the revenue coming in. We have many projects that need completed in a short period of time,” Geffken said during a May 20 citizen information session.

Customers would have the new water rates added to their monthly utility bill, which also includes sewer and solid waste charges.

The city’s water rate revenue does not fund the ongoing federal consent decree that since 2014 has mandated significant improvements to the city’s sewer system. In May 2022, Fort Smith voters passed a 0.75% sales tax – to be in place between Jan. 1, 2023 and 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.

City officials estimated in late 2023 that consent decree work will cost $428.068 million over the next 12 years. Over the past six years, the city has spent approximately $127 million in capital costs for required improvements.

It has been suggested that contract users, who account for about 44% of the water use for the city, should have rates raised before Fort Smith residential customers have to pay for the needed expenses. But by state law, the city cannot raise rates on contract customers without raising rates on all customers.