CAVE SPRINGS -- Arkansas State Police investigated city officials over an altered millage resolution that could mean the city doesn't have the authority to collect property taxes this year.
Benton County Prosecutor Nathan Smith said he couldn't comment.
City Council meeting
The next City Council meeting will be held 6:30 p.m. today at the American Legion, 168 Glenwood Ave. City Attorney R. Justin Eichmann thinks candor is warranted to get the city back on track. “Governance is problem number one in the city. It needs to get corrected. We need to get those things right before doing anything else,” he said. “I think we need to rip off the Band-Aid and have a meeting where all these issues are aired out publicly.”
Source: Staff report
"State Police today delivered their complete investigation file. I plan on releasing my findings in the near future, which will make public the contents of the investigation and any conclusion I reach," Smith said Friday.
Mayor Travis Lee said he had no part in altering the resolution.
"Somebody has turned in a fraudulent resolution to the county," Lee said. "Whoever sent this resolution in showed that we confirmed it in 2016, but we didn't."
The alteration was discovered by a state auditor, Lee said. Arkansas Legislative Audit in Little Rock has been working on a routine audit on the city for the years 2015 and 2016.
Alderwoman Mary Ann Winters said the City Council never passed a millage resolution for 2017.
"I brought it up in October at a council meeting and said it was about time to do the millage rate, and the mayor said he didn't have any information on it," she said.
Don Zimmerman, director of the Arkansas Municipal League, said each year cities are required to notify their county of the amount of millage to be levied for the city. The city council must adopt the millage rate through a resolution.
Lee said he didn't know a 2017 millage rate for his city had to be submitted to the county until he received an email from Benton County Clerk Tena O'Brien. Recorder-treasurer Kimberly Hutcheson also received an email from O'Brien, Lee said.
State law allows cities to collect up to 5 mills in property tax each year, said R. Justin Eichmann, Cave Springs' attorney.
"Obviously there's a big issue out there about whether [Cave Springs] took action to certify those mills," Eichmann said.
O'Brien said every year she notifies Benton County mayors of the millage levy their respective city councils are required to pass for the following year. The resolutions are due before the Quorum Court meeting held in November. The Quorum Court is required to levy the millage rates for the county at that meeting unless an extension is granted, she said.
Where's the Certification?
O'Brien sent Lee a letter dated Sept. 15, 2016, asking for a certified copy of the city's 2017 millage rate as passed by the City Council, according to a copy of the letter Eichmann provided in response to a Freedom of Information request.
"I need this certificate by Oct. 21, 2016, in order to prepare the Quorum Court ordinance to be enacted in November, as required by law," O'Brien stated in the letter.
O'Brien said she emailed a reminder to Lee on Oct. 20 asking if his city had adopted the 2017 millage levy.
"He had been out of the country at the time I asked for it to be submitted. His response was he would get that to me as soon as possible," O'Brien said.
Lee responded Oct. 25, she said.
"Tena sorry for late reply. I was in Haiti all last week. I had quite a few emails when I got back. I will get this to you thanks!," Lee wrote in the email exchange.
O'Brien said she received an email with the resolution attached from Nicole Ferguson, the mayor's assistant at the time, on Oct. 28. O'Brien said she then requested a certified copy of the resolution.
Lee messaged Hutcheson on Oct. 31, saying, "Kim will you send a certified copy to Tena O'Brien? Thanks.," the email messages show.
O'Brien said Nov. 2 someone faxed her the resolution from the earlier email.
Lindsey Bailey, general legal counsel with the Association of Arkansas Counties, said Arkansas Code doesn't address whether a faxed resolution can be accepted in place of a certified copy, but previous attorney general opinions give county clerks leeway in how to accept such resolutions.
Eichmann provided a copy of the millage resolution for 2017 faxed to O'Brien. The bottom of the resolution states "PASSED and APPROVED this 12 day of October, 2015."
The resolution is similar to the one submitted in 2015 for 2016, O'Brien said.
"Everything is exactly the same, except for the resolution number from the one that I received [from Cave Springs] in 2015," O'Brien said.
The resolution O'Brien received from Cave Springs in 2015 had the resolution number 2015-17 at the top of the resolution.
"The resolution I received on Nov. 2, 2016, is resolution number 2015-19, but everything else, the body of it, is the exact same," she said.
Lee said someone wrote over the seven in 17, changing it to a nine.
"It looks like it's a mistake, but it's obviously not because they changed the resolution number," Lee said.
Hutcheson responded to a Freedom of Information Act request and provided city email correspondence sent to her from Lee and Ferguson. She included an email Ferguson sent her Oct. 28 after O'Brien requested a certified copy of the resolution. In it Ferguson says to Hutcheson, "Could you please mail her a certified copy of Resolution 2015-19? Thank you."
Hutcheson included the Oct. 31 email in which Lee asked her to send a certified copy to O'Brien, but she also provided another email from Lee that came a minute after in which Lee says, "The resolution number is 2015-19."
Hutcheson said she wasn't involved with sending the resolution.
"The only thing I can tell you is I was in a chain of emails that went back and forth between Tena O'Brien, Nicole and Travis. I was not involved in it. I was 'cc' in the emails," she said.
O'Brien thinks the altered resolution was brought to her attention by a community member.
Lee provided a March 29 email from O'Brien to him and Hutcheson saying it had come to her attention the resolution she received in 2016 was a copy of the 2015 resolution.
Lee responded, "Tena I am currently looking for this record. That copy has a different resolution number? I was not aware of the state law that says we have to do this every year. I just cannot remember the council ever talking about the millage except for Alderman Mark [sic] Williams trying to get the council to lower it back to the original number. They voted it down. I am still looking and this could have been sent in by accident except the resolution number is different."
Ferguson also denied altering the millage resolution for 2016 and presenting it to O'Brien as the 2017 millage levy.
Ferguson doesn't dispute she emailed the resolution to O'Brien. She would have obtained it from Laserfiche, which she said is the software the city uses to store resolutions; the resolution/ordinance book kept in Hutcheson's office; or from Hutcheson.
"Those are the only sources I have access to," Ferguson said.
Ferguson said she doesn't remember which of the three the resolution came from but said she believes she passed O'Brien's email along to Hutcheson.
Ferguson also said she didn't fax the certified resolution to O'Brien, saying she rarely used the city office's fax machine.
Failure to Pass
Winters said Williams made a motion Oct. 11 to roll back the millage.
"He didn't like it, because the year before in 2015, the council voted to raise the millage tax on property to 5 percent and the county rolled it back to 4.95 percent, so Marc made a motion to roll it back to 2.75 percent," Winters said.
O'Brien said Cave Springs did submit a rate of 5 mills in 2015 for 2016, but it was rolled back by the county to 4.8 percent, not 4.95 percent. A taxing entity such as a city, by law, cannot receive more than a 10 percent increase in property tax revenue over the previous year, she said.
The council vote to roll back the millage was 3-3. Because of the tie, Lee cast the deciding vote against the rollback.
Eichmann said he has audio recording from that October meeting.
"There might have been some people who thought if they don't take any action it would stay the same," he said of the council. But, "I have talked to some folks who said that it was known that they need to meet further and pass the millage, and it just did not get done for some reason."
Zimmerman said the failure to levy the millage by the required date would result in a millage of zero the following year.
"They would wind up with no property tax if they did not do it correctly," he said.
The city would possibly have to refund collected millage money, Eichmann said.
"I don't know if that will be the case, [but] this is serious. This could be a very significant loss of revenue for the city, and if that happens, we're going to have to figure out how to account for that," he said.
Deanna Ratcliffe, Benton County treasurer, said Cave Springs received $373,413 in property tax revenue in 2016 and has collected $14,971 in 2017 through March.
Tax revenue goes toward the general fund and roads in Cave Springs, according to information provided by Ratcliffe.
NW News on 05/09/2017