A year end summary report from Fort Smith Finance Director Kara Bushkuhl shows that city officials are concerned about 2013 revenue and have asked department heads to look for ways to reduce or delay spending.
Fort Smith’s general fund at the end of 2012 was $5.975 million, down $722,144 less than estimated once prepaid expenditures are accounted for. Overall, city revenue during 2012 was $329,000 below estimates.
Each of the city’s 1% sales taxes (1% for streets, 1% for water and sewer work) collected $19.605 million in the 2012 reporting cycle, up slightly from $19.341 million in 2011. The city’s portion of collections from the 1% countywide tax during 2012 totaled $15.279 million, just above the $15.155 million in 2011.
“The city sales taxes for 2012 were 1.36% more than 2011 and were 1.95% above the budgeted revenue for 2012,” Bushkuhl noted in her report that was released late Tuesday afternoon. “The last two months of the year were both below the previous year’s revenue and that had an impact on the amount of taxes available for the fire and parks departments operating sales tax revenue.”
Collection declines may also delay capital projects planned for 2013, Bushkuhl reported. The declines included an almost $500,000 drop in franchise fee revenue, and property tax revenue down $95,000.
The city’s fund balance was also impacted by $302,000 more spent by the Fire Department than anticipated, and $170,000 more in Police Department spending than planned. Those expenditure increases were partially offset by a $136,000 reduction in Transit Department spending and $61,000 less in Parks Department spending than was budgeted.
“The city needs to be cautious in its spending over the foreseeable future until we have an opportunity to review significant first quarter revenues at the end of April 2013,” Bushkuhl advised in her report. “In the meantime, the departments have been asked to review capital expenditures and delay filling vacant positions for at least two months unless critical to operations. The 2013 major revenue sources in the General Fund will be reviewed and adjusted based upon the actual revenues received during 2012.”
In a Tuesday interview, Bushkuhl said she and City Administrator Ray Gosack “are in the middle of looking at what we will revise” with respect to budgets and capital projects.
“Basically we’re just going to have to tighten our belts and review where our levels of revenue and where our level of spending is,” Bushkuhl said.
The report wasn’t all bleak. Revenue reports were positive for the Fort Smith Sanitation Department and the city’s water and sewer operating fund.
The sanitation operating fund balance was $2.048 million at the end of 2012, well ahead of an anticipated balance of $1.705 million. According to Bushkuhl’s report, landfill operations revenue was up about $183,000 more than anticipated, roll-off collections were above estimates by $92,000, and residential collections were $67,000 more than expected. The sale of equipment resulted in about $150,000 more revenue than planned.
Baridi Nkokheli, director of the Fort Smith Department of Sanitation, credited the positive numbers on previous and ongoing efforts to modernize landfill and residential and commercial collections. The department is unique to the city in that it is an enterprise fund – essentially operating like a standalone business.
“We have to compete against the private sector ... and that’s why we tend to be more aggressive and proactive in our operations,” Nkokheli said Tuesday.
Nkokheli anticipates continued gains from efficiencies. For example, with the fully automated residential trash service, the department is able to sell two collection trucks for every new automated collection truck required.
“The focus here is to be service-oriented, and that’s why we have about 75% of the commercial (trash collection) share in the city,” Nkokheli explained. “The efficiencies that we put in place and will continue to put in place help us do more and do it better.”
The working capital balance for the water and sewer operating fund at the end of December was $11.101 million – $2.25 million more than anticipated.
“The revenues from water sales to residential, commercial and industrial users was $1.7 million more than expected. Sewer service charges generated $262,000 more revenue than estimated,” Bushkuhl explained in the report.
The increased revenue included $581,000 received from the city of Van Buren as part of a negotiated “true up” agreement to settle disputed water charges dating back to 2006.
An improved fund balance was also the function of reduced expenses, with some of that from lower interest rates on refinanced water and sewer bonds, Bushkuhl said.
A negative surprise was from the almost $500,000 drop in franchise fee revenue. The decline, down 7.61% from 2011, ended two years of consecutive gains in franchise fee revenue. Following are the previous five years of franchise fee revenue.
2012: $6.071 million
2011: $6.571 million
2010: $6.492 million
2009: $5.99 million
2008: $7.366 million
Part of the reduction is attributed to less production within the Fort Smith regional manufacturing sector.
Franchise payments from Oklahoma City-based OG&E was $3.618 million in 2012, down from $3.832 million during 2011. Whirlpool Corp., once a major customer for OG&E, shuttered its large Fort Smith plant in June 2012.
Franchise fee payments from XTO, a natural gas supplier, fell more than 27% in 2012, dropping from $504,211 in 2011 to $367,343 in 2012. XTO, through Seminole Energy Services, sells primarily to industrial users in Fort Smith.
Fort Smith-based Arkansas Oklahoma Gas Corp. paid the city $914,019 in franchise payments in 2012, down from $1.054 million in 2011. AOG President Mike Callan said reduced production at Fort Smith manufacturing operations and low natural gas prices contributed to the reduction in franchise payments from natural gas utilities.
“We’re just seeing a lot less (gas) going to those (industrial) users,” Callan said Tuesday.