Questions raised about water policy rationale

EDITOR’S NOTE: This is the first of two articles focusing on Wednesday’s Water Provider Legislative Task Force hearing on water and sewer issues affecting Garland County.

LITTLE ROCK — Witnesses that testified Wednesday before a legislative panel at the state Capitol said sales tax revenue is the organizing principle behind the city’s connection and extension policy limiting water and sewer service in the unincorporated areas of Garland County.

Business owners who were denied service by the city and elected officials testified that the restrictions are designed to keep commercial and retail development inside Hot Springs’ taxing authority, a rationale they said is inconsistent with the supply and capacity concerns the city has said forms the basis for the policy.

City Manager David Frasher said Thursday sales tax revenue forms part of the city’s rationale, but supply and capacity are the foremost factors limiting commercial connections outside the corporate limits to one fiveeighths-inch meter that has to be inside the city’s planning area. Main extensions for commercial and residential service outside the city are prohibited.

“Tax base is only one of many considerations the city would have when extending water service outside the city,” Frasher said. “There’s a whole record of public meetings to support that the city’s primary consideration is supply concerns.”

No city officials were present to challenge testimony given to the Water Provider Legislative Task Force, an 18-member panel formed last year to develop best practices for using water to underpin economic development. Its recommendations will be presented to the governor, Arkansas Economic Development Commission and others

before it disbands at the end of the year.

The city sent written comments instead, including a statement that it has approved 91 percent of commercial connection requests in the unincorporated area in recent years.

“I want to note that this is the first meeting (the city) has not attended,” Sen. Alan Clark, R-District 13, Lonsdale, co-chairman of the task force, told the panel. “They were asked to testify. This is the one meeting they’ve chosen not to be at.”

Frasher said the city plans to address issues raised Wednesday at future task force meetings.

“We’re hoping they’ll invite us to appear and make comments later,” he said. “We’d like the opportunity to come before the committee and offer our two cents. We’re looking forward to it.”

The hearing came less than a week before the Hot Springs Board of Directors will consider issuing $30 million of rate payer-secured debt for improvements to the regional water system serving more than 35,000 meters, about half of which are outside the corporate limits. Part of the bond proceeds will pay for engineering and right of way acquisition for the 23 million-gallon average day Lake Ouachita allocation the city is working to bring online.

A public hearing will be held Tuesday at City Hall before the board votes to authorize the bond issue. The meeting starts at 7 p.m.

Clark and Garland County Judge Rick Davis, who’s also on the task force, testified that Frasher told them the city would relax its policy if the county remitted to the city a portion of the half-cent sales tax levied in support of the county General and Solid Waste funds.

“He offered that if the county would give the city $3 million a year, that, quote-unquote, the water problems would go away,” Clark testified. “I want to offer that under oath.”

Davis testified that Frasher told him “the water denials would stop, and the water crisis would go away,” if the county shared part of its sales tax proceeds.

Davis clarified his testimony Thursday, explaining that Frasher’s comments were made in the context of securing Davis’ support for a bill during the 2017 legislative session that would allow counties to share sales tax revenue with cities.

“Mr. Frasher alluded that if the tax structure could be changed with the city receiving this extra revenue off of growth and development countywide, so that they could address other issues in the core of the city, then the discussion with the (city board) about changing the water connection policy might could happen and the water problem might could be solved.

“Unfortunately, Mr. Frasher inherited issues and a policy on water connections that continues to stop growth and development in the county.”

Frasher said the county’s work with the city on securing the Lake Ouachita allocation shows it has acknowledged supply limitations shaping the city’s policy.

“All of us, together, have lobbied and worked hard to get additional supply,” Frasher said. “Now to turn around and say the only reason the city has this policy is to protect its tax base doesn’t seem to be borne out by the timeline and all of the work we’ve done together.”

Clark testified that the Arkansas Municipal League, the lobbying and advocacy group for the state’s cities, approached him last year about a bill allowing counties to remit a portion of their sales tax proceeds to cities. Panel member Jack Critcher, the Municipal League’s health and legislative liaison, confirmed that the conservation took place, telling the panel he was part of the discussion.

“I was told, quote-unquote, if we do this, the water problem goes away,” Clark testified, adding that his conversations with Frasher and the Municipal League gave him doubts about the city’s supply and capacity rationale. “This has caused me to be very skeptical that this has anything to do with a water shortage.”

Clark said his testimony is supported by a 2015 memo the city circulated after the Community Water Committee was formed to address the water issue. It comprised elected city and county officials and members of the business community.

The memo acknowledged that servicing new retail concerns in the unincorporated area undermines the city’s tax base, which is supported by the 1-cent sales tax it levies in support of its General Fund and half-cent public safety tax supporting the Police and Fire funds.

The city assessed a 2.6-mill property tax during the 2016 and 2017 tax years to fund a public safety communication project but has said the tax won’t be levied in 2018.

“The city’s need to protect its revenue base must be addressed,” the memo said. “New retail business development outside the city seriously threatens the financial viability of Hot Springs over the long term. Therefore, the expansion of water extensions to retail businesses is untenable.”

Jeff Stone, director of the Arkansas Department of Health’s engineering section, told the panel the city’s supply and capacity concerns are legitimate, particularly when prolonged stretches of hot, dry weather make demands on the system’s two treatment plants. He said water systems need to plan for additional supply when production reaches 80 percent of capacity, a threshold the city said it crossed more than 50 times in 2012.

“On my observations over the years looking at water systems, I think there is a shortage of water in the sense that until (a new treatment plant) is built, they’re vulnerable to a high pressure, hot weather pattern setting up that pushes them harder then they can deliver,” he said.