Fort Smith Board to revisit bond underwriting vote, discuss budget cuts

It’s likely to be another intense Fort Smith Board of Directors meeting Tuesday (Aug. 11). The Board will revisit a vote on who handles millions of dollars of bond underwriting for the city, and will again discuss budget cutting ideas that include a reduction in 401(a) retirement plan contributions and salary cuts for higher-paid city employees.

The Board will hold a special voting meeting prior to its regular noon Tuesday study session. The only item on the special meeting agenda is a resolution to split underwriting allocation on upcoming bond sales with 65% going to Little Rock-based Stephens Inc. and 35% to Raymond James Financial. The resolution also calls for Stephens to manage the bond sale, a role called the “Book Running Manager.”

On Aug. 4 the Board voted 4-3 to a 50/50 split on allocation and to alternate book running between the two financial companies.

However, Director George Catsavis, who voted for the 50/50 split, initiated a call for the special meeting and proposed the 65/35 split in favor of Stephens, with Stephens also handling the book running job. Catsavis told the Times Record he was was confused on the vote thought they were voting on the second resolution that gave the split and book running to Stephens.

City Director Keith Lau voted against the 50/50 split and hopes a new vote will return the bulk of the duties back to Stephens. He said there has not been a problem with how the bond process has been handled, and said the Board has other things on which to focus.

“There are plenty of things that are broke. We should spend our time looking at the things that are broke and try to fix them. I don’t see what is broke about that (Stephens managing the bond sales),” Lau said Monday.

At stake could be millions in revenue for bond traders as Fort Smith works to meet a $480 million order prescribed in an agreement with the U.S. Department of Justice and U.S. Environmental Protection Agency. The estimated $480 million includes $375 million capital costs and $104 million in additional operations and maintenance expenses. While the proposed settlement between the city and the DOJ is complex, the primary purpose of action is to increase capacity to eliminate wet weather overflows and fix defects to eliminate dry weather overflows. The agreement gives the city 12 years to invest the needed funds and do the work to bring the sewer system into compliance.

During Tuesday’s study session, the Board is scheduled to discuss four items related to finding money to shore up funding for the police and fire pension funding. The items include general fund budget reductions, reducing contributions to the employee 401(a) retirement plan, enacting business license fees and seeking voter approval of a prepared food tax to replace the almost $800,000 that comes out of the general fund to support operations at the Fort Smith Convention Center. A July 14 Board study session focused on budget cuts attracted a large crowd of city employees.

At issue is the ongoing struggle by the Board and city staff to plug an anticipated 2015 budget year shortfall of $899,273 in the city’s police and fire (LOPFI) contribution fund. The estimates show the fund balance at $5.731 million by Dec. 31, but reaching a deficit of $419,042 by 2021.

The Board has voted to return benefits under the pension plan back to the levels in place in 2004. That action saves the city an estimated $477,000 in this fiscal year and up to $516,000 by year 2026. But based on estimates, additional spending reductions and revenue increases totaling approximately $2.1 million annually are needed to keep the LOPFI contribution fund solvent beyond 2030.

An Aug. 7 memo from Deputy Finance Director Jennifer Walker to Acting City Administrator Jeff Dingman noted that cutting personnel costs to a 1% margin, removing most “operating cushions” and other personnel budget reductions could free up $834,000 for the general fund. Walker’s cuts did not include salary reductions or contribution changes to the 401(a) retirement plan.

Walker’s memo also projects an increase of $315,000 from the city’s portion of countywide sales tax revenue for the remainder of 2015. Combined with the proposed personnel changes, the net effect is a $1.148 million pool of money that could address the pension issue.

The Board meets at noon in the Community Room of the Fort Smith Public Library.