Highlights of the Fort Smith Board of Directors Meeting 3/18/25

At the Fort Smith Board of Directors meeting held 3-18-25 with Director Christina Catsavis leaving at 45 minutes into the hour and 45 minute long meeting, the Board voted against reallocating funding so that the Mayor, Board of Directors, City Administration, City Clerk, and Citizen and City Services Department would all be funded from only the General Fund (instead of also being funded using allocations from the Streets Maintenance Fund, Water and Sewer Operating Fund, and Solid Waste Fund). This reallocation was suggested by Director Settle at the 1-28-25 meeting. The reallocation was proposed primarily to allow the funds being allocated from the Water and Sewer Operating Fund for those five other budgets to remain in the Water and Sewer Operating Fund.

Based on the 2025 Budget, the reallocation would cause the General Fund balance to fall to 11.2%, well beneath the 20% contingency reserve threshold required by City policy at which measures must be taken including capital projects must halt, followed by budget cuts, and even lay offs if required to get back up to the 20% threshold.

While the reallocation would be an improvement toward the debt service coverage ratio that is currently a concern for the Utilities Department, it still would not be enough to achieve the bond rate covenant requirement of 110% debt service to coverage. The debt service coverage ratio is on track to hit 105-107% without making any new changes whatsoever.

Chief Financial Officer Richards advised against the reallocation. He reminded that “these allocations are permanent” not something that is adjusted every year. He expressed concerns that reallocation “makes you look like you’re manipulating the financials” to credit analysts. He expressed concerns about the added burden on the General Fund. He suggests instead making cuts to the 2025 budget or placing spending holds. He also suggested possibly shifting the budget responsibility for the credit card fees billed to the City from 2024 through March 1, 2025 (that now are being paid by the customers instead) that are currently accounted for out of the Water and Sewer fund so that they are accounted for as coming out of the General Fund instead. That change would result in about a million dollars not being to charged to the water fund.

Director Christina Catsavis agreed with Richards’s suggestion on the credit card fees. She also suggested potentially changing to a system of performance based zero-based budgeting throughout the entire City budget. Richards said that could “potentially” work and that priority-based budgeting is also something that should be considered.

Former Director and CPA Lavon Morton spoke against the reallocation. He also called the proposed shift for the credit card fees to being a General Fund expense “fine” based on his experience as a CPA.

Kim Fodge spoke and advocated for keeping “as much money in the water and sewer department as possible.” She expressed concerns that cuts alone would be enough to meet the debt service ratio and expressed concerns about asking the departments to all make budget cuts now at 4 months into the year. She also spoke against water rate increases.

Krystal Cadelli spoke in support of the reallocation. She also advocated for taking the $4.2 million for the waterslides from the Parks budget from the sales tax for parks capital improvement projects and shifting that to the General Fund. She expressed support for leaving the responsibility for credit card fees with the water and sewer department instead of shifting that responsibility to the general fund. She mentioned that ongoing auditing missed inappropriate spending by the Mayor.

Chris Cadelli spoke against the water slides and advocated for that expense to come from the Parks budget instead of the General Fund but acknowledged that the slide expense issue is probably “irreversible at this point.”

Director Settle said of the reallocation “I understand the burden it’s gonna do” to the general fund, but voiced his support because of the help it would be for the Streets, Water and Sewer, and Solid Waste funds. He said that other cities fund their government services out of their general funds. He said that the reallocation would be another way to get funds back to the water department without a rate increase.

Director Martin expressed his support for the reallocation as a way to avoid or minimize water rate increases. He called it “something that would benefit us.” He called the idea of making the water slide purchase come out of Parks instead of the general fund a “good idea.” He called the reallocation “step one in a multi-phase approach.”

Director Rego said “I philosophically do not support a change of this nature.” He mentioned not having previously ever seen the Chief Financial Officer send a memo or speak out not recommending an action in the way he had on the reallocation issue. Rego mentioned that the Board, Administration, City Clerk, and Mayor do have leadership duties for the water, streets, and solid waste departments to justify allocations coming from those departments. He said he doesn’t “believe that a burden should be shifted around” “from one fund to another” but advocated for spending cuts instead.

Director George Catsavis called the reallocation “just shifting money around” “unless we increase money somehow.” He asked if there is waste in City government. Richards said that he doesn’t know about significant waste but that there are “always ways to be more efficient.” Director George Catsavis suggested having an outside CPA be given access to all of the City computers and see what they can come up with. Director Rego said that there are no “secret figures” an outside CPA would need access to as all of the budget documents are out in the open. Director George Catsavis mentioned some potential areas for cuts including trips and magazine subscriptions. He said of the reallocation “I don’t think this is gonna solve a thing.”

Director Kemp suggested possibly just reallocating Citizen and City Services to coming solely from the General Fund. Richards said that the Department’s total budget of $250,000 is “not necessarily consequential” to the General Fund or to the other funds. Director Kemp asked if the shifting of the responsibility for the charge for the credit card funds to the general fund instead of water would get the water department up to the 110% threshold for the bond covenants. Richards said that it would possibly or at least would be very close to it. Director Kemp suggested phasing in reallocation starting with just the Citizen and City Services Department first and then possibly the others later.

Director Good said that he “can’t see voting any other way than” the recommendations of the Chief Financial Officer.

Mayor McGill encouraged the Board to “take the advice of our financial people” on the issue.

The Board voted against the reallocation with only Director Settle and Director Martin voting for the reallocation. All of the current allocations will all remain in place.

The Board voted unanimously without discussion to contract with MAHG for $251,064 for architecture services for the renovation of the existing building at 4501 Burrough Road to turn it into a consolidated 911 call center. All of the funds needed for the design and construction will be from E911 Funds transferred from the County to the City and the City will own and manage the facility.

The Board voted unanimously to contract with TLS Group for $1,812,317 for upgrading 19 traffic signals and Rogers and 6 on Phoenix from old video detection systems to new more reliable radar detection systems to help traffic flow.

Andy Posterick spoke in support of the signal upgrades on Rogers. He said that the most value is created by streets that are highly mobile (allowing very efficient travel from point A to Point B like Riverfront Drive) or highly accessible (like neighborhood “alphabet lettered” streets). He said that signal upgrades will make Rogers more mobile. He also mentioned that the upgrades are highly compatible with the changes that ARDOT has planned for Rogers.

Director Settle asked with Rogers being a State Highway if ARDOT had been asked to split the cost of the signal upgrades on Rogers. Engineering Director Snodgrass said that while it is a State road, ARDOT does not maintain signals, those are the responsibility of the City or County.

Director Martin asked if the old signals that used video detection only were used for the signals and not monitored for anything else. Streets Director Meeker said that they were only used for the detection for changing the signals.

During the Executive Session portion of the meeting, David Boyd and Wendall Sampson were appointed to the Civil Service Commission. Rex Terry was reappointed to the Housing Authority. Richard Hainlen, Daniel Fudge, Ashley Gerhardson, Keley Simpson, Jennifer Terry, and Rocky Walker were reappointed and Marcus Day and Amanda Sanchez were appointed to the Future Fort Smith Committee. Though there were two applicants for the vacancy, no appointment was made to the Transit Advisory Commission to give the Board time for further consultation.