Nicky Boyette – Monday evening saw Eureka Springs city council spend two-and-a-half hours talking about the city’s finances with a couple other topics briefly interspersed, but it was mostly finances from 5:30 to 8 p.m.
Council convened 30 minutes early for its monthly budget workshop, and Mayor Butch Berry started off saying February sales tax revenue was up 18 percent over January. Alderman James DeVito added that collections at the City Advertising and Promotion Commission (CAPC) have also been especially favorable this year, which bodes well for future city revenue.
Fire Chief Randy Ates also had glad tidings. He was able to break a stalemate in the billing process at the state-level Medicaid office, and the city can now back bill for ambulance services for the past year, meaning the city stands to receive up to $53,000.
Berry said city revenue was not keeping up with expenditures, and announced he had sent a memo to department heads last week instituting an immediate “freeze on all non-operational essential expenditures.” The freeze includes new hires, replacement hires, pay rate increases, travel and conference expenses, uniform purchases and even maintenance expenses. His memo states, “Maintenance items that can be directly related to the immediate and essential operation of the city only will be considered on a case-by-case basis.”
Berry reiterated the problem is cash flow lagging behind expected expenses, not a mishandled budget.
Alderman David Mitchell was first to comment. “The memo says it all. This what a business should do and the freeze should not be released until we’re in the black.” He later called Berry’s move “remarkable.”
Alderman Terry McClung stated regarding the memo, “I think it’s great. It’s going to stop spending and it will give us a better handle on where we are with the budget.”
Sales tax implementation
Berry said he found no legal impediments in his conversations with the Municipal League regarding his plan to ask for a two percent sales tax on retail items and using the anticipated $1.2 million annual revenue for infrastructure upgrades, maintaining the Auditorium, and building back the city’s reserves.
He said his plan was to allocate $200,000 toward the Auditorium. Of that total, $150,000 would be for operating the facility and $50,000 could be for maintenance and reserves. The remaining $1 million would go toward repairing and extending sewer and water lines and rebuilding the city’s reserves.
After discussion, the mayor agreed a percentage of revenue rather than a fixed amount could be apportioned to the Auditorium. Mitchell was not comfortable that the CAPC, which pays an annual amount of more than $100,000 to operate and maintain the Auditorium now, would be “off the hook” if the tax were enacted.
Berry stated much of the CAPC contribution would go away as would much of what the city pays for Auditorium utilities; however, details would be worked out when they are ready to craft an ordinance.
Alderman Joyce Zeller commented she did not think the public would support a tax to fund the Auditorium. Maybe sewer repair, but not the Auditorium.
McClung remarked if the city were to net $1.2 million from the tax, he would want to give $300,000 toward the Auditorium, but did not think the tax would generate nearly that much.
DeVito mentioned Berry had presented a five-year plan, so suggested a five-year sunset on the tax, and Berry countered that he was thinking of a ten-year sunset.
DeVito answered that the city should then have a ten-year plan, to which Berry was amenable. “It took us ten to fifteen years to get into this mess, so it will take us awhile to climb back out,” he said.
Mitchell was still not satisfied that the CAPC would not be participating much in maintaining the Auditorium, and DeVito replied, “The Auditorium has been a political hot potato for years. It has been tossed back and forth between the city and the CAPC.” He said 12 percent of CAPC collections are diverted to maintaining a building, not attracting tourists to town. If funds were redirected back into advertising, it would benefit everyone because the city depends on tax revenue it gets from tourists.
Berry said he would continue to update council at the next meeting.