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Fort Smith director: New insurance plan could cover Convention Center shortfall

Fort Smith City Director Gary Campbell is proposing that the city can solve its future and certain convention center deficit by using the Arkansas Municipal Health Benefit plan to cover city employees.

Arkansas turnback funds supporting the Fort Smith Convention Center — about $1.8 million a year — will end in July 2010. The annual deficit without the turnback funds could be as high as $1.2 million. Plans to cover the deficit include a 1% hamburger tax and reinstating the city’s business license fee.

Campbell, who is the current president of the Arkansas Municipal League, suggests that using the Arkansas Municipal Health Benefit plan could save the city up to $3 million a year compared to the city’s current plan.

“One way to cover the Convention Center deficit without rushing into a risky election would be to determine how we could utilize the less expensive Arkansas Municipal Health Benefit Plan and determine the potential savings for 2010,” Campbell noted in an e-mail memo to Fort Smith City Administrator Dennis Kelly.

Campbell also raised the issue in the Tuesday (Nov. 3) board meeting.

In the memo, Campbell listed several reasons the Arkansas Municipal plan is preferable to the current plan.
• Comparable to our current plan including wellness features
• Zero co-pay
• Higher maximum lifetime benefit (e.g. $2M vs the current $1M)
• Life Insurance premiums are 67% our current plan
• Lower management fees (3% versus our current 8%)
• Most Arkansas cities that offer employee health coverage utilize this plan
• Many cities have seen their health care costs reduced year to year.
• Both hospitals are active in the plan
Most local physicians are already active in the plan
Most surrounding cities utilize the plan, including Van Buren and the Fort Smith Housing Authority
Physician reimbursement is higher than our plan, which could contribute to better physician recruitment and retention
Hospital reimbursement is higher than our plan, which could benefit our hospitals

“As the 2nd largest city in the Arkansas Municipal League, Fort Smith would have a voice in its self-insurance management decision,” Campbell noted.

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Campbell asked Kelly to schedule a meeting “as soon as possible between key staff members” and Don Zimmerman, director and health plan administrator for the AML, to compare the financial and health care features between the League’s plan and the city’s existing plan. Campbell’s request received support from City Director Cole Goodman.

“If we can get the same or better coverage at significant savings, we need to seriously consider this,” Goodman said in an e-mail response.

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Get us out of the convention center/wedding reception business!

Self-serving enough? Not only does Mr. Campbell want to avoid taking a stand in a "risky election," he's pushing his own organization's health plan. Give me a break. If I were a city employee, I certainly wouldn't want my family's health coverage being determined by how much money it costs to run a convention center. If the plan's a competitive one, sure, evaluate it with all the others when it's time for that. But to do it to save your political ass is just the height of self-serving cowardice. Before I retired, I spent nine years in the convention center business in Texas. What people in Fort Smith don't seem to realize is the issue here is not problem-solving the budget shortfall. It's not a good idea for the city to be running the convention center, anyway. Nothing against the fine folks working there, but they aren't doing the job as well as I bet they could if they were cut loose from the city's governance. You don't have the same negotiating power, the same competitiveness in attrracting conventions. What do they attract now? Wedding receptions and poorly attended boat shows? If that's all they're doing with it, then the city REALLY doesn't need to be running the place. Conventions are a customer-centric industry. I don't care what party you're in, government does not equal customer service, folks. If the convention center isn't big enough to attract a management firm, the merger with the separate A&P is probably the best idea. The only reason our feckless (yeah that's with an e) city directors don't like it is because they're afraid people will eat them alive for what will probably end up being a 1% restaurant tax when all is said and done. That's pennies, people. Unless you're eating out daily or regularly feeding a few soccer teams, it's not something that you'll ever notice in your budget. It's the way almost ever other city does it, and that's because it works. If you wanna talk about something that's really an explosive issue, start messing with people's health insurance to save a dime. Smart, real smart.

Anon knows the deal

Whomever this Anon is knows of which he speaks. I assume that Director Campbell wants to keep the operation of the Convention Center within the city itself if he is going to operate it with general funds saved from changing insurance providers. That is a bad idea. If we can get better coverage cheaper with the Municipal League policy, let's do it. But. Let's let the A&P run the convention center and use a restaurant tax to pay for it. Let's keep the revenue that the center generates within the center so that it can have the resources necessary to keep it in top notch condition. The revenue from the convention center has been diverted to the general fund for the purpose of the library and parks. These are much needed and necessary city functions. Use the savings from the insurance change to help these good folks and not divert convention center revenues for that purpose. The convention center and the A&P should be self-financed operations independent of the general fund. The restaurant tax (resource) collected by the city for the A&P along with the existing hotel tax and convention center revenues are the way to go.
Whomever this Anon is knows of which he speaks. I assume that Director Campbell wants to keep the operation of the Convention Center within the city itself if he is going to operate it with general funds saved from changing insurance providers. That is a bad idea. If we can get better coverage cheaper with the Municipal League policy, let's do it. But. Let's let the A&P run the convention center and use a restaurant tax to pay for it. Let's keep the revenue that the center generates within the center so that it can have the resources necessary to keep it in top notch condition. The revenue from the convention center has been diverted to the general fund ...>> Read the entire comment.

Campbell and Convention Center

Director Campbell has stated he is very open to the idea of the operations of the convention center being turned over to a private 3rd party and have the city get completely out of it. I will ask those criticizing him and making assumptions to do a little more home work. Campbell is the only one making any "cents" on this whole issue. While the other directors are using their ingenuity to come up with new taxes he is actually suggesting ways to cut city costs and free up resources.

Let it sink or swim...

Sure, a restaurant tax, why not? While we are at it let's add a new car tax too. What else can we tax? The restaurant industry is down roughly 25% right now. Why would anyone in their right mind tax a struggling industry to pay for a money losing venture. Would you seriously tax the auto industry right now? How about we take a closer look at how the center is run? What are the total annual revenues of the convention center? What could be done to increase revenue? What could be done to decrease expenses? I'm sorry, but as a business owner, I have to ask these questions, why doesn't the convention center.

Convention Center is a cash cow for the community

There’s a real imbalance in the funding of the Convention Center. We expect it to survive on its sales; yet, when an event comes to town, chances are that the incidental money and tourist money spent around the town exceeds Convention Center rent. The rest of the community businesses owe the Convention Center something for bringing new customers to the area. Kill the Convention Center, and you’ll see a remarkable decrease in outside money coming to the River Valley.

Taxes and fees for the convention

OK RobertM. Let's impose restaurant taxes,etc. only on those days when an event comes to town at the convention center, fair is fair.

No Cash Cow here!

So with that thinking, while my inlaws are in town this week, I should expect a kickback from each restaurant they visit and retail outlet they shop? If I host a sports tournament with out of town guests, should I expect local businesses to help me cover the costs? The convention center is NO cash cow, it operates at a loss! It's a giant white elephant that occaisionally dresses up like a cow to trick you into thinking it's valuable. From wiki: In business, a cash cow is a product or a business unit that generates unusually high profit margins: so high that it is responsible for a large amount of a company's operating profit. This profit far exceeds the amount necessary to maintain the cash cow business, and the excess is used by the business for other purposes.

Basis for turnback

The existence of a turnback funds was based on the amount of sales tax the facility would generate for the state. This is based on a formula from the state. Conventions and shows generate business for restaurants and hotels. How accurate is it? Don't know. I know that the gun shows, boat shows, conventions such as the Jehovah's Witnesses last year bring a ton of folks to town. People drive from Fayetteville and NWA to hear our symphony cause they ain't got one now. The cash cow designation is not based on direct revenues. It is based on increased economic activity in the community. In answer to your question on kickbacks on sports tournaments...yes most of the bigger ones get some help in their costs from the A&P if they bring in folks that stay in hotel rooms. Your inlaws? Naw, they stay at your house and sponge off of you. No big impact.
The existence of a turnback funds was based on the amount of sales tax the facility would generate for the state. This is based on a formula from the state. Conventions and shows generate business for restaurants and hotels. How accurate is it? Don't know. I know that the gun shows, boat shows, conventions such as the Jehovah's Witnesses last year bring a ton of folks to town. People drive from Fayetteville and NWA to hear our symphony cause they ain't got one now. The cash cow designation is not based on direct revenues. It is based on increased economic activity in the community. In answer to your question on kickbacks on sports tournaments...yes most of ...>> Read the entire comment.

Sitting on their fat "turn back sides"

Only now that the state turnbacks are gone does the Convention Center get overdue attention. Lost revenue from mismanagement cannot be recovered but those responsible for the mismanagement should be dealt with. If that means termination, lawsuits or prosecution so be it. Many things need to change in Fort Smith and the whole country with no more business as usual.

Those responsible

I wish that all you anons would get a name so we would know you apart. That is why I am "The Observer". You may not know who I am but I am distinguished from the many anons. You claim mismanagement but it is not that. The hardworking staff at the center only do operations. Budget matters are done by the city administration and the elected board members. They are the one's responsible for diverting revenues into the general fund. The time you can fire them is at the next election. If the funds are placed into the operating budget of the center in the future then the library and the parks will suffer and the funds they got will have to be made up from other sources. This is what should happen. But all are important to economic development and the funds should be made up. Listening to some of the other comments would lead me to believe that the library and parks should be shut down if they don't pay for themselves. Convention centers, performing arts centers, parks, etc are the things that make a city where life is worth living, to coin a phrase. The same with Zoo's, waterfronts and other amenities that make for vibrancy. Without these things the city and the economy will not grow. Imagine, "Mr. Industrial prospect, we had a convention center and a performing arts center but we padlocked it. We no longer have a UAFS Season of Entertainment or the Fort Smith Symphony because the center lost money and we in Fort Smith don't think these things are important. Won't you move your plant and the executives to Fort Smith?" "Don't we have what you want? We don't have no restaurant tax that would cost you .50 on a $50 meal." "No?"" You would rather move to a town where the arts are valued and there would be a place to have a large company meeting? I don't understand."
I wish that all you anons would get a name so we would know you apart. That is why I am "The Observer". You may not know who I am but I am distinguished from the many anons. You claim mismanagement but it is not that. The hardworking staff at the center only do operations. Budget matters are done by the city administration and the elected board members. They are the one's responsible for diverting revenues into the general fund. The time you can fire them is at the next election. If the funds are placed into the operating budget of the center in the future then the library and the parks will suffer and the funds they got will have to be made up from other ...>> Read the entire comment.

Observer Is Right

The convention center staff is not the problem. Never said that, never will. City government mismanagment is the problem. City administrator, city directors, they are the problem. The Mayor is doing his job, the support staff are doing their jobs. Administrator, city directors, get with the program and get your fiscal ducks in order.

not quite so sure about that

There is much to be said about getting the city government out of the business of running a business, namely the convention center. I will defend Director Campbell as someone who has stood up and said that the business model of the convention center must be disected and reformulated first before any notion of taxing were to commence. From the get go, it was known that the state turnback would expire. That meant, that there was a definite learning curve for the convention center. In a nutshell, it was squandered. Some definite questions need to be asked as to who and how? A 10-year open armed, megaphoned development director, experienced in conventions, was needed to put the convention center where it needed to be as of this point in time. I am not in a position to answer those questions except to say that a fish always stinks at the head. As to the why, a good part of the answer rests in the fact that Fort Smith remains a town off the radar. I am glad that the city continues to address that question as well. So, we're in the boat we're in. It's got a hole in it and it's sinking. We address this with a short term and a long term solution. Bubble gum and fingers followed by either a new captain or drydocking the boat. I applaud Director Campbell for exploring an out of the box solution. Why not look at a new health insurance program? That's all he's called for is to investigate the plan. Director Settle suggests a penny sales tax. Administrator Kelly says 1-3 penny prepared food tax. That's the bubble gum and fingers, mixed in with answering the "why questions". Director Campbell is suggesting a business model review, which may include outsourcing management. He's the only one looking at the long term. Drydocking means finding an alternate use for the building. New city offices, anyone? How about downgrading the Marshal Museum a tad and putting it there? A vo-tech school? Any other ideas?
There is much to be said about getting the city government out of the business of running a business, namely the convention center. I will defend Director Campbell as someone who has stood up and said that the business model of the convention center must be disected and reformulated first before any notion of taxing were to commence. From the get go, it was known that the state turnback would expire. That meant, that there was a definite learning curve for the convention center. In a nutshell, it was squandered. Some definite questions need to be asked as to who and how? A 10-year open armed, megaphoned development director, experienced in conventions, was ...>> Read the entire comment.

Gary Campbell and City Administration Wrong

OK, let me correct the title to include everyone, so the Gary Campbell for state senate team doesn't get upset. He was on the board, and most of the rest on this current board were present, when the turnback money was allocated somewhere besides where it was intended. The new members on the board were present when the latest round (last budget) of bait and switch was done with the turnback money. Now, all the accomplices in this action are wanting to tax us more because they didn't realize the turnback money was going to end (although everyone else in the state knew this and PLANNED for it). So, are they accomplices in bait and switch spend taxpayer money how we see fit, or are they incompetent? Either way, we (citizens) now have to foot the bill for their apathy/arrogance/incompetence/irreverance. It is time for this group to either start doing their job or get off the board. I am tired of paying for their......... Most individuals gain experience and knowledge from what they do over time, what is the excuse for this group?
OK, let me correct the title to include everyone, so the Gary Campbell for state senate team doesn't get upset. He was on the board, and most of the rest on this current board were present, when the turnback money was allocated somewhere besides where it was intended. The new members on the board were present when the latest round (last budget) of bait and switch was done with the turnback money. Now, all the accomplices in this action are wanting to tax us more because they didn't realize the turnback money was going to end (although everyone else in the state knew this and PLANNED for it). So, are they accomplices in bait and switch spend taxpayer money ...>> Read the entire comment.

So we are looking at a

So we are looking at a restaurant tax to ultimately fund the library and parks? Let the convention center stand on it's own. Stop diverting any funds from it. If it turns a profit, put the profit in a savings account for the years it loses money. Once the savings account is high enough to cover a years expenses, start using the extra profits for other city expenses. Run it like a business, not a entitled liability. As for Mr. Industry, he's more interested in the bottom line than performing arts. The convention center can make it on it's own, it's like a baby bird, it just needs to be kicked out of the nest.

Funding & Management: Two Separate Decisions

My suggestion of taking advantage of an equally good and more economical healthcare plan was aimed at the funding shortfall without regard to the Convention Center management issue. One of the structural/organizational problems, is too many "cylinders of excellent" independently driving Convention Center business. This needs to be corrected. Relative to General Fund monies diverted to Parks and Library, prior to a legislative change, the state turnback funds were limited to capital projects. This required the General Fund to subsidized the Convention Center. I don't disagree that the funding should have been handled differently.

Gary Campbell, Whatever do you mean

What do you mean by "too many cylinders of excellent" independently driving convention center business? Are you saying there are too many cooks in the kitchen i.e. too many interests fighting against one another? Please elaborate. Also, if you don't disagree that the funding should have been handled differently, when did you come to that conclusion? At the outset when the funds were being diverted or this year when it was brought to the public light?

Explanation to anonymous 2

My apologies for the confusion. I should have used a different term. "Cylinders of Excellence" are sometimes used in business discussions referring to independently operated silos or departments that would be more effective (1)as a tightly coordinated team effort or (2) combined into a single organization. It can work both ways (e.g. In Overland Park, KS, they contract with a private firm to operate their CC in tight coordination with the public Visitors Center to support their Convention Center. Last year it returned $500K to the General Fund). Our A&P (or Convention and Visitors Bureau) and our Convention Center are separate organizations because the Convention Center was built by the City and the A&P was created independent of the city by state law. As a result, they have separate budgets and separate objectives. This as we have learned can lead to a collective inefficiency as good as they may be individually. Regarding your funding question: As the saying goes, "hindsight is better than foresight..." The CC funding formula has been a moving target. As I recall, when the Convention Center project was approved by the voters, the state turnback was fixed at a percentage of the state sales taxes generated by the CC. Later, the Legislature eliminated that provision and approved a 10 year fixed amount for selected cities. The 10 year law, limited the turn-back to capital projects. With our CC brand new, we had very little capital improvement work and the General Fund subsidized the CC's operations. After we got the law changed, it freed up the turn-back funds for CC operations and the General Fund money was reallocated to the Library which had suffered a big state cut and parks, etc. Along the way, the CC did not achieve a breakeven position and that is where we find ourselves today. Many know that I have been concerned for sometime about the growing CC deficit. For various reasons, the Board, Mayor and Administration have been focused on other issues like water supply ($180M), EPA/wet weather solution ($123M), drainage problems, economic development, etc. But regardless of how we got here, we must combine our efforts to develop a plan whatever that is, to keep it running successfully. Thanks for your questions and call me if you would like to discuss more details.
My apologies for the confusion. I should have used a different term. "Cylinders of Excellence" are sometimes used in business discussions referring to independently operated silos or departments that would be more effective (1)as a tightly coordinated team effort or (2) combined into a single organization. It can work both ways (e.g. In Overland Park, KS, they contract with a private firm to operate their CC in tight coordination with the public Visitors Center to support their Convention Center. Last year it returned $500K to the General Fund). Our A&P (or Convention and Visitors Bureau) and our Convention Center are separate organizations because ...>> Read the entire comment.

The right stuff

This looks like a plan that will save money for both the city and its employees. It also looks like a much better plan than the one currently in place. I hope no time is wasted in investigating whether this will truly work for us. Kudos to Director Campbell for finding something that is not only better for us, but that will save us $3 million every year in the process!

Good idea, why did it take so long?

Why did it take a $1.2 Million dollar shortfall for someone to find this "better" option? Shouldn't the city be looking for better deals/pricing anyway? I'm glad Campbell is suggesting this new path, I just wish whoever was over the cities insurance would have suggested this 5 or 10 years ago.

Gary Campbell Is Wrong

The reason the "better" option isn't a better option is because the city has tried this plan years ago. The city only did it for a year and realized it wasn't a good plan. The only reason this "better" option is being considered now is because Campbell is president of the municipal league and they want him to shove it onto the city. Bad idea years ago, bad idea now. This is the same old bait and switch by the city government. Instead of spending money on what it is stated to be used for, they spend it on pet projects. Then when the money runs out for the needed projects, they come up with "better" options. When is this city government going to stick to it's budget, be fiscally responsible, take care of its obligations and quit thinking of today only and do some forward thinking? Build a tax base, cut waste, increase quality of life, and everything else will fall into place.
The reason the "better" option isn't a better option is because the city has tried this plan years ago. The city only did it for a year and realized it wasn't a good plan. The only reason this "better" option is being considered now is because Campbell is president of the municipal league and they want him to shove it onto the city. Bad idea years ago, bad idea now. This is the same old bait and switch by the city government. Instead of spending money on what it is stated to be used for, they spend it on pet projects. Then when the money runs out for the needed projects, they come up with "better" options. When is this city government going to stick to ...>> Read the entire comment.

Too Good To Be True

Amen

Gary Campbell answers anonymous 2's questions.

Mr. Anonymous 2, I appreciate your thoughts, but feel compelled to offer you some answers. (1) I can't recall the city using the Municipal Health Plan during my 15 years on the Board. I would be interested in any evidence you have to the contrary. (2) Like most taxpayers, I do not care how the city sources its employee health care program as long as it is competitive and cost effective. I will not benefit if the city elects to use the Municipal Plan. This has been my stance on all city bidding contracts during my Board tenure. (3) My position as President of the Municipal League is a one year voluntary term in which I receive no compensation and I do not benefit whether the city uses any of the League's programs or not. But, I think you would agree that it is an honor to serve and promote Fort Smith around the state. (4) My position as President, has enabled me to observe the successes of many other Arkansas Cities that are not obvious from Fort Smith. About 400 other Arkansas Cities, counties and municipal organizations use the Municipal Health plan to reduce costs while providing excellent coverage for their employees. This is what caught my attention. (5) My suggestion was that the City do an "apples to apples" comparison of our current plan and the Municipal Plan. Then we should do what serves the employees and the taxpayers best. Incidentally, both plans are self insurance plans that use the same Fort Smith physicians and hospitals. (6) If the Municipal Health Plan is the right choice, its savings could cover the Convention Center deficit short term while we can figure out how to deal with it. This would certainly follow your suggestion of cutting waste, being fiscally responsible and thinking about tomorrow. Also, if the only CC option is a tax, the voters would have more time to fully discuss and question the details of the proposal before stepping up to the ballot box. Fully informed voters make better decisions. Thanks for speaking up and I would be happy to discuss more details at length on the phone.
Mr. Anonymous 2, I appreciate your thoughts, but feel compelled to offer you some answers. (1) I can't recall the city using the Municipal Health Plan during my 15 years on the Board. I would be interested in any evidence you have to the contrary. (2) Like most taxpayers, I do not care how the city sources its employee health care program as long as it is competitive and cost effective. I will not benefit if the city elects to use the Municipal Plan. This has been my stance on all city bidding contracts during my Board tenure. (3) My position as President of the Municipal League is a one year voluntary term in which I receive no compensation and I do not ...>> Read the entire comment.

Kudos to Gary Campbell

I appreciate you speaking up and elaborating. The city utilized the municipal plan prior to your tenure. As for the plan itself, as long as it is apples to apples as you say, and this saves the city money, I too am for it. I would think it would be dirt cheap if there are that many organizations using it. I too would be interested in the numbers. When we start looking at cost cutting at the cost of the city employees benefits, that is where I draw the line. Those at the sanitation dept., city offices, police and fire are out there working for us and should get their just compensation. I still disagree with you on the civic center. The turnback was not used for the civic center, but diverted to other needs. This was done for many years and now that it is sunsetting, now we are in a panic. As highlighted in Mr. Tilley's reporting, many other cities knew this would end and planned for it. My question is why we (COFS) didn't plan for it? As for how to solve it, it looks like ye old food tax is going to be the route we take. I am hoping it will be a little bit and not a lot of taxes. From this, we can build upon all the quality of place items being discussed over the past few months on the TCW and each of these improvements will lead to greater tax base and more improvements. We can agree to disagree and I do applaude you stepping up and answering the questions.
I appreciate you speaking up and elaborating. The city utilized the municipal plan prior to your tenure. As for the plan itself, as long as it is apples to apples as you say, and this saves the city money, I too am for it. I would think it would be dirt cheap if there are that many organizations using it. I too would be interested in the numbers. When we start looking at cost cutting at the cost of the city employees benefits, that is where I draw the line. Those at the sanitation dept., city offices, police and fire are out there working for us and should get their just compensation. I still disagree with you on the civic center. The turnback was not ...>> Read the entire comment.

Cost cutting, savings,etc.

Today the community service bus is parked across the street with the engine idling. It is a lovely day for the street crew to be out cleaning up the sidewalks. I thank the street department for their work. With warm sunshine, blue skies and a cool Autumn breeze the only think wrong with the picture is the smell of diesel exhaust from the idling bus and the wasted fuel. With our fighting men overseas let's remember why they are fighting in these oil rich,insane countries. If we conserve fuel we can make a small gesture with big benefits towards reducing the price of oil and reducing the money in the pockets of our enemies who are floating on oil in the Middle East, Venezuela, etc.