Nicky Boyette – At a workshop July 5, Mayor Butch Berry told city council he intends to send them his proposal for a one percent tax increase on all items currently being taxed. Estimates at city hall indicate this tax would bring as much as $1.1 million annual revenue. His plan is for the preponderance of the new money to go toward infrastructure needs with a percentage – as much as 25 percent – to be dedicated to pay for upkeep and operations of the Auditorium and another portion earmarked to replenish city reserves.
Berry told aldermen, “What’s been draining our revenues are water and sewer.” He distributed data that demonstrated the city has been using some of its reserves since 2007 to prop up the water and sewer line item.
His data showed reserves as of December 2011 totaled $949,326. The next two years’ reserves topped this figure, but by 2014, the figure was back down to $942,437. It sank sharply in 2015 to $574,513.
Berry stated sewer rates are not keeping up with expenses. To raise those rates, the city would have to conduct a public hearing, but to raise them enough to cover expenses would be an exorbitant increase to locals. A city of 2,000 residents is forced to maintain an infrastructure supporting as many as a million visitors passing through each year. Though tourism is the town’s industry, tourists also have a tremendous impact on the aging infrastructure, and Berry estimated as much as three-fourths of the new revenue would come from visitors.
Alderman David Mitchell agreed revenue enhancement was in order, and noted because water and sewer was not paying its way, Public Works would never be able to pay for improvements to the system. “Some of the lines are from the 1880s. We can’t kick the can down the road much farther. We’re going to have to fix it.”
Berry added, “The city will have to spend money to save money.”
Finance Director Lonnie Clark explained Public Works spends $5,000 monthly on two drums of chemicals it must use in processing sewage. If the city had funds to purchase the chemicals in bulk, it would save as much as 70 percent of the annual cost of the purchase and transportation, or $42,000. There is the cost of testing at the treatment plant because the city cannot afford to build its own testing facility. Also, Public Works must hire someone to remove sludge from its tanks, a twice a month procedure during the busy season. If the city had the equipment to do the job in-house, not only would it save the cost of hiring a contractor, it could dry the sludge and resell it as fertilizer to generate revenue.
“We don’t have the funds to do these things,” Clark commented.
Berry gave a more dramatic example. He said the City of Berryville received $8.8 million through loans and a Community Block Grant of $3.8 million. To get the grant, Berryville had to pay a match of $600,000. Eureka Springs is eligible for a similar grant, but does not have the wherewithal for the match. Ample reserves would afford the city that opportunity.
Alderman Terry McClung asked if the city were to build a water testing facility, would it also need to hire extra personnel, and Berry said it would not as far as he knew. He emphasized the proposed one percent tax would be strictly for infrastructure needs, reserves and for maintenance and operation of the Auditorium, not hiring extra personnel. He also suggested a ten-year sunset clause on the tax.
There was consent at the table the general election in November would be the best time to put the tax to a vote of the people, meaning council would need to pass its ordinance regarding the tax no later than the last meeting in August.
Berry suggested 25 percent of the tax revenue could go to maintenance and operation of the Auditorium, and an Auditorium Commission would oversee the funds. He acknowledged council would have final decision on how the tax revenue would be apportioned.
As for adding one cent to the tax base, Berry said, “We’re not out of line,” explaining comparative data showing Arkansas retail tax by city with West Memphis and Ashdown at 10.75, Batesville and Texarkana at 10.25 and Eureka Springs at 9.375. This amount is the total of state tax of 6.5 percent, county tax of .5 percent and city tax of 2.375 percent. In addition, there is the tax on prepared food, drink and lodging (CAPC tax) of three percent, and a state tourism tax of two percent.
Mitchell stated their message to the public should be to communicate the need for the revenue enhancement accurately and honestly and not allow naysayers to preempt the conversation.
Berry said the city has been promising citizens for years it would repair and extend sewer lines, and he is convinced this tax is what it will take to get it done. Eureka Springs does not have a large business such as Tyson’s whose monthly water bill covers the water bill for the rest of the town.
McClung proposed that if the tax generates what is expected that the city pays for everything out of pocket and not depend on loans or bonds. Others at the table agreed.
Berry said his office would begin work on the ordinance right away so council would have time to work it over.