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Budget Committee – Crippling Side-effects of Water Project Bond Issue

November 20th, 2014 by

The City Council Budget Committee, composed of Al Peer, Joe Meeks, Claudia Hartness and Tim Chase, met with Vicki Tiner, City Financial Director, and members of her department, to discuss the City’s 2015 budget, and to review some issues with the 2014 budget.




Ms. Tiner began the discussion by pointing out that the bottom number is a negative number. Members questioned why this year’s budget is a negative figure when last year’s budget was not. The reason is that none of the revenue from the 1 cent sales tax is figured into the budget, and without that money, the City is operating at a half million dollar loss. This is a situation that has been present for many years. ¬†(The¬†staff stated the the general fund’s bottom number is a negative number – not the entire city – the general fund, covers administration, police, fire & district court.)

Ms. Tiner explained that the big issue currently, is the bond issue. The revenues from water and sewer departments are pledged 100% against the bond. Because of that, money generated by the water and sewer departments cannot be used for general fund expenses, and cannot be transferred or used for any other purpose.. This was a situation that was overlooked last year, and some money from the water department was transferred to the general fund.

Ms. Tiner proposed that money from the 1 cent sales tax be used to reimburse the money back to the water department, to replace the money from that department, that was erroneously used for the general fund. Ms. Tiner stated that the amount needed to be reimbursed is $360,590.

In addition to the water and sewer revenues being held as collateral against the bond, the water and sewer systems themselves are held as collateral on that bond issue.

She also clarified that the water department revenue is sufficient every month to pay the bond payment. That is not the problem. The water department generates $1.7 million. The bond payment is $602,000. There is also an allowance for maintenance and operating expenses for the water and sewer department. After all that is taken out, the water department still has a net income of $172,000.

~~~~~~
About $800,000 generated by the 1 cent sales tax was appropriated for bond payment.

By ordinance, that money could be used to repay the bond if the bond was voted on by the public. These bonds were not voted on by the public.

The ordinances that were passed by the City Council for the bonds, and the bond contract, states that the bonds must be repaid only with funds generated by the water and sewer department.

Both in the ordinance and in the ballot title, the one cent sales tax can be used to pay for bonds, but it can be done only when voted on by the citizens of the city. Ms.Tiner stated that because of those two things, she is not comfortable using the one cent sales tax revenues to pay the bond payment.

A council member stated that they need to talk to the bond attorney and the city attorney about that issue.

The city attorney was consulted, and he stated that in times past, revenue from the water department was transferred to the general fund to be used for other city expenses. Now, that money can no longer be used for any other purposes than paying the bond and other water department expenses, but the money generated by the one cent sales tax can be used in the general fund for city expenses.

Ms. Tiner pointed out that there is a sunset clause on the one cent sales tax, so that cannot be depended on long term. Her recommendation is that the City operate on a bare bones budget to compensate for the possibility that the sales tax will not be renewed.

Ms. Tiner also stated that there needs to be a monthly meeting with city department heads to discuss and monitor budget needs and issues. She encouraged the City to be concientious about spending, and to plan ahead and anticipate equipment and other future departmental expenses.

Ms. Tiner stated that her department’s goals for 2015 is to re-group, bring anything she has concerns about out in the open, look at the City’s projects that are in process, produce a list of unfinished projects, and review whether the projects are still viable. That list could be available between the 15th and 20th of December.

Mr. Meeks pointed out that the City is looking at some major maintenance issues ahead, citing in particular the need to repair or replace the city swimming pool liner. The company who installed the liner have been contacted and are making arrangements to come check on the pool.

Meeks also mentioned the water tower at UAM, and the impending need for major maintenance there.

Tiner stated that she has to have some sort of budget in the City Council’s hands by December 1. It doesn’t have to be passed at that time, but it does have to be presented.

Ms. Tiner emphasized that the money taken from the water department for general fund and the shortfall to the Arkansas Public Employees Retirement Fund must be repaid before any other money can be used for the City budget. Also, the money generated by the sales tax needs to be re-appropriated from bond repayment to be available for other purposes. It is her determined intention that all money generated and all bills paid will be paid from the appropriate revenue sources. She reaffirmed that the money is available to pay for everything; it is just not allocated properly, and her goal is to make sure everything is allocated properly and legally.

Claudia Hartness also mentioned that the City needs a list of all CDs they own; they need to get a legal opinion on the uses of the CDs, and re-appropriate money from the CDs where legal and appropriate.

City Attorney Whit Barton stated that if the CDs were gifts to the City for specific purposes that have now outlived their usefulness, you would have to look at the trust documents to see what can be done. If it is a collection of CDs that have built up over time that are city funds that didn’t get spent for a project so they got put in a CD, then that is an asset of the City, to re-appropriate as the City sees fit. Generally the City has a lot of leeway with the CD’s, unless the trust documents specifically restrict the use, such as the funds for the cemetery.

Claudia Hartness requested a summary sheet with every department’s cash in the bank, and all the CD’s, every month, and also how much income is being generated by the sales tax every month.

Ms. Hartness said she would like to given all city employees some sort of raise.

Joe Meeks suggested that the City give employees a total rewards statement, showing them how much extra the City is paying in employee benefits. Claudia Hartness stated that this will not help the employees when they go to the grocery store.

Meeks also mentioned that he is concerned about the half million dollar loss the City would be operating at, without the one cent sales tax, and is concerned what will happen to the City if the sales tax is not voted back in. Ms. Tiner pointed out that the lack of option to use the water department revenues for general expenses is responsible for that deficit.

The consensus was that it is critical to look at reducing the operating budget for the City.

Ms. Tiner recommended that they budget the expenditures that are absolutely essential, and then add in any extra budget items out of the remaining revenue. She also again recommended talking to department heads and enlisting their help in reducing expenditures as feasible.

The group agreed to present the “budget proposal” they were given for the meeting to the city council, as required by statute, but specify that it will be revised, probably in great depth.

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One Response to “Budget Committee – Crippling Side-effects of Water Project Bond Issue”

  1. LaNell McKiever says:

    It seems we have someone finally with some knowledge and input into the expenditures that go on in the city. I am speaking of Tiner, the water fund has too long been used as a slush fund, instead of taking care of maintenance and other problems in our water department. I am also glad the City Council and the Mayor at that time did not allow the citizens to vote on the bond issue and can not not use the one cent sales tax. Instead they have stymied themselves because we did not have any input on the bond issue, instead they did not let us know, because the water and sewer money has been spent on everything else, and they wanted to keep raising the water rate on each of us to pay for their bond that they passed and it has proven to be just another tax. Our water rates are high already and our sales tax is out of sight. So I guess by not including us in their big bond issue, they have outsmarted themselves. They have painted themselves into a corner, trying to outsmart us, maybe they will stop spending for a while on things we can do with out right now and fix the things we need.
    We should have been informed more on this water project and allowed to vote. Our sales tax is one of the highest in the state, and Arkansas is one of the highest states for sales tax in the Union. I would not bet on Monticello voting it back in. It is about time someone paid attention to our spending problem in Monticello, and the citizens need to get to vote on matters that are funded by the citizens. It sounds as if we are finally getting someone (Tiner) that is aware of what is going on, can finally read a budget, and can see what is going on in each part of the city and get some priorities handled like worn out pipes and pot holes and rough streets.

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