Fort Smith Mayor vetoes Board action changing city budgeting method

Fort Smith Mayor Sandy Sanders has vetoed an ordinance approved Tuesday (May 19)  by the Fort Smith Board of Directors that changes how the city manages a more than $42 million general fund budget.

Several members of the Fort Smith Board have during the past few months battled Fort Smith Mayor Sandy Sanders and city staff over the city’s budgeting method. A majority of the seven-member Board preferred a “structural” method they say presents a real world financial picture. The city now uses a “cyclical” method that factors in fund balances from previous years.

City Finance Director Kara Bushkuhl has noted in a memo to the Board that advantages of a cyclical budget include familiarity, conservative revenue estimates, a multi-year perspective that provides better future financial planning, spending for actual needs, and the avoidance of negative changes in service levels because of changes in available funding. Her note did say a disadvantage of this budgeting is the possibility of “spending above current year revenues.”

The Board voted 4-2 to change the budget process, with Directors André Good and Don Hutchings voting against the plan. Director George Catsavis was not at the Tuesday Board meeting.

On Thursday Sanders sent a notice to Board members that he had vetoed the ordinance. Overturning a veto requires five votes, which makes Catsavis’ decision a potential swing vote. The Mayor’s office nor the City Administrator’s office notified The City Wire of the veto. News of the veto was forwarded to The City Wire by Director Keith Lau.

Sanders provided this statement in his veto notice: “The current process has a long history of providing a conservative and responsible balanced budget. Over the last 12 years the general fund year end balance has ranged from $5.2 million to $10.1 million. In three of the past four years the percent of the actual balance to operating expenditures has met or exceeded the 15 percent goal…the fourth year was at 14 percent. The current process provides the flexibility to reduce spending if income levels fall short of projections, especially during economic downturns, while still providing essential services. The other changes made within this resolution are positive and should be implemented in the future as part of the budget process.

“Accordingly, I have vetoed this resolution.”

City Director and Vice Mayor Kevin Settle said he was surprised by Sanders’ objection to the ordinance, “especially after all the work we put in and the hours and the study session after the Spring Break holiday and as a group worked through this and said, ‘This is the way we need to go.”

Settle told The City Wire that the ordinance is “the right way” to efficiently manage city funds because it allows the Board and city staff “get ahead of the curve” and monitor the budget throughout the year instead of learning at the end of the year if spending came in above or below revenue.

Director Keith Lau, one of the most vocal Directors pushing for the change, said the structural process also “makes the department heads more accountable” when the budget is being monitored in real time. He said that having a better picture of available city funds would allow the Board to better address potential liabilities like the looming shortfall in the pension program for fire and police employees.

“I can’t effectively do my job without more accurate data,” Lau said Thursday.

He also said the old way of budgeting depended on fund reserves from previous years to address budget deficits. He said the city’s fund balance in 2006 was $10.1 million, but ended 2014 at $6.7 million.

“We keep on that trend, on that path, and we’ll run out of money,” he said.