Fort Smith board reviews first quarter finances, fund balances

The city of Fort Smith’s finances are on good footing to begin 2026, with general fund revenue up 2.13% and general fund expenses down 17.1%, according to figures provided by the city. The city’s three other primary operating funds are also trending in the right directions based on the 2026 budget plan.

Andy Richards, the city’s chief financial officer, presented the first quarter 2026 numbers to the Fort Smith Board of Directors during Tuesday’s (May 12) study session.

“Overall, I think the budgetary session is doing its job,” Richards told the board. “At this point I feel pretty good about where we’re at.”

After several months of budget talks between the board and city staff, the board in December 2025 approved a 2026 budget with $16.904 million in reductions scattered through the city’s four operating funds – city’s general fund, water and sewer fund, solid waste fund, and streets and maintenance fund. The largest part of the budget cut came from removing 71 vacant jobs. The job cuts are estimated to reduce the budget by $4.226 million.

The city’s general fund pays for key services such as police, fire, and administrative management.

FUND REPORTS
Following are key details from the four operating funds.
General Fund (January-March periods in each year)
Revenue
2026: $9.118 million
2025: $8.927 million

Expenses
2026: $10.363 million
2025: $12.497 million

Fund Balance
2026: $24.451 million (37.6% reserve contingency)
2025: $27.016 million (33.8% reserve contingency)

Street Maintenance Fund (January-March periods in each year)
Revenue
2026: $2.005 million
2025: $2.079 million

Expenses
2026: $2.094 million
2025: $2.079 million

Fund Balance
2026: $8.248 million (68.8% reserve contingency)
2025: $8.383 million (62.7% reserve contingency)

Water and Sewer Operating Fund (January-March periods in each year)
Revenue
2026: $17.797 million
2025: $15.8 million

Expenses
2026: $14.437 million
2025: $13.253 million

Working Capital Balance
2026: $33.377 million (46.1% reserve contingency)
2025: $25.037 million (32.3% reserve contingency)

Solid Waste (Sanitation) Operating Fund (January-March periods in each year)
Revenue
2026: $6.501 million
2025: $5.304 million

Expenses
2026: $5.016 million
2025: $5.021 million

Working Capital Balance
2026: $12.71 million (48% reserve contingency)
2025: $12.196 million (46.2% reserve contingency)

BOARD DISCUSSION
There was discussion among board members about how much of a contingency reserve – fund balance – should be held in each operating fund. Director Christina Catsavis suggested the board consider using some reserves, where allowed, to reduce debt. Director Neal Martin said the board might also using reserves to “offset” higher water and sewer rates with a rebate to citizens.

Richards and Acting City Administrator Jeff Dingman suggested the board may consider a sinking fund for the general fund budget that would allow the city to better afford future capital needs. The city’s solid waste operating fund, for example, has a sinking fund that supports capital outlays to keep the landfill and equipment updated and maintained in a timely manner.

“Every department has needs,” Richards said. “We’ve all had to kind of bring it back, you know, we’ve had to scrounge for resources. No one is sitting flush with resources at this point.”

In response to questions about the city’s general fund reserve being too much, Richards said a general fund reserve of more than 30% would cover just four months of city expenses.

“Balancing the budget structurally is one thing, which I think was a great move,” Richards said of the board’s 2026 budget plan. “But sitting on 35% reserve is not an excess.”

In a memo to the board, Richards noted “best practices” advice form the Government Finance Officers Association about fund balance levels.

“If a contingency reserve exceeds 80 percent of expenditures for two consecutive years, Board could consider a Fund Balance Utilization Plan during the subsequent budget cycle which could include allocating excess funds to one-time purposes such as capital improvements, deferred maintenance, equipment replacement, or debt reduction,” Richards noted in the memo.