City council met on Monday, May 11 and in unfinished business, bond attorney Michael Moyers of Eldredge & Clark LLP, gave a comprehensive breakdown of three ordinances he helped write, explaining the sales tax and bond questions that will appear on the November ballot. He began by defining the ordinances themselves, then interpreted what different post-election outcomes would mean for the city.
“The first ordinance levies a one percent sales tax for a period of twenty years. If it’s approved by the voters in November, that tax will become effective on April 1, 2027. The second ordinance calls an election on the levy of that tax. The city can’t levy a sales tax without the approval of voters,” Moyers explained.
“The third ordinance puts two bond questions on the ballot: the water question and the sewer question. State law requires that there be a separate question for each purpose. So ultimately the voters will be voting on three separate questions; one for the levy of the one percent tax for twenty years, another for ten million dollars’ worth of bonds for water improvements, and another for ten million dollars’ worth of bonds for sewer improvements.”
Moyers iterated that it is really a “job of sales” for the city council, Chamber of Commerce, and advertising agencies to make sure they notify citizens on what’s at stake. “Whenever you have necessary water and sewer improvements, for every dollar of those that’s funded through a sales tax bond issue is one dollar less that the revenues of the system do not have to support,” Moyers stated. He pointed to Eureka Springs’ enviable position given the amount of tourism the city brings in, which will potentially allow visitors to subsidize these necessary improvements to the water and sewer system so that the burden doesn’t fall on the backs of folks who actually pay water and sewer rates. “It’s just a matter of making sure all the stakeholders know what all the ramifications are.”
Moyers outlined potential outcomes of the vote. If the tax question were to pass and one or more of the bond questions fail, the city would have a twenty-year, one percent tax on the books that could be used for operations and maintenance of the water system and improvements to the water and sewer system. No bonds could be issued, but the tax revenue could be used for pay-as-you-go projects.
Council could return to voters later on for approval on a bond issue. Because the tax will only be levied for twenty years, if an election for bonds were held two years down the road, it would be two less years that the bonds could amortize over that period – resulting in higher bond payments. The residual that goes back to the city after payment of debt service (bond payments) that can be used for water and sewer improvements would be reduced.
If the tax along with one or more of the bond questions pass, the city could issue the bonds. Then, the tax could be used first to make the monthly debt service payment on the bond issues. The money would then flow back to the city from the state to the trustee bank for the bonds to pay the monthly debt service, then back to the city to use for water and sewer purposes. If the water question passes and the sewer question fails, the city can issue up to ten million dollars but only use it for water purposes not for sewer – and vice versa.
If the tax fails, and the bond question passes, the entire plan fails.
Moyers said he would send council a form within the week that demonstrates what will be on the ballot so they can collaborate on putting together the information and begin educating the public. Ordinance Nos. 2384, 2385, and 2386 were read by title only, and approved unanimously on third and final reading.