Northwest Arkansas Democrat-Gazette
Miscalculated fees prove costly to city
Bentonville loses $877,841; impact fee goes uncollected
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.