Mis­cal­cu­lated fees prove costly to city

Ben­tonville loses $877,841; im­pact fee goes un­col­lected

Northwest Arkansas Democrat-Gazette - - NORTHWEST ARKANSAS - MELISSA GUTE

BEN­TONVILLE — The city lost nearly $878,000 over six years be­cause it mis­cal­cu­lated fees col­lected for new devel­op­ment.

The fees for four mul­ti­fam­ily devel­op­ments built be­tween 2009 and 2015 were cal­cu­lated us­ing the method for com­mer­cial in­stead of mul­ti­fam­ily devel­op­ments, which re­sulted in $877,841 go­ing un­col­lected, ac­cord­ing to city of­fi­cials.

The im­pact fee is a one­time charge to de­vel­op­ers to pay for growth-re­lated city ser­vices and in­fras­truc­ture. The fees are col­lected be­fore the city is­sues a cer­tifi­cate of oc­cu­pancy for a new home or build­ing.

The city col­lected nearly $2.4 mil­lion in im­pact fees — $ 606,435 be­ing sewer fees — in 2015. Last year, it col­lected nearly $1.9 mil­lion — $538,725 in sewer fees.

State law re­quires the money must be used for cap­i­tal projects re­lated to growth and must be used within seven years.

Troy Gal­loway, com­mu­nity and eco­nomic devel­op­ment di­rec­tor, ex­plained the sit­u­a­tion to each city coun­cil mem­ber in­di­vid­u­ally be­fore giv­ing a brief pre­sen­ta­tion to the coun­cil at its meet­ing Tues­day.

“We re­gret that this hap­pened, and we’ll do ev­ery­thing to make sure it does not hap­pen again,” he said.

When asked why he met with coun­cil mem­bers pri­vately in­stead of dis­cussing the de­tails in a meet­ing open to the pub­lic, Gal­loway said it was a com­pli­cated is­sue and the pri­vate meet­ings al­lowed them to un­der­stand and ask ques­tions. He said the pri­vate meet­ings lasted from 20 min­utes to an hour.

Gal­loway said a pub­lic dis­cus­sion “would have taken a long time. It would have been much more of a con­fus­ing topic.”

City staff dis­cov­ered the er­ror af­ter de­vel­op­ers of the Sul­li­van Square apart­ment and town­home com­plex along South­west I Street asked the city late last year about its fees. Sul­li­van Square de­vel­op­ers claimed their fees were higher than The Trails at Rain­bow Curve, an­other nearby apart­ment com­plex that was built in 2014, ac­cord­ing to meet­ing doc­u­ments.

The city charged The Trails as a com­mer­cial rather than res­i­den­tial devel­op­ment, ac­cord­ing to meet­ing doc­u­ments.

“Ev­ery mul­ti­fam­ily devel­op­ment in that pe­riod of time was treated the same although it was done in­cor­rectly,” Gal­loway told coun­cil mem­bers.

The sewer fee was the only im­pact fee mis­cal­cu­lated, Gal­loway said. The city also col­lects fees for fire and emer­gency med­i­cal ser­vices, parks, li­brary and po­lice.

The er­ror wasn’t caught and cor­rected sooner be­cause the in­fre­quency of mul­ti­fam­ily devel­op­ments be­tween 2009 and 2015, Gal­loway wrote in a memo to coun­cil mem­bers.

The mis­take was a com­bi­na­tion of hu­man er­ror and in­ac­cu­rate soft­ware pro­gram­ming, Gal­loway said. Three clerks did the four as­sess­ments, which sug­gests no one was do­ing any­thing in­ten­tion­ally wrong, he said Fri­day. No one was dis­ci­plined for the mis­take.

The city stopped col­lect­ing wa­ter and sewer fees in Septem­ber 2016 fol­low­ing an anal­y­sis and re­struc­tur­ing of all im­pact fees. It had col­lected fees for wa­ter and sewer since 2002.

“I don’t think any of us like this sit­u­a­tion,” Ward 2 coun­cil mem­ber Chris Sooter said af­ter Gal­loway’s pre­sen­ta­tion Tues­day. “It’s never good to un­cover a mis­take of this mag­ni­tude.”

Sooter rec­om­mended the

city not pur­sue try­ing to get the lost money, es­pe­cially since the wa­ter and sewer fees are no longer col­lected. The coun­cil voted to forgo the money.

“We’ve ex­plored with out­side coun­sel what our op­tions are, and there aren’t any that make sense,” Mayor Bob McCaslin said Tues­day af­ter­noon.

City of­fi­cials have im­ple­mented mea­sures to en­sure a sim­i­lar er­ror doesn’t hap­pen. Those in­clude staff dou­ble check­ing fees charged on all com­mer­cial and mul­ti­fam­ily devel­op­ments, hav­ing an an­nual au­dit for the next three years, hav­ing the ac­count­ing depart­ment dou­ble check the cal­cu­lated for­mula in the soft­ware when a new fee sched­ule is adopted and bet­ter train­ing for city em­ploy­ees whose work in­volves the fees.

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