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Water Rates Rise, While $690,100 is Transferred from Water Fund for Other Uses.

May 22nd, 2012 by

“They raise the water rates saying we need to fix the dangerous water pipes, then they take the money out of the water fund to pay for other projects, then they raise the rates again saying there’s not enough money in the water fund. Meanwhile, we don’t even have a line item in the budget for water pipe repairs. What’s going on?”

This statement is from a source that wished to remain anonymous, and their sentiment has been shared by many MLive readers over the past several months.

Mayor Maxwell presented these failing water pipes to the City Council, last October.

Add to this the report from last September’s City Council meeting where Mayor Maxwell said, “The water line problems below Maple and Speer Streets, where galvanized water lines run under the street, and constantly have to be repaired. Overlaying these two streets will soon have to be patched, whenever the next leak occurs…” Mayor Maxwell told the council that these lines need to be replaced, instead of making repairs to the lines and the streets, over and over. “The water lines need to be moved to the side of the streets, then do the overlay.”

The city has recently received easements from the property owners, and ordered pipe to begin this project. This means we’ve got “shovel ready” needs, and money being spent elsewhere.

Questions have been raised concerning all aspects of the water fund budget, including where the money is going that’s transferred from it, if it is legal for it to be transferred at all, and if replacing water pipes is just a falsely given reason to raise rates further.

In a lengthy sit-down with Mayor Allen Maxwell, Finance Director Kimberly Fletcher, and City Clerk Andrea Chambers, answers to these very questions were sought out.

According to Mayor Maxwell, one of the first issues he began looking into when taking office was that of the water pipes.

“I came in here and instantly talked to Faulkner Pipe.” “I didn’t know we had all of these pipes with all of these holes in them, and asbestos pipes that break with just slight movement. I didn’t know we had galvanized pipe in the ground. I didn’t know anything about that. Here we are all of a sudden and I think how are we ever going to get through with this? We don’t until the pipes are gone.”

After realizing that most of the City’s pipes and meters needed to be replaced, the Mayor said he knew it would be a very large financial undertaking. He began looking at the budget and said that he discovered that water rates had not been increased in a very long time.

“The city went from 1972 to 2009, that’s 37yrs with no rate increase. The City has had four water rate increases. Now, does milk cost the same as in 1972?”

Water rates in Monticello have gone up in 2010, 2011, and 2012 after a 37 year period with no increases at all. Finance Director Kim Fletcher said, “Yes, they’ve gone up each year, but we’re really just playing catch up after so long with them remaining the same.”

With rates increasing, the question remained, “Where is the pipe replacement line item in the budget?”

“This will have to be a continuing nature contract.” “That’s a performance based contract, it continues on for up to 20 years. Arkansas state law allows you to do this contract, it was passed by legislature because the legislature understands that when these systems need to be replaced, it’s a 10 or 15 or 20 year process.” “What you can do is create your contract, and if you get half a million dollars, you create your 20 year contract and the contractor has to analyze what your revenue is, and then he has to give an analysis of what he can do with that amount of money. If he says he can do A, B, and C for half a million, and he can’t, he owes the city the money back because he is bound by that contract.” “For people to expect in a year and a half that we would have water rate increases and we’d be out replacing pipes, they would be incorrect.” “This is the way cities in America do it, most Arkansas cities do.” – Mayor Maxwell

When asked if there is an idea as to when replacing pipes will begin to appear in budgeted line items the Mayor answered,

“Siemens will come and look at what your projected revenue is and create a plan based upon it. We must have money first to replace meters, and so far the City hasn’t been given an amount of how much this will cost to budget for.”

With the water fund 2012 budget showing a total of $1,599,500.00, the question many people have wanted answered is, “where is that money going, if not to replace pipes and meters?”

The Water Fund Breakdown shows an operational total of expenses to be at $909,200.00. On top of the operation costs, there is an additional expense listed as “transfers” in the amount of $690,100.00.

Transfers are listed as programs or projects that are being funded by money taken from the water fund. The 2012 list of transfers is as follows:

General Fund: $265,500.00

Parks and Recreation: $337,000.00 (Parks and Rec is completely funded by the Water Fund)

Bonds and Investments: $30,600.00

Airport: 32,000.00

Cemetery Association: $25,000

Total Transfers: $690,100.00

In reference to where the money has been used from the transfers from the water fund, Mayor Maxwell said, “We have all of these projects going on and all of these projects are already under way, and already have high expectations. Where do you get the money to fund all of that stuff and then stick a million dollars into the water fund? You have to reduce the projects in the city, and increase the money going into the water fund. That’s what we’re working on.”

He went on to explain that next year’s budget is already being discussed, and, “I asked Kim to move everything possible to sales tax to take off of water.”

“Next year Sadie Johnson, the Fire Station, Tanker trucks, and so on will no longer be things we’re chasing money down for, so we expect some serious progress.” – Mayor Maxwell

With so much money leaving the water fund in transfers, concerned citizens have asked about the legality of such practices.

According to Arkansas Code Annotated 14-234-214, money can be transferred from the water fund into other areas if it is deemed a “surplus fund.” The statute defines “surplus” money as money that shall:

(e) (1) … be in excess of the operating authority’s estimated cost of maintaining and operating the plant during the remainder of the fiscal year then-current and the cost of maintaining and operating the plant during the fiscal year next ensuing, the excess may be by the operating authority transferred to either the depreciation account or to the bond and interest redemption account, as the operating authority may designate.

(2) If any surplus if accumulated in the depreciation account over and above that which the operating authority shall find may be necessary for probable replacements needed during the then fiscal year, and the next ensuing fiscal year, the excess may be transferred to the bond and interest redemption account.

(3) If a surplus shall exist in the bond and redemption account, it may be applied by the operating authority, in its discretion, subject to any limitations in the ordinance authorizing the issuance of the bonds, or in the trust indenture:

(D) To any other municipal purpose

Plainly speaking, the statute states that money in in the water fund is surplus when there is enough money in the fund to provide operating costs for the current fiscal year and the next fiscal year. If that is the case, the remaining money can be transferred to either the depreciation account or to the bond and interest redemption account. Then, if there is enough in either of those accounts to operate for the current and next fiscal years, that money can be deemed a surplus and it can then be transferred to other municipal purposes.

MLive asked the panel present, “Does the water fund have enough in budget to maintain and operate for this fiscal year and next fiscal year?”

“No, we are not aware that we have a surplus.” – Mayor Maxwell

Mayor Maxwell went on to say that the practice of taking money from the water fund to provide money for City projects is something that has gone on for at least the past 30 years. “There is no other way to obtain money to provide things like the Sadie Johnson Building, fire trucks, and tanker trucks.”

Mayor Maxwell pointed to a lawsuit filed against Fort Smith for the same issue, and the complainants lost the suit.

“This is a continuation of what’s been going on over the past 30 years. We have Legislative audits done every year and there has never been a question about this.” – Kim Fletcher

Upon research, the case in which Mayor Maxwell was speaking was MADDOX v. CITY OF FORT SMITH:

Bill MADDOX, Bill Grace, Jerry Frisby, Melba Riggs, and Charles Beasley for Themselves and All Others Similarly Situated, v. CITY OF FORT SMITH. No.?01-117. — October 11, 2001

“The appellants claim that the City has been illegally spending its share of revenues collected under a countywide sales and use tax since 1999 when the City’s Board of Directors authorized the use of those tax revenues in a manner inconsistent with a resolution passed by the Board in 1994. ? Furthermore, the appellants allege that two transfers made from the City’s water and sewer operating fund to the City’s general fund and one transfer made from the City’s sanitation operating fund to the City’s general fund were unlawful.”

The case was taken to the Supreme Court to appeal the summary-judgment order of the Sebastian County Chancery Court dismissing their illegal-exaction and unlawful-transfer claims against the appellee, the City of Fort Smith. The Supreme Court ruled in favor of Sebastian County Chancery Court and upheld their decision to dismiss.

The Supreme Court stated:

“With our rules of statutory construction in mind, we turn to the present case to determine whether Ark. Code Ann. § 14-234-214(e ) is applicable . The circuit court ruled that the statute was inapplicable because it was silent on the issue of whether non operating funds, or county sales-tax receipts, are considered surplus. Further, the circuit court found that the funds generated by the sales-tax and deposited into the water-sewer account never became surplus funds under Ark. Code Ann. § 14-234-214(e).”

“Because the entire statute is based on rate-derived funds, the term, “surplus funds,” as used in subsection (e), refers to the disposition of rate -derived surplus funds. Here, the revenue transferred into the water-sewer account was not rate -derived surplus; rather, it was the City’s portion of county sales-tax revenue that was authorized by a Sebastian County-9-ordinance to be used for any municipal purpose.”

The Supreme Court found that because City sales-tax funds were put into the water fund and then withdrawn to fund projects, they were not bound by the given statute.

Monticello’s water fund did show a $2,500 transfer-in from the one cent sales tax, but Kim Fletcher told MLive that the money is only put there as an “as needed” item and it is not a regular occurrence. It is an “in and out” type of transfer.

So, while Fort Smith’s situation was not bound by the statute given, it’s unclear as to if Monticello could be.

There is no penalty listed in the statute for failure to comply, therefore it is an “unclassified misdemeanor” if prosecuted. Unclassified misdemeanors are crimes which do not fit into any of the other general categories such as Class A, B, or C.

The legal consequences for an unclassified misdemeanor will usually depend on the jurisdiction. Consequences can also depend on the specific type of crime that is committed. Like most other misdemeanor convictions, being found guilty for an unclassified misdemeanor will usually result in a monetary fine and jail time of less than one year.

The penalty for an unclassified misdemeanor will not be contained in any state statute or law. Therefore it will be up to the judge to determine the penalty for the misdemeanor. They will arrive at a penalty by analyzing the individual facts of the case, and comparing it with similar types of misdemeanor cases.

Discussions concluded with the realization that without taking money from the water fund, many of the amenities our city currently enjoys would become obsolete. Even seemingly simple things such as having our parks mowed, ball fields constructed (and bathrooms added), and the city pool being open each summer would be things of the past.

“We can’t just stop mowing the parks or tell kids they can’t play baseball… who wants to live in a city like that?” – Kim Fletcher

12 Responses to “Water Rates Rise, While $690,100 is Transferred from Water Fund for Other Uses.”

  1. Conservative voter says:

    Send new members to the City Counsel and maybe we can all get answers to these questions! We live in the county, but have to pay the city for higher water rates. We can’t vote the mayor and counsel out, but hope folks in the city will put honest folks in office. Hoping new council gets elected!

  2. How much says:

    How much does it cost to mow the parks a year?

  3. Finally !!!!!! says:

    I have much more to say on this topic, but I would like all the readers to know that the Mayor is sadly mistaken when he stated that water rates had not increased since 1972. I copy this quote from the Advance:
    Wednesday, December 20, 2006 2:00 AM CST
    As part of the discussion of the proposed operating budget for 2007, the Monticello City Council members were told that water and sewer rate increases were needed to keep those departments from going into the red in the near future. City Clerk Cindy Fakouri and finance director Kim Fletcher asked the council to consider an eight percent increase in water rates and a four percent increase in sewer rates
    when the council met in committee Thursday night. If approved, the minimum water rate would increase from $6.50 to $7, and the minimum sewer rate would increase from $7.25 to $7.50.

    It has been four years since the city raised water rates, and two years since sewer rates were raised. Eight percent is horrible, Fakouri said, and we hate to ask for that, but the cost of everything keeps increasing. She noted that diesel costs had doubled, Burlington (a big water customer of the city) had closed, and the prices for fittings, pipes and other needed supplies had increased.

    She noted that the last increase, four years ago, had been four percent, and that rates had not been increased for several years prior to that. A small yearly increase to keep up with inflation would prevent having to ask for such large increases, Fakouri said.

    Maybe we should think about doing one every year, Councilmember Beverly Hudson said.

    Monticello water users please note that the City has readily admitted to “illegal exaction” when they ‘rationalize” their misappropriation of our water funds. The water raises have been used as an illegal “tax” to fund everything else under the sun. Our water tower fund is not improving and no improvements are being made to our water infrastructure.

  4. Finally !!!!!! says:

    Maybe you need to read this Mr. Mayor and call Lawyer Barton to figure out how parks and recreation. etc. relate to our water funds and the yearly rate increases. After you read this I expect you may need to call the Municple League’s lawyer. The news will not be good.

    “Excerpt from Atty. General Dustin McDaniel Opinion No. 2006-210

    January 23, 2007

    It should perhaps also be noted as a general matter that state law does not address the issue of water and sewer fees, other than to grant cities the authority to establish fees for the use of municipal water and sewer systems. See A.C.A. §§ 14-234-214; 14-235-223. In other words, state law does not differentiate among the types of fees that municipalities may charge for the use of water and sewer systems. I will also note, however, regarding your statement that a hookup fee is being “used to generate revenues and is not related to services,” that this suggests the possibility that the “fee” is actually a “tax.” The Arkansas Supreme Court has explained the characteristics which sometimes render “fees” taxes. The court has stated:

    “The distinction between a tax and a fee is that government imposes a tax for general revenue purposes, but a fee is imposed in the government’s exercise of its police powers.” City of Marion v. Baioni, 312 Ark. 423, 425, 850 S.W.2d 1, 2 (1993) (citing City of North Little Rock v. Graham, 278 Ark. 547, 647 S.W.2d 452 (1983)). A city may assess a fee for providing a service without obtaining public approval; however, a city cannot levy a tax unless it has received approval by the taxpayers. Barnhart v. City of Fayetteville, 321 Ark. 197, 900 S.W.2d 539 (1995) (citing Ark. Code Ann. § 26-73-103(a) (1987)). A governmental levy of a fee, in order not to be denominated a tax by the courts, must be fair and reasonable and bear a reasonable relationship to the benefits conferred on those receiving the services. Id.; Baioni, 312 Ark. 423, 850 S.W.2d 1.

  5. Not Hard to figure says:

    Sales Tax Receipts never mentioned. That in itself is a very large amount. If we have to drain the water fund dry, where is the sales tax revenue being spent? I am sorry, but Kim and the Mayor just proved a point in this article with their comments about what the priorities are by the Mayor and the City Council. I have mentioned this before, you can build a beautiful fire department, but when you get to a fire and the water pressure won’t put a fire out or the pressure causes a water line to burst. We might look good, but that will be very slim satisfaction to the owner of a home or a business that will burn. This time I will have to sign off with HARD TO FIGURE WITH THIS LEADERSHIP.

  6. Confused says:

    I guess that I read a different article than those who posted comments above. The quote clearly stated that “The city went from 1972 to 2009, that’s 37yrs with no rate increase. The City has had four water rate increases.”

    And, this issue was never brought to the attention of the public until THIS mayor was elected. I never remember West, Anderson or Rodgers talking about the condition of the water lines or the water fund or any plans to get things fixed.

    After 37 years, it seems to me that we finally do have better leadership in the mayors office. I know for sure that a 37 year old problem will not fix itself, nor will it be fixed by anyone in less than 2 years.

  7. you're kidding me right? says:

    its not hard to see that this “news” publication shows everything the mayor may or may not have done wrong… it doesn’t print many wins the mayor has had, and it takes some of the good things the mayor is doing and puts a backwards spin on them to make him look bad. news is supposed to be unbiased and this “news site” is very biased. and will take every opportunity to put videos of mistakes on here but not the videos of the things done right.

    i thought it was funny in that babe ruth video that one lady said a very important meeting was videoed and never put on Monticello live… a video that made someone beside the mayor look bad, it didn’t get placed on here..

    don’t know why i even typed this out, it will be censored

  8. Finally !!!!!! says:

    Confused, you need to spend the time researching, and we did not go 37 years withour a water rate increase. The last water rate increase was 2002, not 1972, before the yearly increases started in 2009. We have had four since then. Under West we built the Gaster Hill water tower and built Lake Monticello for a future water supply and under Anderson we paid off everything and the water department was in good shape.

    The real fleecing was began when we voted in a non-dedicated one cent sales tax and our spending for wants rather than needs started. As no maintenance and upkeep is budgeted when we build new splash pads , parks etc the drain on our water funds is escalating every year. This started under Rogers and has grown worse under Maxwel.

    I would like to point out that this is the same Mayor who had an emergency meeting to levy a “hotel tax” and decree that we need a 33 million doolar sports center for UAM. He is right now trying to find ways to generate new revenue in “fees” that bypases taxpapyers and the current Council does nothing to stop this.

    Ms. Moss, thank-you for this brave article and I hope you follow-up as thr Mayor did not tell the truth when you interviewed him.

  9. Dennis says:

    Mayor West was the one who got the use of Ten Mile Creek for Monticello’s sewer system. It was illegal to dump sewage into a stream that did not flow year round. Everybody knew the creek dried up every year, but West was creative and used aquatic plants that lived off of and cleaned up the sewage enough to allow the excess to be dumped into the creek. After a year of doing this the creek was deemed “free flowing” and the aquatic plants discontinued. Now Ten Mile Creek flows year round fed entirely by Monticello sewage. There’s progress for you. Watch out for “creative” ideas to deal with the problems facing the water issues today and don’t drink, fish, swim or dip your toes in Ten Mile Creek!

  10. suzzie says:

    not all pipes are old metat plastic pipes break as do metal ones one broke on a sunday afternoon no one could fix it til monday this pipe had been broken for over a week water shooting high into the air who pays for this we do should have been fixed when discovered

  11. dollar bill says:

    Confused you picked a good id name to go buy because its clear your “confused”. its taken 2 years for this mayor to decisive everyone that voted for him. he hasnt done a thing he told voters he would do. he has only been a bully, and this is a very good example of it.

  12. GRANMAW says:

    I would say good things about maxwell but I DON’T KNOW ANYTHING!!

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