Highlights of the Fort Smith Board of Directors Meeting 4/16/24

At the Fort Smith Board of Directors meeting held 4-16-24, the Board discussed changes to the water rates for the next 2 years. The changes were discussed at the 4-9-24 study session meeting. The proposed changes included rate increases, changing residential volume charges from a 3 tier to a 4 tier system, changing the commercial rate system back to one single commercial rate, charging separate rates for contract customers north and south of the Arkansas River, and charging retail customers outside of the city limits 1.5 times the regular Fort Smith rate. For the majority of residential users, the increase in the first year would be $5 per month or less. The rate increases for the first year are being proposed to generate enough revenue to cover the cost of the water department’s operating costs and debt service.

Fort Smith resident Drew Smith spoke. She said that it was “unconscionable” for the City to not be able to pay the water department operating costs. She spoke about how the rate increases could be more gradual if they had been implemented gradually since 15 years ago. She also expressed support for using debt to fund the large capital projects saying that “paid off at the front end is wiser.”

Fort Smith resident Russell Bragg expressed support for the rate increases but spoke about his concerns regarding water leaks. He challenged the City to present a plan in writing about how the leaks will be addressed. He said that volume billed is pretty stagnant and that the city has not attracted new high volume users and water production continues to increase. He asked “Where is that water going and why?” He said that the water loss is 10% higher than what we should be losing in the system.

Fort Smith resident Kristen Kitchens spoke and requested a report on progress for the consent decree sewer projects. She said that per the consent decree the City is not allowed to raise water rates more than 1.9% per year. Director Martin argued that that is not in the consent decree. Kitchens also mentioned that the water leaks are damaging the roads. She advocated prioritizing spending for consent decree sewer work over water spending.

Director Christina Catsavis mentioned that Fort Smith’s water loss in 2023 was 35%, more than double the national average. Utilities Director McAvoy said that in 2023 there was an 18 inch line that was over 100 years old that ruptured and took time to find a solution and a lot of water was lost in that incident. Also there was a 24 inch main that broke. The 23 miles of 100 year old transmission line from Lake Fort Smith into Van Buren has leaks that are fixed by driving wooden stakes into the holes and that it may have some leaks that haven’t been found yet. He also said that aging water meters are reading less of what is going through them every year. He said the water department fixed 180 leaks in January. There are 512 currently existing leaks. He said the City is “way down from where we were” but “Yes, we need to be better.” Director Christina Catsavis said it “doesn’t feel like we have a plan in place to address the loss” and that everyone nationwide is dealing with aging infrastructure. McAvoy said that he knows of cities in Arkansas dealing with 70% water loss. He said that 15% is the AWWA goal. He said that plans in place to address the “unaccounted for water” (loss through things like leaks, firefighting, main breaks, and meters under-reading) include changing meters, replacing old lines, and fixing leaks. He said that the first 5 years of the Capital Improvement Plan have a large portion to address the unaccounted for water.

Director Christina Catsavis noted that the new meters already installed have not increased revenue. McAvoy said that his predecessor chose to change the meters on the South side of town instead of the North side of town. The growth has been dominantly on the South and East sides and that new construction is higher efficiency. Yet the oldest meters are on the North side of town and there are more less-efficient plumbing and appliances and fixtures on the North side. Director Christina Catsavis said “I would like to see a plan in place with achievable milestones.”

Director Rego stated that several cities in the state have raised their water rates recently including Little Rock, Fayetteville, Springdale, Jonesboro, Rogers, and Greenwood. He mentioned that his former hometown in Colorado also raised theirs to $10 per CCF plus an 80 cent per day base charge. He noted that Fort Smith rates increased 12% when they changed from the 2007 rate to the 2011 rate (still in place). He said that if rates had increased incrementally at 12% that the rates would be “strikingly similar” to the proposed increased rates. He advocated establishing a “pattern or structure” for rate increases “instead of going so long between addressing the topic.”

Director Morton said that the proposed increase structure “moved the increase from the lowest level users to the highest level users” versus the previously discussed structure. He said that he checked his own water bill history and that in September when he did the peak watering of his lawn his volume charge was up 100%, but said “I choose to water.” He said that the increase in the bills for the 20 CCF users are “going to cost a good bit of money”. But said that the increases are “not going to impose a great burden on our citizens” with 62% using 5 CCFs or less and 80% using 8 CCFs or less. Of rate increases, he said it is “not pleasant to have to consider these” “but we have a great need for the money.” He emphasized the need to meet the bond covenants to qualify for the low interest State loans to be able to get started on the transmission line project.

Morton suggested that a Utilities Commission including 2 Directors and 3 citizens be established and meet monthly. He also suggested a special study session only for utilities issues be held monthly (potentially on a Thursday or the 5th Tuesday of the months with a 5th Tuesday) and that would allow for citizen comments even though it would be a study session.

Director George Catsavis questioned the cost of installing new meters versus the revenue captured from the proper reading and billing for water asking “Is it even worth it?” He expressed concern about the 35% of unaccounted for water. He said that he “can’t in good conscience raise rates on people till we get our own house in order.”

Director Martin said that with the 10 year expected accurate lifespan of a meter that we should be seeing a tenth of the revenue increasing every year for the 2/3 of the meters in the city that have already been replaced. McAvoy agreed and said that it could be higher even than 1/10 for some customers. Director Martin said “I don’t know that that is bearing out in the numbers.” Director Martin also mentioned that he’d never seen the numbers on the unaccounted for water until this week. He expressed concern about having 6 million CCF in unaccounted water saying the amount is “eye opening to me.” He said that he is not in favor of rate increases without a plan to deal with unaccounted for water. He said “I’ve got real concerns about these rates.”

Director Morton said that even if all the leaks were fixed that it “would not provide a dollar of revenue.” He said that the unaccounted for water “costs us for the treatment only” so the savings from fixing the leaks would only involve saving “maybe a few dollars on chemicals.” Director Martin argued that the City has to produce more water to offset the loss. McAvoy agreed with Morton. He said that unaccounted for water results in “additional treatment costs, but not missing revenue”. Director Martin said that a major point of the transmission line project is to remedy capacity shortfalls so not having to produce water that is lost will help ease the need to increase capacity. Director Morton said that the city will need that water with the enormous growth expected soon. Director Martin said “None of the data says that.” Director Morton argued that the military and the home builders have said that.

Director Morton expressed support for contracting with Water Company of America to find water not being billed on meters. He said “We’re gonna fail the bond covenants if we don’t get some revenue.” and “Sitting and doing nothing is not a viable option.” He said “The responsible thing is to pass this.”

Director George Catsavis asked if in 5 years all the leaks will be fixed. McAvoy said “no way”, all the current leaks will be fixed “but there will always be new leaks.”

Director Good called the unaccounted for water an “acceptable amount all cities experience” and said that the City is addressing leaks but “haven’t had a full dedicated force to address these issues”. Director Good said that he is “not defending having to raise rates” but mentioned that they have been talked about every couple of years with no action ultimately being taken. He said “We have to cover our cost.”

Director Christina Catsavis mentioned that water rationing has been suggested to address the capacity shortfalls. She suggested that retaining the water lost through the unaccounted for water could make up for the extra water needed instead of having to resort to imposing restrictions.

Director Settle expressed concerns about the differences between the billed rates and the percentages of usage between Fort Smith residential customers and contract customers with the impact being higher on residential Fort Smith customers. He said “It’s not fair.” He advocated for making sure customers outside the City are paying as much as inside. Director Martin agreed with Settle regarding residential in-town rates versus usage as a percentage of the total saying “That is a concern for me. I don’t feel it is equitable.”

Settle said that he is “not a fan of bonding”. He said the City should have asked the voters to vote in favor of a sales tax in December. He said that “instead of punishing the citizens of Fort Smith” through the proposed rate increases, they should ask for a sales tax. He said a 1% sales tax would pay for the transmission line and waste water plant projects. He said “Times get tough, people don’t raise rates. People reduce spending.”

Director Christina Catsavis asked how raising rates on the outside users instead of on the in-town residential users could be considered “arbitrary and capricious” when the outside customers are paying for less than their use. Colby Rowe with the City Attorney’s office said that the current agreements have wording on how the City can raise rates and that when the City is using an AWWA water rate study and only follows a portion of it and only applies increases to the out-of-town users it would be “picking and choosing which parts of the rate study they want to use”. Director Christina Catsavis said “We need to get creative and think about ways to do this.”

Director Morton said that $150 million is needed in the next 3 years for the transmission line and that there is “no source of money” other than the Congressional Directed Spending funds that are not nearly enough to cover it. He said it is “not being responsible” that it costs $8 million more to produce water than is coming in in revenue. He said that only raising water rates on outside users would lose in court.

Director Christina Catsavis suggested that the rate study could be redone. Director Morton said to not take action would be “not doing our job” and that the City should not be selling water for less than the cost to produce it. Director Martin said it is “Important for us to do the right thing at the right time.” Director Morton said “I want a meeting soon.”

Director Settle said that the Board recently fought for the 5/8 cent sales tax for consent decree sewer work and suggested the same approach could be used to appeal to the citizens to pass a sales tax for water. He said that 50% of a sales tax is paid for by people who live outside of the city limits.

Director Good expressed his view that funding the water through reduced spending was “not viable.”

There was a motion to table the water rate issue and instead of voting on it at the 4/16/24 meeting add it to a single issue study session (with citizen input allowed) to be held as soon as possible. The motion to table passed with all but Director George Catsavis voting in favor of tabling. There will be a water rates study session scheduled soon.

The Board voted unanimously to appropriate $250,000 to go to a program to assist people experiencing temporary financial hardship to pay their City utility (water, sewer, and solid waste) bills. The program will be administered by a non-profit organization under a services agreement. The City’s existing utility bill assistance program, Project Concern, is for people who are low-income on an ongoing basis, but the new program would be for people in temporary hardship situations.

Director Morton expressed support for the assistance program but expressed opposition to the service contract being with CSCDC as mentioned in the agenda packet. He expressed dissatisfaction when dealing with them in the past with them being difficult to contact. He said that there are other non-profits that could administer the program and that he can think of another one that is already dealing with helping with utilities payments in their existing program.

Director Martin asked for clarification that the organization to administer the program is not in the ordinance to be voted on. Deputy Administrator Dingman clarified that it is not, that the ordinance only sets the money aside until some entity is chosen and that the service agreement needed would still have to come to the Board for approval.

The Board voted unanimously with no discussion from the Board to purchase 18 acres near Massard Road from Cliff Cabaness for $2 million. Cabaness intended to build 40 duplexes on the property, but the noise from the Foreign Military Sales Project at the airport nearby and concerns from the military about the safety of putting the housing so near to where jets full of fuel will be taking off and landing will make the property unsuitable for the planned housing. The property is currently included in the area under the residential construction moratorium. The City will work with the Fort Smith Chamber of Commerce to market the property for commercial development.

John Alford with Massard Business Park spoke in favor of the purchase. He said that the PZD zoning for the planned duplexes was approved in 2020, the plat was approved, they were beginning to move forward with the engineering for streets and infrastructure for the development, and then in Spring of 2022 the Chamber of Commerce and the City Administration asked them to hold off because the City was considering a moratorium on residential construction near the airport. They were told that the delay would be about 1.5 years with the moratorium to expire in December 2023 and that there would then be codes in place that they could comply with and could move forward. The moratorium was extended an additional 2 years. The City and the property owner negotiated a price for the City to buy the land. Alford said the city is “anticipating great rewards” out of the Foreign Military Sales Project. He said the property owners “have a piece a land we have a lot of investment in.”

The owner of the property Cliff Cabaness spoke in favor of the purchase. He said that he purchased the land 12 years ago and has been running cows and horses on it and holding onto it because he expected growth at Chaffee Crossing and that the land would be on the only North/South corridor to Chaffee Crossing. He said that he tried to find some land to trade with the City but was unsuccessful because suitable similar sized tracts would cost 3-5 million. He said that he has paid $151,421 in interest during the moratorium already and that it will cost $605,502 in interest to continue to hold out without being able to develop the land. He said “I want this base to come in” but spoke of the financial stakes for him of the property not being developed. He said that not being able to construct the duplex development expected to bring in millions in profit would be a “tremendous loss to us.”

The Board voted unanimously to give permissions for 12 parking spaces in the right of way and the replacement of a deck that is in part of the sewer easement at 7301 Terry for Rival Commercial Real Estate.

Director Morton mentioned when driving by the nearby property that was approved recently for similar angled on-street parking he thought the parking appeared to be wider and asked if the street would be widened to not cause it to be reduced to one lane to accommodate the parking. Planning Director Rice assured that it would not be cut to one lane and that the street was the same as the other and the angled parking would be the same. Director Morton asked about the costs for any necessary construction to accommodate the parking. Rice said that the developer will incur all the costs.

The Board voted unanimously to contract with Hawkins-Weir for $998,780 for construction observation services for the Highway 45 utilities relocation project.

Director Martin asked if all of the costs of this contract would be reimbursed by ARDOT. McAvoy assured that they would.

The Board voted unanimously without discussion on action to set in motion the application for grants of up to $500,000 from Arkansas Recreational Trails Program and Arkansas Transportation Alternatives Program for Phase II of the Maybranch Greenway.

The Board also voted unanimously without discussion to contract with Halff Associates for $326,700 for engineering on Phase II of the Maybranch Greenway.

In the Executive Session, Omar Portillo was reappointed to the Housing Assistance Board and Shaun McCaffrey, Griffin Hanna, and Ralph Taylor were all reappointed to the Planning Commission.