North Little Rock City Council members are considering either a half-percent city sales tax or the revival of a fee for sanitation services as a way to increase revenue to maintain city operations and a healthy reserve fund over the next five years, according to city financial projections given to council members.
City aldermen met 30 minutes before their regular meeting Monday night to discuss revenue projections provided by Mayor Joe Smith's recent state of the city report, as well as the revenue options available. A sales tax would need approval by city voters. The council could impose a sanitation fee without going to the electorate.
Smith scheduled a public hearing on the options for 5 p.m. April 24 at City Hall, one hour before the next regularly scheduled City Council meeting.
"We have to come up with an attractive means of increasing revenue, whether it's a sales tax or a sanitation fee," Alderman Charlie Hight said.
If a sales tax increase is the preferred option, the council will need to make that decision this month, perhaps at that April 24 meeting, in order to hold a special election in August, Smith said. North Little Rock doesn't currently charge for sanitation services, which include its leaf pickup in the fall.
"A sales tax is the most fair," Smith said. "The problem is to convince the people that they're better off with that than with a sanitation fee."
The city projects its reserve fund balance, at $13 million to begin this year, will drop to $8.9 million by year's end. By "not doing anything," Smith said, those reserves will fall below $6 million by 2019. A healthy reserve for a city the size of North Little Rock, Smith said, is about a minimum of $6 million.
A monthly $15 sanitation fee imposed on the city's 22,000 households would raise $4.2 million annually, according to figures provided to the City Council, but that would still leave the city $1.5 million in the hole by 2022 for its reserves, according to the figures.
A half-percent sales tax would raise $8 million annually and increase the city's reserve fund to $20.4 million by 2022, the city's projections show.
"Someone on a fixed income would do better with a half-penny sales tax instead of a fixed expense of $15 per month," Alderman Linda Robinson said. "The problem is convincing people that we won't have the money we need in two years without it."
With no changes in income sources, North Little Rock would see its $13 million reserves, or fund balance, decimated by 2020 and become even worse over the following two years, according to city projections. The city's budget shortfall would be $6.3 million in 2020 and up to $7.9 million by 2022.
Taking away sanitation fees was a pledge made during an election campaign in 2000 when voters approved the current 1 percent city sales tax. At that time, making up that lost revenue from a sanitation fee cost the city about $3 million in annual revenue. Those services are a $5 million expense to the city now, Smith said.
Smith has said the city has done well in reducing its expenses and operating more efficiently over the past four years. The city has trimmed its debt from $10 million to $2 million since he took office in 2013, he said.
"We've cut our expenses just about as low as we can go without cutting personnel," Smith said. "We're going to have to raise income."
Metro on 04/11/2017