With bleak projections about North Little Rock's finances in the next five years, Mayor Joe Smith is asking for the community's guidance on how to best address the situation.
The suggested options are asking voters for an increase to the 1 percent city sales tax; asking the City Council to implement a $15 fee for sanitation services, which are now free; or cutting jobs and services.
A public hearing to discuss the options will be at 5 p.m. Monday in City Hall at 300 Main St., an hour before the regularly scheduled City Council meeting. Smith already has met with neighborhood and community organization leaders, laying out the figures during a brief presentation at the Argenta Branch Library on Thursday evening.
"I normally have a pretty good gut feeling about what the people would prefer," Smith said before Thursday's meeting, the first of 10 groups scheduled to hear the presentation over the next month. "In this situation, I don't have it."
The city's cash reserve balance was $13.1 million to start this year. That fund is expected to dwindle to $8.9 million by year's end, then to a minus $1.5 million within three years without any added revenue. The city also projects that without an additional revenue source, it will have almost a $5 million shortfall for next year's budget.
A special election for a city sales tax to address the predicted shortfall would be set for the second Tuesday in August if the City Council decided to go that route by next month, Smith said. The council could set a sanitation fee without calling an election.
A half-percentage point city sales tax increase would raise an extra $8 million annually, according to the projections, and increase the city's reserve balance to $20.4 million by 2022. With the added tax money, the city's revenue would move in front of its expenses for maintaining city operations by next year, the figures show.
Asking for a full 1 percentage point tax increase -- with the extra half-percentage point to expire in five years -- would allow for half of the tax revenue to be dedicated to capital needs, such as a permanent fire station on the city's east side, and replacing the 60-year-old police and courts building and the 90-year-old Main Street viaduct.
A $15 sanitation charge for the city's 22,000 households would raise $4.2 million a year, not enough to keep the city's reserve fund from going into the hole after five years, figures show. It also would leave the city taking in less than it spends.
Last year's combined collection of city and county sales taxes for North Little Rock was $30.2 million, barely above the $29.3 million collected in 2007, with an average increase of 0.3 percent annually. City expenses have grown by 3.5 percent annually, rising from $48.99 million in 2007 to a budgeted $66.3 million this year.
"This is not political opinion," Smith said in an interview about the numbers. "These are facts. I want everyone to help me decide what the best way is to attack the financial challenges we have in the next few years and to come up with a decision that's best for everybody."
Smith invited 31 neighborhood groups and community organizations to Thursday's meeting of the Neighborhood Associations Leadership Council so he could present the figures and get feedback. Packets outlining the financial projections were provided to attendees. What he heard back was a more positive feeling for a sales tax than a sanitation charge.
"I'm for that," Belinda Burney of the Dark Hollow Community Development Corp. said after the meeting. "I think others would agree if they look at our [city] budget. We want to go forward, not backward. I think a sales tax would be more appealing [than a sanitation fee]."
Artis Boykin of the Sherman Park Neighborhood Association agreed that a sanitation fee would unfairly affect couples who have no children and those who live alone, who would be charged the same fee as those with large families and bigger homes.
"A $15 sanitation fee would not be equitable for me," she said. "I wouldn't mind a sales tax. Even the 1 cent. The city needs the money. We need to grow our city."
Jim Baker, representing the Amboy Neighborhood Association, said that after he first looked through the numbers, he was against the sanitation fee.
"I believe the sales tax is a fair tax," Baker said. "I'm a proponent of everybody paying their share. They should not have a fixed number [for a fee] that would scare the public. If they market this [a tax election campaign] right, they'll pass it."
City general fund budgets under Smith have increased from $60.1 million in 2014 to $66.3 million this year. Each year, the city has used its cash reserve balance to balance its budget: $1.15 million for 2014, $1.54 million for 2015, $1.07 million for 2016 and $2.62 million for 2017.
"It's our savings account," Smith said of the reserve fund.
While Smith's administration has reduced the city's debt amount from $10 million to $2.4 million, according to city figures, the mayor said at Thursday's gathering, "We have cut all we can cut without cutting people."
Some expenses have remained steady, however. The city annually pays 100 percent of its employees' health insurance premiums, and 75 percent for employee dependents, at a cost this year of $7.18 million. Reducing that amount of insurance coverage by 10 percent for only the employees would save about $800,000 yearly, according to the city's finance office. The city has 843 full-time employees.
City employees and elected officials received a 3 percent raise in 2016 and a 2 percent raise for this year at costs of $1.09 million and $1.28 million, respectively, for a total of $2.37 million of the $3.69 million taken from North Little Rock's savings in those two years to balance the general fund budget.
A carryover of funds is an accounting measure and doesn't involve an actual transfer of city cash, city Finance Director Karen Scott has said previously.
Among the state's 25 largest cities, according to a chart included in the city packet, only five others have a city sales tax at North Little Rock's rate of 1 percent or below. Little Rock's city sales tax is 1.5 percent.
North Little Rock dropped its sanitation fee in return for voters approving the current 1 percent city sales tax in 2000. Renewing the fee would go back on that campaign pledge, but Smith said he hasn't heard any complaints on that as of yet, and no one brought it up at Thursday's meeting.
The city's sanitation costs have grown from $2.7 million in 1999 to $5 million now, Smith said.
Only two cities, according to a city chart of the state's 25 largest, don't charge sanitation fees. Two others don't provide sanitation pickup, leaving residents to hire privately run services.
Metro on 04/23/2017