Highlights of the Fort Smith Board of Directors Meeting 2/11/25
At the Fort Smith Board of Directors study session meeting held 2-11-25, the Board discussed renewal of the City’s auto and property insurance policies. Phillip Merry, a representative from First Western, that is contracted with the City to consult on insurance matters, presented their findings and recommended that the City renew their coverage with Arkansas Municipal League. He said that even with unusual severe weather patterns, AML has “done a heck of a job stabilizing” in that market. The premium for the renewal on property coverage will increase a half million dollars this year but will still have a deductible of only $10,000 per occurrence. Merry stated that that low deductible is not available in the private market. The auto coverage premium this year will increase from $774,694 to $791,077 and the deductible this year will increase $1000 per vehicle. Merry said that “AML is cost effective” and that the City “cannot match” the premium for the coverage provided. Merry also mentioned that First Western would be studying the cost efficiency of no longer carrying insurance coverage on traffic lights and would have information to present to the Board on that by next Tuesday’s meeting.
Director George Catsavis asked about how the cost increase would be funded. Finance Director Richards said that the City did budget for some increase in 2025 but “not quite this much.” He said that the cost would be allocated among all the CIty departments.
Merry mentioned that flood coverage through AML is “limited” and that First Western will study National Flood insurance and FEMA and advise on that.
Director Kemp asked how many departments have covered places to get vehicles under to prevent storm damage and suggested looking into covering vehicles and opportunities to park them in the downtown parking garage. Interim City Administrator Dingman said that other than Transit, not many departments have covered parking. He said “It costs money to put them under cover.” Kemp asked about City workers taking fleet vehicles home to help spread out risk. Dingman said that the police do that already.
Director Settle mentioned that AML paid out $6 million for damages from the 2023 hailstorm and praised the only $10,000 deductible. Merry said that for coverage of about a half a billion dollars worth of property for a $10,000 per occurrence deductible “no other carrier in the United States does this.”
The renewal of property and vehicle coverage with AML will be up for a vote by the Board at the 2-18-25 meeting.
The Board discussed ideas to expedite the repair of water leaks and staffing and equipment for the Utilities Department as it pertains to repairing water leaks.
Utilities Director McAvoy mentioned that galvanized pipe is responsible for 25% of the service line leaks. He said that it is “very difficult to make a long term permanent fix” on the galvanized pipes. There are 2 projects planned for the future to replace 40% of the galvanized pipes at a cost of $15 million-$20 million. The projects also include upsizing the pipes to also provide better pressure for fire protection. He said that the water infrastructure being so old results in having to re-fix pipes with about 25% of the leaks repaired since 2019 having to be re-fixed already. He mentioned that on Garrison there are main lines that are 140 years old and if we ever dig them up and expose them “we will have a blow out.”
McAvoy addressed a couple of suggestions that had been mentioned by the Board in the past. He said that he looked into Director Settle’s suggestion of using flex tape to perform repairs. Flex tape said that they are not suitable for water distribution and the state Health Department also said no.
Using plumbers for repairs has been suggested. McAvoy said that under State law (that is based on the federal Safe Drinking Water Act) a licensed Grade 4 Water Distribution Operator or a licensed engineer must be present onsite to observe the work for the duration of the repair work. The City does not have enough licensed operators to send to oversee plumbers that don’t have one on their crew. Director Rego asked the cost and time required to acquire the certification. McAvoy answered an 8 hr course, 16 hrs of math courses, three 24 hour classes, and a national test that is offered only 4 times a year with a passing rate of about 20%. The classes are free, but there is a fee for the test. The classes are not offered locally. Director Rego asked about the availability to host classes here in the River Valley to get more plumbers the certification. McAvoy said that trainers would have to be brought in because there is no faculty to teach it here. Director Christina Catsavis asked how the City obtains the certifications for their operators who have it. McAvoy answered that they send them off to Springdale, Russellville, or Lonoke. Director Kemp asked how that licensing requirement worked with the contract for fixing leaks with Forsgren. McAvoy answered that one the City’s licensed inspectors oversaw their work.
Director Kemp asked about declaring a state of emergency to receive “leniency” and flexibility in the licensing requirements to be able to get the repairs done. McAvoy said that the Arkansas Department of Health looks at a “water emergency” for things more like the situation in Jackson, Mississippi. Leaks resulting in 35% water loss would not be considered as some systems in the state have greater than 50% and haven’t declared an emergency. The County Judge would be the one to make the declaration. Director Christina Catsavis asked if the licensing requirement applies to Fort Smith with our exemption from Act 605. McAvoy clarified that Fort Smith’s exemption is just from the part of the Act regarding the rate study and the City is not exempt from any of the other requirements and standards. Director Rego expressed his view that it is “worthwhile” to explore variances to make it more flexible like if it might be possible for a licensed operator to float between 2 or 3 job sites and oversee and make the final sign off rather than having to remain stationary at one site for the duration of the repair.
Director Christina Catsavis said that the “common sense solution” is to hire more people and asked why the Utilities Department is not filing all of their vacancies. McAvoy said that there are 6 positions open on the leak crews and they are entry-level positions that are currently being filled by temps to determine if they are a good fit. Director Christina Catsavis questioned the use of temps. McAvoy said that it “streamlines the interview process” and avoids going through the hiring process for people who only stay a couple of days. Director Christina Catsavis expressed concerns about it “lacking some efficiency here” and that a temp agency had been used because it was a friend of former City Administrator Geffken. Dingman said the use of temps “is efficient.” Director Kemp agreed with Director Christina Catsavis. He spoke of his previous experience at a company that paid more per hour to use a temp agency and was always in a hurry to hire permanently to save money.
Director Kemp mentioned that in talking with local contractors he has heard that private companies will pay better and offer better benefits than the City so private companies are likely to “snatch up” potential new hires. He suggested the City make workforce development easier for these private companies because the competition for workers from private companies would be an issue regardless of whether the City does direct hiring in-house or uses temps. Director Rego said that the labor force “desiring to be leak repair grunts” is limited and that there will be more openings than people considering the position. Director Kemp asked how many grade 4 licensed operators the City has. McAvoy said that there are 12-24 total but they are not all available to work on leaks.
Director Kemp suggested that the leak repair list be “triaged” and the City take on some leaks and contract some out. He said that if the City were to hire 30 people to fix leaks they would get caught up and then have to cut off those employees and that potential job seekers would know that, so it would be better to contract out the work out until it is caught up. He suggested a goal of 60 days from a leak being reported until it is fixed. Director Martin suggested a goal of 30 days. Director Rego suggested splitting the difference with a goal of 45 days.
Director Settle suggested that since a regular plumber can fix water leaks near the meter on the customer side of the meter without having the certification that they should be able to also fix water leaks near the meter, like within a couple of feet of the meter, on the City side, too. That would allow for the use of plumbers to fix those leaks so that the City leak crews could focus on bigger projects. McAvoy said that he would ask the health department about that.
Director Rego mentioned that the 2021 contract with Forsgren spent $2.6 million to fix 619 leaks, averaging a cost of $4200 per leak and less than one leak fixed per day. He said based on this “purely outsourced is not cheaper.” He suggested “targeted uses for the the private sector” but not like the Forsgren contract. He suggested leak reporting via social media and communication updates on the leaks. Director Martin said that the Board should “have some conversations with contractors.” He said that Forsgren “left a million dollars on the table” and “that tells me something.”
Director Martin asked how many crews would be needed to meet the 30 or 60 day goal. McAvoy said “I need equipment before I need crews.” He said that the existing equipment needs replaced and that the department spent $300,000 more this year than last year keeping the old equipment up and running and dealt with significant challenges with equipment being down. He said he needs a backhoe, 2 dump trucks, and a service truck for every crew. Director Martin asked about the potential for leasing the equipment. Director Settle said that that had been tried in the past but didn’t work out. Dingman said that it was done when the City didn’t have money but they have “gotten away from that” as finances improved.
Director Martin suggested appropriation of a quarter million or half million dollars from the general fund to reward performance and incentivize fixing leaks faster. He said if crews want to work 80 hour weeks they could work 80 hour weeks. McAvoy expressed concerns about safety for crews working 80 hour weeks and that with equipment issues crews waiting on equipment would be penalized for something beyond their control.
Director Christina Catsavis suggested getting the law requiring grade 4 licenses changed in the State level. McAvoy reminded that the State law was based on the Federal Safe Drinking Water Act.
Director Christina Catsavis expressed concerns about the property damage done by leaks. She mentioned a leak flooding her own yard and ruining landscaping and the irrigation system. She mentioned the City having to pay to replace another resident’s circle drive damaged by a leak and a parking lot on Towson that had a sinkhole form due to a leak.
Director Good requested that McAvoy provide a list at an upcoming meeting of what his department would need to meet water leak goals. He also expressed his view that the funding for those needs cannot “simply be out of the general fund.” Director Martin disagreed. Director Kemp said “Equipment is easy. Qualified people is hard.” He suggested the possibility of pared down equipment for leak crews like that they might not all need a dump truck. Director Rego mentioned that even if funded it sometimes takes months for the equipment to arrive. Director Martin said “we can find dollars to fund all of this” by not allocating funds out of the water department.
Director Rego asked how many leaks a crew can get done in a week. McAvoy answered 15-20 per crew.
Director Kemp said “If we can’t fix this by the middle of the year, I’m not voting for a rate increase.” He expressed his view that fixing water leaks shows expense cuts to the public. Director Christina Catsavis said “I won’t be voting for a water rate increase as long as I’m in this chair for the next two years.”
Director Settle mentioned that while they reduce expenses leak repairs don’t generate revenue, so money spent on the project while not generating increased revenue negatively affects the debt service ratio. Director Martin mentioned that water leak repairs might help with the issue of water capacity on the few hot days in the summer and possibly delay the need to spend to address that problem.
No later than the April 1, 2025 meeting, the Board will be presented with a package of proposals for appropriations and policy changes related to water leaks to vote on.
The Board discussed elements of the 10 year financial plan for funding the sewer work required by the consent decree that was presented to the EPA and DOJ. The plan was discussed at the 8-27-24 meeting, 9-10-24 study session, and approved by the board to be submitted to the federal government at the 9-17-24 meeting.
The Board discussed the part about the City asking the voters for renewal of the existing 5/8 cent sales tax for consent decree sewer work but with the revenue from the tax being authorized to be used for debt service on the bonds (unlike the current version that is only authorized for spending directly on the projects) and asking the voters for renewal of the 1 cent sales tax for Streets, Bridges, and Drainage but instead of the entire percent going to Streets, Bridges, and Drainage as it currently does only 5/8 would go to streets and 3/8 would go to debt service on the consent decree sewer work. If approved, those tax renewals would result in a full 1% of sales taxes going towards the consent decree work without requiring any tax increase.
Director Rego kicked off the discussion by asking if the Board had any desire to consider a fresh additional penny sales tax for the consent decree. Director Settle suggested instead of diverting any money from the Streets and Drainage, having the voters vote on a fresh additional half penny sales tax for the consent decree. In combination with the existing 5/8 cent for the consent decree, it would result in a total of 1 1/8th cent for the consent decree and still a whole cent for the streets. Total sales tax would increase by a half cent. He expressed his view that taking 3/8 of a cent from streets for 30 years, resulting in $11.25 million being diverted from streets, would be “devastating.” He advocated for a higher sales tax to avoid raising rates any higher than the 3.5% annually that the City already told the EPA they would do. He mentioned that 50% of sales taxes are paid by people that live outside of Fort Smith while utility rates are only paid by the residents of the city. He reminded that bonds legally have to be through sales tax or rates. They cannot be funded through reallocations.
Director George Catsavis asked how much revenue a 1% sales tax would raise. Finance Director Richards answered that one penny would raise $30 million and the 1 1/8 suggested by Director Settle would raise $33 million.
Director Rego reminded that the deadline for having issues on the ballot for the May 13, 2025 election is that they have to be delivered to the County by March 4th. He called the tax issues a “very urgent consideration.”
Director Good agreed that a sales tax would be better than higher rates. He also said that customers should pay enough to cover the cost of operations.
Director Martin said “I don’t know if I’m sold on the increased sales tax at this point.”
Director Rego suggested potentially having the renewal on the street tax as it currently is on the May ballot and an additional tax for the consent decree on the November ballot. Director Christina Catsavis disagreed with waiting until the November ballot.
Director Christina Catsavis asked if WIFIA loans had been considered. Lauren Lowe with PFM said that WIFIA loans require a 51% match from the City and also that with the current debt service ratio the EPA is not supportive of approving a loan. Also, the money for that has to come from system reserves and cannot come from a sales tax.
Director Martin said “I’m for reallocating.” and said that he would not be for taxes that would result in a total sales tax rate of over the current 9.5%. Director Kemp asked Director Martin if he would support renewing the street tax as it currently stands in May and coming back to the public for a vote on another tax in November. Director Martin answered “Maybe.” Directors Martin and Settle mentioned that both elections would be off-elections. Director Martin mentioned that most sales taxes pass in those elections. Director Christina Catsavis mentioned that when she opened her business the tax rate was 9.75% and now it has gone down to 9.5% and “no one has noticed the difference.” She said that most customers mentally round to 10% when considering the tax. Director Rego suggested a renewal of the street tax and a new tax for the consent decree both on the ballot in May, but a pledge in April on the reallocation and efficiency package. Director Settle mentioned that Fort Smith is one of only a few cities in Arkansas with no prepared food tax. Director Christina Catsavis expressed her preference for the tax issues on the May ballot rather than waiting until November so that there would be more opportunity to pivot if the taxes on the May ballot do not pass. Mayor McGill expressed his support for Director Settle’s suggestion.
The Board will vote at next week’s meeting on whether to put the existing 1 cent street tax as is up for renewal for 10 years and a new additional 3/8 cent sales tax for the consent decree on the May ballot and to put allowing the existing 5/8 cent tax for the consent decree to be used for debt service on the May ballot. The Board will also consider alternatively voting to put the existing street tax up for a 10 year renewal at 5/8 of cent going to streets and 3/8 of a cent going to the consent decree on the May ballot.
During the Citizens Forum section of the meeting, Patrick McGuire spoke. He suggested that the Transit buses should run later, until at least 11PM or Midnight on the weekends to allow people to visit the businesses on Garrison and drink and have a safe ride home. He also said that he could not find how to obtain a reduced bus fare card for senior citizens. Transit Commissioner Jo Elsken who happened to be in the audience for the meeting offered to assist him in getting a card.
