Highlights of the Fort Smith Board of Directors Meeting 4/9/24

At the Fort Smith Board of Directors meeting held 4-9-24 with Director Rego absent, the Board discussed potential changes to water rates and scenarios for funding the water department. At the 12-12-23 meeting, the results of a water rate study were presented and the Board was presented with a couple of options that included rate increases, one plan that included a sales tax increase, and one that did not. The Board was not enthusiastic about either proposed plan and based on the discussion at that meeting and the input and feedback from the Board, Burns & McDonnell was instructed to devise more alternative plans. Dave Nauman with Burns & McDonnell presented new possible scenarios at the 4-9-24 meeting that included changing the tier structure to 4 blocks to help reduce the impact on smaller residential users, raising residential rates, raising the irrigation rate, reverting back to the structure used over 10 years ago that had a uniform business rate instead of three tiers of business rates, raising the rates for retail customers outside the city limits, and increasing the rates for wholesale customers (with higher rates for the South system than the North system to offset higher water delivery costs for the Southern system). He also presented an option that included no sales tax and options that included a half percent sales tax and a one percent sales tax.

The cost of providing water and sewer services has grown by about 5% per year the past few years. There has been no increase in water rates since 2011, but there was a dramatic increase in sewer rates a few years ago in response to the federal consent decree. With the existing rates, Fort Smith’s water revenues are not sufficient to fund the 2024 operating budget and the existing debt for the utilities department. The City would be in default on their bonds. Inflation will increase the costs of the operating budget over time. Nauman said “water can’t cover its costs and it’s going to get worse.” Plus, there are $365 million in water Capital Improvement Projects approved for the next 5 years that would need to be funded.

When compared with some other Arkansas cities and with some other American cities that are under a consent decree, Fort Smith’s current combined water and sewer rates fell about the middle of the spectrum. With the proposed rate increases, they would be higher than the average of that group. Fort Smith rates are currently relatively low in comparison to their regional peers. Greenwood, Van Buren, and Fayetteville have passed water rate increases in the last nine months. Utilities Director McAvoy said Winslow and Cedarville and almost all of the City’s contract customers have completed or are currently completing a water rate study and will likely be adopting new increased rates.

With the proposed increases, 60% of residential customers in Fort Smith would see an increase of $5.00 or less on their monthly bills in the first year. Though planned increases every year would impact residential customers, with bills doubling over their current rate by 2028.

Director Settle expressed his opposition to all of the proposals’ heavy reliance on debt. He opposed paying the up to 40% interest for debt service and advocated a pay-as-you-go approach instead. An example given was that using debt the $174 million transmission line project would end up ultimately costing $300 million. Nauman said that debt spreads the cost over the life of the asset and makes it “more affordable for today’s rate-payer.”

Director Morton pointed out that only 30% of water revenue comes from residential customers, that the rest is from wholesale, commercial, and industrial customers.

Director George Catsavis asked if the study had explored increasing revenue from other sources such as charges for water and sewer taps and other fees and improving efficiency in the department. Nauman said that efficiencies and those types of fees were not part of the scope of their study but “for most cities it’s a really small percentage of the funding stream.” . Director Morton motioned for a vote regarding changes to fees like tap fees and deposits to be added to the next meeting. It will be added to the agenda for next week.

Director Morton motioned for it to be added to the next study session meeting to discuss hiring a company to look at the water capacity needs issue to reduce water shortfalls with an eye on finding “creative ideas” to cut costs and still meet the need that are “cheaper than $76 million.” That item will be added to the next study session meeting agenda.

Director Morton said that he “wouldn’t spend $23 million” on new water meters in light of the water budget woes and the other water projects that need funded that are a higher priority. Director Martin agreed saying “We gotta step back and look at that CIP further.”

Director Settle suggested that instead of trying to fund things in 5 years that they ought to be planning for an 8 year time line. McAvoy mentioned that the projects currently being prioritized have been in the CIP for over 8 years already. He called the longer time table “kicking the can down the road.” Director Settle said that mathematically over 8 years, a 1% sales tax could almost pay for the Fort Smith share of the cost of the transmission line and the treatment plant without using bonds for those projects. He said we “want to be the most attractive city in Arkansas because we’ve done things the right way.”

Director Martin said that especially with the growth the city is experiencing “I feel like we do have time” and of the water capacity shortfalls said that there are “miniscule days where we’re hitting max capacity” and that we “need to take a step back and look at this.”

Director George Catsavis inquired about the growth of the city and how that correlates to increased revenue. McAvoy said that with the new growth, especially with the city building outward, there is an increase in water efficiency. Those newly built homes and newly remodeled ones are using more efficient plumbing, fixtures, and appliances that result in less water usage. He said that one year recently utilities actually saw a negative impact on water sales. There was also discussion regarding the impact of rate increases on usage. McAvoy confirmed that rate increases would likely result in lower usage because of intentional conservation and that that phenomenon was seen when the sewer rates were increased.

Director Morton advocated for putting the rate increases for the first 2 years on the agenda for a vote at the next meeting and then considering the subsequent years’ increases and the possibility of a sales tax at a later date like in 2025. Director Morton said that with the sales tax putting the overall sales tax rate for Fort Smith residents above 10% that it would be a “hard sale” and suggested looking for alternatives. He expressed a need to immediately move on increasing revenue saying “To issue revenue bonds, you’ve got to have revenue.” Director Settle advocated for putting the tax to a vote by the public, saying “Let people choose their fate.” He said that if the Board were to pass rate increases, voters won’t pass a tax increase.

Nauman and Burns & McDonnell recommended passing the rate increase proposal without the tax and then to amend it if the tax were to be implemented at a later date.

McAvoy clarified that the rate increases proposed for the first year are “just to make sure we are solvent and not in default” and not to fund the capital projects. Director Morton said “We need to get this started particularly on the outside users right now.”

Director George Catsavis asked for confirmation that the City can’t raise the rates on the outside wholesale customers without also raising Fort Smith residential rates. Colby Rowe with the City Attorney’s office said that the City has an agreement with Van Buren and Barling that says they can’t apply rate increases to only some portion of users without raising the residential Fort Smith rates, too, it would be viewed legally as “arbitrary and capricious and subject to attack”. Director Christina Catsavis said Fort Smith has not gotten an opinion from the Arkansas Attorney General on that matter yet. Rowe said an “AG opinion is just that.” Director Christina Catsavis responded “But it goes a long way in a court battle.” Director Settle agreed with Director Christina Catsavis. Director Morton added that if contract customers litigate that the City will likely not have access to any of that revenue for at least while the matter is tied up in court.

Director Christina Catsavis said that with residential making up less than 30% of the revenue they should look at commercial and industrial first and “look at residential last.” She said that with the increased rates “no one would be able to water their yard.”

Director Good expressed the importance of finding funding moving forward saying “Covering costs is vitally important.”

Mayor McGill expressed the importance of showing the DOJ and EPA that Fort Smith is “doing all we can”. He said “To postpone and delay things that are inevitable doesn’t do much good.” and “Doing nothing is not an option.”

Director Good asked if the grant writer is working on water grants. Administrator Geffken said that he is not at this point except for the Congressionally Directed Spending. Director Christina Catsavis asked about federal funding that might be available in relation to being a military community. Geffken said that that is currently being worked on.

The first two years of rate increases will be added to the agenda for a vote by the Board at next week’s meeting.

At the 1-23-24 meeting, the Board discussed the potential of contracting with Water Company of America to review the water and sewer utilities billing system to try to find ways to recapture lost revenue including finding unbilled and misbilled utility services. Questions were raised at that meeting regarding security risks associated with sharing the information with the outside company, including cybersecurity risks.

At the 4-9-24 meeting, IT Director Gentry answered the Board’s questions about those potential cybersecurity related issues. He said that he would “advise not to sign up for an API where another company is accessing our systems directly.” He advised instead pulling data and putting it into a point of time “flat file” and transmitting that securely to them for them to work with.

Director Martin mentioned that in the medical industry it is common to have agreements with outside companies include holding them to clear standards about how they use the data. Gentry agreed that he would advise that being put into the agreement.

Director Christina Catsavis asked about who destroys the sensitive info when WCoA are finished with it and if WCoA would be responsible for that. Gentry said that WCoA would be responsible for disposing of it. Director Christina Catsavis said that it “seems like any time there is a cyberattack, it always comes through a vendor.” Gentry said he completely agrees. Director Christina Catsavis asked if social security numbers would be visible to WCoA. Geffken said that they would not. McAvoy added that the only sensitive customer information they would only be seeing would be the names, addresses, and utilities account numbers. Director Christina Catsavis said “I don’t want them having access to our system. That’s too big a risk.” She added that there could be compromises (like hackers) in WCoA’s system. Gentry agreed that they should not have access to the system but the point-of-time data alternative would allow them to work with the data without giving them access to the system.

Director Christina Catsavis asked McAvoy if he is in favor of contracting with WCoA. He answered that he is not. He didn’t feel satisfied with the answers the City got from them on things like when the national Best Practices don’t match up with City policy. Like the leak write-off program that Fort Smith has is not something other cities do. WCoA weren’t clear about if that would be counted as a finding that we should be paying them for the lost revenue on. He said “every bit helps” but there are “too many open questions.”

Director Morton expressed support for contracting with WCoA because it would be a way to raise revenue without raising rates. He suggested the contract be written up carefully. He also suggested calling cities that have used them already and hearing what their experience was with them.

Director Settle said “I don’t want to send someone out to strong-arm people for money” when asking for rate increases or a sales tax.

Both Director Christina Catsavis and Director Morton expressed their view that a 50/50 split of the recovered revenues was too high and that the City should negotiate for a better rate (more like 30%).

The speakers participating in the Citizens Forum section of the meeting dominantly addressed the Board in regards to animal issues.

Fort Smith Resident Robert Robertson spoke expressing dissatisfaction with Fort Smith Animal Haven that the City contracts with to provide animal shelter services. He spoke about an incident where a dog named Dallas did not receive proper veterinary medical care. He said that there were false claims about costs by FSAH. He said that numbers submitted to the City about spay and neuterings were incorrect and that numbers of animals transported that were heart-worm positive were incorrect. He said that Best Friends protocols were not being followed. He said that Trap Neuter Release documentation was incorrect. He said that he will be filing complaints about members of the Fort Smith police department in relation to incidents involving animals. He said the City has “Police officers who cannot be trusted to tell the truth around cats and dogs.” He mentioned the increase in cost per animal to the City and lower overall intake at the shelter since the new director took over.

Fort Smith Resident Johnnie Rogers spoke on behalf of Brandon Sanchez who could not attend the meeting in person. Sanchez is the owner of a husky named Toby that was euthanized by FSAH. The dog was in the care of Sanchez’s brother in Fort Smith while Sanchez was living out of the area temporarily. The dog went missing on January 23rd. A stranger found the dog and took care of him temporarily but did have him picked up and taken to FSAH eventually on February 9th. The dog was euthanized minutes after being brought in for being “too aggressive”. Sanchez and the lady who took care of the dog while he was stray both said that he was not aggressive. State law requires that stray animals be held by shelters for 15 days before they are euthanized. When Sanchez contacted the shelter looking for Toby, the shelter said that he hadn’t been brought in. They have no record of him being there or of his being euthanized. The owner learned that he was euthanized from contact with the shelter manager and confirmed that it was Toby by sharing pictures with the animal control officer who responded to the animal control call. Sanchez said via email that he was “deeply troubled by the lack of due diligence” in the incident. Rogers said that the owner and the dog were not treated in a “compassionate way.” She added that in her experience as a volunteer at another shelter that dogs are often more scared by a male stranger in uniform than by a woman.

Rogers also spoke about a different incident where a dog was loose on a school playground in which she was disappointed with animal control’s response. She said that when the officers responded to the call about the dog on the playground she asked them to not take it to FSAH since it might be euthanized like Toby and the officer said that that story had been “blown out of proportion.”

Fort Smith resident Mel Winker spoke about her dissatisfaction with animal control. She has made 18 police reports regarding a neighbor’s dogs running at large. In another incident with a different stray dog that she reported to animal control she was told to keep the dog and take a picture because FSAH was full. On the police body camera footage from one recent call she made to animal control, the officers used foul language (once even using the f-word) and spoke disrespectfully about her including saying “She’s on Facebook and talks a bunch of sh*t about us.” and “If you take this dog, it will probably save us 20 calls a week.” She also said that in one incident Officer Milam told her the animal’s owner was cited but that according to official records, he was not cited. Winker said “I’ve been labeled the villain.”

Cindy Scott, Director of Artemis Project, said that her organization receives over 100 messages asking for help every day with a significant number of those coming from inside the Fort Smith city limits. She said that prior to the incident with Toby they advised Fort Smith residents to call animal control first but said “Now we pause about doing that.” She said that with the legal 15 day hold not being honored that they “don’t feel confident” the animal won’t be euthanized immediately. She said that they are contemplating changing their protocols to no longer advise calling animal control but instead to advise leaving stray animals on the street because they are “better off there than dead.”

Kimberly McCormick, Artemis Project wildlife rehab specialist, spoke about a recent incident where an eight minute video was posted to Facebook of a possum where it was being held by its tail and kept on a choke chain and was people were “just strangling” it. She called the video “horrific”. The people in the video are keeping the possum in the backyard caged as a pet. Keeping a possum as a pet is legal under Arkansas state law, but is illegal in the Fort Smith city limits under Fort Smith municipal codes. When McCormick called animal control they said that since the possum has water, food, and shelter, there was nothing he could do about it. The officer said “Maybe next time I could help you.”

Scott and McCormick requested to receive body camera footage from the police department from the Toby incident and the incident involving the possum, for documentation about the medicine used to euthanize Toby, and for charges to be pressed for illegal wildlife possession and animal cruelty in the possum incident.

Fort Smith resident Hon Chung said it is “pretty sad to see the animals be mistreated” and “responsibility lays with people who own the pets.” He said that one resident in his neighborhood has owned multiple dogs that have been regularly allowed to run loose and one has bitten multiple people. He calls animal control and “nothing happens.” He said that there “needs to be some mechanism to deal with recalcitrant owners.”

Ramona Roberts with Friends of Kitties and Kanines spoke to request that an additonal $20 be added to the $50 limit for the TNR voucher program to allow for the vouchers to also cover rabies vaccination. Roberts also praised the City’s new spay/neuter voucher program and said that Kitties and Kanines has seen strong usage of the vouchers already. She said that Kitties and Kanines performed 264 sterilizations last week. Of the vouchers, she said it is “very appreciated what the City is doing for the citizens.”

Fort Smith resident James Hughes spoke to the board in opposition to the changes that recently made parking in parts of the city owned right of way illegal except by the owner of the adjacent property. He said that in his neighborhood many homes don’t have driveways that can be parked in. He said that a neighbor yells at his relatives when they visit his sick wife and park in the right of way in front of the neighbor’s house . Of the parking policy change, he said “I don’t think it’s fair.”