Wal-Mart Stores has made no secret of its need to innovate. By some outside estimates the retailer has spent around $2 billion on 10 tech startups since 2011. But the retailer rarely allows the media inside its expansive innovation lab in Bentonville where about 3,500 employees work to transform the shopping experience.

The media got a rare peak at some of the innovation consumers can expect to see in the coming months to years. Items revealed included 3-D digital printers in stores that allow shoppers to replicate their own images for wedding cake toppers and digital watermarks in print circulars that allow shoppers to scan the item on the page into their phone to glean a host of additional product information including reviews.

Wal-Mart’s chief technology officer Suju Chandrasekaran said the innovation lab and its collaboration with a Wal-Mart employees in San Bruno, Calif., Bangladore, India, and Sao Paulo, Brazil, have become a formidable technology company within the world’s largest retailer. She said the amount of data Wal-Mart collects and analyzes daily is so large that the company created a “Data Cafe” which merges point-of-sale data with social media feeds and syndicated market share data.

This real-time data is used to impact store staffing, on-shelf availability, merchandising and a host of other applications.

Cory Gundberg, vice president of strategic planning at Walmart Technology, said the retailer is looking at wearable technology and, with its suppliers, hopes to find that item that will become as common as the cell phone.

The retailers’s innovation lab has held eight hackathons in the past two years which has yielded scalable ideas such as “Amazing on a Budget” – a shopping tool that allows a shopper to get help stretching a food budget. The innovation came from a real-life situation when a shopper in Chicago asked the store manager to help feed her family of four on a limited budget. She gave the manager the budget and the store gave her list of items.

“Amazing on a Budget” does the same thing in a seamless manner while also allowing the shopper to stay within a budget. It can refer a private label or access a manufacturer coupon if available to help the shopper access savings.

Gibu Thomas, senior vice president of mobile and global e-commerce for Wal-Mart, said  Wal-Mart is using technology to get closer to the customer.

“We know 65% of our shoppers have smartphones, 80% of Millennial shoppers. This an incredible opportunity for help improve the shopping experience giving them more tools,” Thomas said.

He talked about e-receipts, which are created by scanning the QSR code on the bottom of the receipt or typing in a phone number into the terminal when cashing out. While e-receipts are not a new innovation, he said it is pa latform that can be expanded. Thomas said the e-receipts can be stored in e-mail locker and then used to create predictive shopping lists which may be accessed as the shopper enters the store. He said Scan & Go, which is now being tested in about 300 stores is more appreciated for its budgeting capabilities than the time savings, which is why it was originally created.

“We are testing lots of things, learning fast and willing to fail fast which is part of the startup mindset.” Thomas said.

A Tuesday (June 3) letter from the city of Fort Smith's attorney disputes allegations made by attorney and blogger Matt Campbell against the city. Campbell had claimed the law firm billed the city for services not rendered and had excessively billed the city for work completed related to a Freedom of Information Act request by Campbell.

Campbell, who represents a group of Fort Smith officers involved in lawsuits against the city, made the allegations in a post on his Blue Hog Report blog, alleging that Daily and Woods had billed the city for phone calls to Campbell that were never made.

Campbell had requested documents tied to one of the cases through a FOIA request, but was denied, prompting him to eventually file a lawsuit. The lawsuit was eventually settled, with the city providing the documents requested and Campbell only being out about $315 (costs and filing fee for the lawsuit). But as a result of another FOIA request filed earlier this year, Campbell was able to track billing from the law firm to the city related to his first FOIA request, with the city on the hook to Daily and Woods for a total of $6,778.75.

In adding up the billing from the firm, Campbell noted an unusual number of meetings or telephone conversations between the firm and city officials. Campbell also noted several phone conversations listed by Daily and Woods that did not happen. City Attorney Jerry Canfield of Daily and Woods has said he believes the firm's records to be accurate, though he said the firm would investigate the claims made by Campbell.

"Our records are accurate and we're still in the process of looking at the details that are mentioned in the blog, but our comment is again it's a regular, ongoing monthly process. It's been going on for years. They're subject to public inspection. They've always been subject to public inspection. We're taking the time to evaluate the individual assertions in the blog to make sure we know what all the appropriate facts are."

‘TIME REASONABLY SPENT’
In his letter to City Administrator Ray Gosack on Tuesday, Canfield stood by his firm's billing.

"The billings to the City reflect the actual time reasonably spent on matters we were asked to handle," he said, adding that "time spent by members of our firm preparing responses at the request of the City is accurately reflected in the billings to the City."

Canfield also challenged with documentation six different phone calls Campbell said had never occurred. The documentation includes copies of the corresponding phone bills, as well as handwritten notes by Rick Wade, though Canfield notes that Wade's notes indicate the wrong date, which could have explained the assertion by Campbell that he had not received a call on November 22. In fact, Canfield said, the call took place on November 21.

Without providing additional documentation, Canfield said calls were made to Campbell at his Little Rock office that went unanswered.

"Apparently, the Little Rock attorney does not have a full-time secretary and, consequently, a number of phone calls were placed to his office that were not answered by a human or were not answered at all. Calls were sometimes 'answered' at his office by a voice message indicating his message box was full. In those instances, it is customary for our firm's attorneys to document the attempted call(s) in order to keep an accurate record of legal services."

CAMPBELL REBUTTAL
In response, Campbell said the claims about his voicemail, or lack thereof, were not true.

"That never happened. There was a one day period a week ago where I switched to another phone, but there's never been a time when my voicemail was full."

He also said his allegations initially claimed that at least nine phone calls the city was charged for were not made, meaning the letter from Canfield to Gosack does not answer the allegations in their entirety.

"Yeah, if they want to say there were a couple of additional calls from numbers I didn't recognize, I'll say that. But you still didn't make all the calls you charge for in November. But if this is your evidence, you're practically admitting that there are phone calls you can't account for."

Campbell also said the documentation from Canfield accounts for only six phone calls.

"What about the other three," Campbell asked. "Their own invoice is not evidence of anything. That is what I had and was pointing out. Most of (the calls accounted for by Canfield) were missed calls and that still doesn't get you to the number of phone calls they were charging the city for."

In an e-mail to the Board of Directors Tuesday, Gosack said the record did not show certain calls because of the alleged full voicemail.

"There were some calls made by Daily & Woods attorneys to Mr. Campbell for which there is no record from Daily & Woods’ phone company. There is no record because Mr. Campbell’s inbox/voice mail box was full and wasn’t accepting any more calls. Daily & Woods has confirmed with its telephone service provider that, in this instance, the attempted call wouldn’t appear on the telephone billing record. Nonetheless, Daily & Woods’ work records show the attempted call to Mr. Campbell," Gosack wrote. "I trust this information and documentation demonstrates that Daily & Woods hasn’t improperly billed the city."

In discussing the report by Daily and Woods, Campbell said even if the calls were made as claimed, it was still difficult to detail any work done associated with the calls due to the billing style of Daily and Woods.

"No one can verify that because they bill (clients) with block billing. When (attorney) Doug Carson lists like 6.8 hours of total time spent and puts eight or nine things in a block, it's impossible to know how much time he spent on any one of those things. When you do anything in block, no one can tell what you did."

In an e-mail to The City Wire, Gosack referred back to his e-mailed comments to the Board of Directors.

The letter to Gosack came the same day City Director Philip Merry had requested a CPA audit of billing by Daily and Woods to the city, as well as a formation of a committee to review whether the city should keep its contract with the firm or hire independent counsel that would be on the city payroll, therefore eliminating billing errors in the future.

Campbell said the proposals by Merry are worth pursuing.

"I think the independent (review) of their bills is necessary if you base it on what they sent (to the city)," he said. "In the bigger picture, the committee to look at the relationship between the city and Daily and Woods needs to be done every few years to make sure this is still in the city's best interest."

Link here for the PDF of the June 3 letter from Daily & Woods to Fort Smith City Administrator Ray Gosack.

As the dream of a regional trail system is rapidly becoming a reality, Northwest Arkansas businesses are reaping the benefits from the Razorback Regional Greenway.

The Greenway should be “substantially complete” by the end of 2014, said John McLarty, transportation study director at the Northwest Arkansas Regional Planning Commission. That means the ribbons of concrete will be connected with only minor improvements and landscaping remaining to complete, weather permitting.

Full build-out of the Northwest Arkansas Razorback Regional Greenway is expected to cost approximately $38 million with majority of necessary funds already pledged from two different grant sources: a federal transportation grant and a matching grant and gift from the Walton Family Foundation, according to the NWA Trails website.

The trail is already complete from Walker Park in Fayetteville to Lake Fayetteville and from the northern end of Lake Bella Vista to Garrett Avenue in Rogers. Work began recently in Lowell and Springdale, which will complete the trail system.

“We are seeing tremendous use, lots of traffic and lots of good comments,” McLarty said. “It’s really filling a need in the community.”

And local businesses are thrilled to help the community fill that need.

Several local bike and outdoor stores are reporting a noticeable increase in sales due to people wanting to get active on the Greenway. Phat Tire Bike Shop, which has locations in Bentonville and Fayetteville, is seeing a “definite increase in bike sales, both in cruisers and hybrids,” said manager Haley McCurry from the Bentonville location.

Hybrids alone have seen a 10% increase since the Greenway opened, McCurry said.

“In the bike industry, that’s a lot,” she added.

The Greenway opening has changed how they do business, McCurry said.

“We are seeing more first-time riders and families,” she said. “They just want to get out there and start riding as a family. We think that’s awesome more people want to get exercise and get involved.”

Another change is that people are purchasing more bike accessories that lend themselves to commuting such as racks and baskets for people to carry groceries and other items to their destination.

Rob Potts, co-owner of Lewis & Clark Outfitters, which has locations in Rogers, Springdale and Fayetteville, said his company is also seeing a rise in business. Potts declined to give a specific growth percentage, but “it has been great for business and we have seen a huge increase in the number of people that are interested in getting into cycling.”

The company offers bike sales and repair, as well as other outdoor enthusiast gear. The increase in demand required them to increase their maintenance staff to increase their ability to do timely bicycle repairs.

“People who had never thought about riding before the trails were built are now seeing the benefits in cycling and having an overall healthier lifestyle and are coming into the stores,” Potts said. “We are seeing a combination of people riding for recreation and for commuting, though the majority are recreational riders.

“(The Greenway) is definitely the most impactful thing that has happened to cycling here in NWA.”

Potts added that when all the cities are connected, he expects to see a considerable increase in the number of people interested in using the trails for commuting and pleasure. He also sees the Greenway as a popular tourist attraction.

“A lot of people are going to be traveling here to ride that trail,” he said.

While the Greenway is promoting more bicycling and running in Northwest Arkansas, it’s also a national trend. According to the U.S. Census Bureau, commuting to work by bicycle has increase by 60% over the last decade. According to Bicycle Retailer and Industry News, which is an online trade publication, the sales of new people-powered two-wheelers were more than $3.66 billion in the United States in 2012 (most recent available figures).

Not all of the businesses seeing better sales because of the Greenway are related to outdoor sports. Apple Blossom Brewing Company in Fayetteville normally sees traffic from bikes, but it’s increased with the opening of the trail and the better weather, co-owner Ching Mong said.

“They end up here a lot as a destination spot,” he said. “It’s noticeably different from winter. Foot traffic and bike traffic probably account for up to 25% to 30% of our business.”

Bike Bentonville is a nonprofit organization dedicated to growing community involvement in healthy outdoor activities. Kyla Templeton coordinates the Safe Routes to School Program and the women’s cycling program. She said the new trails are especially good for the Safe Routes program and that volunteer parent-led bike chains travel from Bella Vista to arrive at R.E. Baker Elementary School and Old High Middle School.

She also leads women cycling groups. While most prefer to use the roads, the trail system allows for a multi-generational experience, Templeton said.

“It’s a way of getting out and enjoying the outdoors and each other without being scared of being on the road,” she said.

Once the Greenway is complete, Templeton anticipates hosting an annual ride to Fayetteville and back.

Bill Simon, CEO of Walmart U.S., said the retailer is excited about the interest from about 500 U.S. companies who want to sell American-made products in its stores. Many of those companies have secured a date to meet with Wal-Mart at its July 8, open call, Simon said.

“I am excited about the possibilities for these U.S. manufacturing jobs and to see what new U.S.-made products will be presented at these meetings. In these meetings we will look at possibilities of supplying Wal-Mart, Sam’s Club and or Walmart.com, whatever fits the best,” Simon said.

He said the retailer has 180 active projects with manufacturers in the pipeline toward moving operations onshore.

‘This is not a Wal-mart initiative. It is a macro-economic fact that is evolving from trends in the marketplace today. … These U.S. made goods do not cost more. If you drive past our home office you will see these silly pink flamingos out front. Last year we sold a ton of those that were made in China, there are two pink flamingos out there this year that we made in the U.S. that cost less and allow for more flexibility inventory ordering on demand,” Simon said during the question and answer session with executives on Thursday (June 5) at the Embassy Suites in Rogers for the Wal-Mart shareholders week.

LESSONS LEARNED
He said the multiple formats are essential in Wal-Mart’s ability to meet consumer’s diverse shopping needs. Simon added that the learnings from the Walmart to Go convenience store format in the past 90 days have been huge. On area is in the fountain beverages from milkshakes to coffee and soda.

“We took these fountains out of our supercenters and we are now evaluating the feasibility of bringing them back,” Simon said.

He added that the Bentonville store has some expensive features like the covered awning from the gas pumps to the front door, which may or may not be duplicated in future iterations of this concept store.

Simon told the group that the hybrid neighborhood market store is also a convenience play and comparable sales are on par with other top grocery retailers like Kroger.

“The past quarter marked the 46th consecutive positive same-store sales reading, with sales growing incrementally in every year since they were introduced in 1999 till now. These are hybrid stores that are performing very well,” Simon said.

Simon will need more of the stores in the Walmart U.S. universe to perform well. The company’s first quarter earnings were ugly. The retailer reported per share net income for the first fiscal quarter of $1.11, below the consensus estimate of $1.15. The company earned $1.10 per share from continuing operations. Total revenue of $114.96 billion was up slightly over the $114.07 billion in first quarter of 2013 and was below the consensus estimate of $116.27 billion.

Company officials said the first quarter was hit hard by unusual winter weather in the U.S. during January.

Comp traffic for Walmart U.S. was down 1.4% in the quarter, despite a 1.3% uptick in the average shopper ticket. This marks the fifth consecutive quarter of negative to flat comparable sales, the benchmark metric used to measure retail performance.

And the second quarter may not be a big improvement. The company is predicting earnings per share in the range of $1.15 and $1.25. The company hit $1.24 per share in the second quarter of the previous fiscal year.

HEALTH CARE TEST
Another area Wal-Mart is testing is company-owned health care clinics to be located in up to 12 supercenters this year, according to Simon. The first clinic opened last month in Coppers Cove, Texas, providing primary care access to Wal-Mart employees and customers.

“Associates on the Wal-Mart health plan have a $4 co-pay and customers pay a flat $40,” Simon said.

Wal-Mart is contracting with QuadMed staffing company who will provide two licensed nurse practitioners for the clinic. As a self insured company, Simon said getting its own employees to use the service is key to its success and the response in the one pilot test is strong.

The retailer has about 180 health clinics in stores, which are operated by local health care professionals or hospitals on a lease arrangement, and this is retailer’s first company-owned clinic.

“Our Walmart Care Clinic pilot is creating a new price position for retail health services that aims to give our associates and customers greater access to quality, affordable health care that will improve their lives,” said Labeed Diab, president of Health and Wellness for Wal-Mart.

Following are some stats pushed out during several Thursday meetings with the media.
• $3.2 million: The savings money transfer fees since April.
• 115,000: The number of games exchanged for cash since March.
• 7 million: The number of online items at walmart.com.
• 1,000 new hires: The number of technology jobs added @WalmartLabs this year.

The 21st Annual Jack White Legislative Golf Tournament to be held Monday, June 16, will involve more than golfers trying to prove their skills on the course – it will involve a robot trying to do the same.

That's right. An IRB 120 robot, the brainchild of a robotics team at ABB, parent company of Fort Smith-based Baldor Electric, will be on hand at the golf tournament.

And while the robot will wow and dazzle the crowd, Baldor Marketing Vice President Tracy Long said the purpose of having the robot on hand June 16 is to highlight the partnership between Baldor and the University of Arkansas at Fort Smith, which announced the creation of a new robotics certification in February.

"With the help of ABB and Baldor, they are installing a whole new series of ABB robots in the McFarland Lab over in the technology building. So UAFS has really kind of moved into this next stage and understanding that there's a lot of manufacturers in town like Baldor who are using robotics now in production to improve safety and to improve productivity and to really add value to the job that we have in manufacturing plants,” Long said in a note. “And so it's a really, really cool thing that UAFS is doing and ABB and Baldor are both so excited to be part of that. So to help them celebrate and kind of share that news, ABB is loaning us this robot they've created to take out to the Chamber (of Commerce) golf tournament.”

Fred Carillo of ABB Robotics said the robot uses a few different technologies to sink the perfect put that alludes so many and further demonstrates the types of projects UAFS students can work on if they choose to pursue the robotics certificate.

First, he said the device uses "range finder technology" to locate the hole and then uses "vision technology" to locate the ball and club before eventually picking up the putter and sinking the ball in the hole.

"Based on some other things that go on that we've developed, we're utilizing some technology that is commonly used on different kinds of applications and manufacturing. And you're seeing it deployed in a rather fun way and it's great that people in the community get to see that.”

Carillo said individuals who are not involved in the manufacturing industry often assume that robots are only used in motor manufacturing or some sort of other automobile assembly. But he said companies across Arkansas are starting to use robots in everyday common activities, including packaging and casting. He said factories in Little Rock and Jonesboro are just two of several examples across the state using robots as an essential tool in the manufacturing processes.

It is for that reason that Carillo said ABB/Baldor partnered with UAFS to make sure the school had the tools it needed when it launched the program.

UAFS Chancellor Dr. Paul Beran said in February that in addition to the robot donation from Baldor, Gov. Mike Beebe had also made available $300,000 to the university to launch the program. But Beran added that the decision to go with a robotics certificate was not made "on a whim," but instead was created after much research, adding that the next closest academic robotics program was in Indiana.

Carillo said the need exists in Fort Smith and the entire state for individuals who know how to work with robots and maintain them, adding that some lower-end models can be purchased for as cheap as $25,000, making it far more feasible for local manufacturers than even just five years ago.

And that's why Long said the public needs to make itself aware of the role robots play in the economy today and will continue to play in the economy as time goes on.

"It's really becoming a critical component for manufacturing and there's so much manufacturing that goes on in Arkansas, that we are seeing the need for the students to come out and become part of our teams who can support this type of manufacturing process. And that's why we're so proud of the university for offering another set of skills for students that are going to walk out and have something that we're looking for right now.”

The tournament will start at 1 p.m. with a shotgun start, according to Director of Operations Tamara Fitzpatrick of the Fort Smith Regional Chamber of Commerce. Long said the robot is expected to be set up along the first nine greens.

The Wal-Mart shareholders meetings have become part late-night talk show, part church service/pep rally, part United Nations parade, with a retail Woodstock music festival sans the hippies, mushrooms and mud. And that was the case this year, to include Harry Connick Jr. in what may have been an impromptu performance of “Just a Closer Walk with Thee.”

And it may be a rare year that a change in Wal-Mart CEO is not among the more notable changes or news in the world of retail. This is one of those years. And comments about a plethora of those changes – new ways to reach the consumer, tethering stores to better serve customers, the “Savings Catcher,” new store formats – were part of Friday’s (June 6) shareholder meeting attended by an estimated 14,000.

Doug McMillon moved on Feb. 1 from his Wal-Mart International post to succeed Mike Duke as president and CEO of Wal-Mart Stores. McMillon said during the shareholders meeting, held at Bud Walton Arena on the University of Arkansas campus, that the customer remains the focus through all the new technology and new physical formats.

“Without them (customers) we don’t have jobs,” McMillon said, adding that it’s important that Wal-Mart employees work to keep the customers happy.

To reinforce that point, pop music sensation Pharrell Williams, along with his trademark hat, sang his hit song, “Happy.” His performance was followed by the stage entrance of Harry Connick Jr., who would serve as the celebrity emcee of the shareholders meeting. Other entertainers performing at the meeting included Robin Thicke, Sarah McLachlan, Aloe Blacc and Florida Georgia Line.

CHANGES
The year has delivered several physical changes and experiments in how the world’s largest retailer plans to boost business in what has been a flat U.S. market.

The company unveiled its new convenience store format – Walmart to Go – in March and judging by media and retail industry reaction it seemed that Wal-Mart announced it was selling dimes for 5 cents. This little (relatively speaking) 5,000-square-foot format now open in Bentonville just a short Ford pickup drive from the corporate headquarters is Wal-Mart’s effort to capture more of the $415 billion “quick-trip” market consumers make between their big grocery and shopping runs.

Bill Simon, CEO of Walmart U.S., also announced during the year that the company would invest in pick-up depots that will allow shoppers to drive through and get their online grocery order that was  placed earlier in the day. The “Walmart to Go” grocery delivery test market will also be expanded this year. It is already available in Denver, San Jose, Northern Virginia, Philadelphia and Minneapolis. Wal-Mart also plans to ship product from 50 more of its supercenter locations this year. This effort to tether supercenters to smaller formats and e-commerce fulfillment is key to Wal-Mart being able to better compete for Amazon Prime customers.

Part of Connick’s emcee work was scripted for him to talk about buying a Beignet mix online and then picking it up at his nearby Wal-Mart.

The drive-through pick-up for online orders was tested in 11 stores in the Denver area and are yielding a 90% satisfaction rating with consumers. The test in the Denver market was first announced in October. Shoppers pull into the parking lot and a loader brings the items to the car. Wal-Mart also allows order pick-up through the drive-in pharmacy line. Wal-Mart has obtained approval to build to 15,000 square-foot retail warehouse facility in Bentonville with 52 parking places — 33 for customers driving through to pick up grocery orders and 19 for employee parking.

The drive-in service is more about convenience, and those fill-in trips mid-week, an area that Wal-Mart has lost sales to in recent years from the rise of smaller format dollar stores and convenience stores. Simon said this quick-trip market is worth $415 billion annually and equals some 40% of the U.S. grocery spend. Wal-Mart’s share is just 10%, something the retailer thinks it can improve.

The company is also getting into the organic food business. Sales of organic products rose 11.5% last year to $35.1 billion, the fastest growth rate in five years, according to the Organic Trade Association. It’s anyone’s guess what that number will look like next year as Wal-Mart expands its organic products under the Wild Oats brand.

‘A REVIVAL’
When the early portion of the entertainment wrapped up, Wal-Mart Board Chairman Rob Walton recalled the days when his father, Wal-Mart co-founder Sam Walton, presided over the shareholders meeting. Rob Walton noted that his father referred to the 1985 meeting as “a revival.” That meeting was attended by 400 associates from 20 states.

“Things have changed a bit, folks,” Rob Walton told the estimated crowd of 14,000 from 27 countries.

Rob Walton also preached a “customer-centric” focusing, saying that no matter how technology and formats change the business, the “focus remains on the customer.”

He also welcomed Doug McMillon to the role as CEO, saying that McMillon, who began has an hourly employee at a distribution center, is “truly an associate-CEO.” He added that McMillon is an example that all Wal-Mart employees “can go as far as your hard work and talent will take you.”

In ending his opening remarks, Rob Walton said Sam Walton once ended a note to shareholders with the sentence, “Let’s go for it.” He said that attitude is still needed across all Wal-Mart operations.

“Let’s go and build the Wal-Mart of the future,” Rob Walton said.

SHAREHOLDER PROPOSALS
The meeting was not all rah-rah for Wal-Mart.

A representative of OUR Walmart, a union-funded group that has worked to raise wages and improve working conditions at Wal-Mart, spoke for a shareholder proposal seeking an independent Board Chairman. The representative said “serious scandals” at the company call for someone who is not a Walton family member to lead the board. The call for an independent chairman received a surprising amount of applause throughout the crowd.

Cambria Allen, representing groups who own 2.6 million Wal-Mart shares, asked shareholders to approve a “clawback” provision that would return compensation from executives who caused the company to be assessed fines for corruption or other problems.

“Wal-Mart has a clawback with no teeth,” Allen said.

The two proposals were not supported by Wal-Mart, and did not receive shareholder approval.

Presentation of the shareholders proposals critical of Wal-Mart were followed by pop star Robin Thicke singing “Blurred Lines.”

FINANCIALS
Cutting to the chase, Wal-Mart Chief Financial Officer Charles Holley told the shareholders that the company did have a difficult year in fiscal year 2013.

“It was a pretty rough year by anyone’s standards,” Holley said.

And the company’s first quarter earnings were ugly. The retailer reported per share net income for the first fiscal quarter of $1.11, below the consensus estimate of $1.15. The company earned $1.10 per share from continuing operations. Total revenue of $114.96 billion was up slightly over the $114.07 billion in first quarter of 2013 and was below the consensus estimate of $116.27 billion.

Company officials said the first quarter was hit hard by unusual winter weather in the U.S. during January.

Comp traffic for Walmart U.S. was down 1.4% in the quarter, despite a 1.3% uptick in the average shopper ticket. This marks the fifth consecutive quarter of negative to flat comparable sales, the benchmark metric used to measure retail performance.

And the second quarter may not be a big improvement. The company is predicting earnings per share in the range of $1.15 and $1.25. The company hit $1.24 per share in the second quarter of the previous fiscal year.

But Holley ended his comments with a litany of financial successes. He said the company has recorded $68 billion in sales growth in the past five years, and market value of the company has grown $50 billion in the past five years.

‘PICK UP UP THE PACE’
McMillon closed the executive comments with essentially a sermon about how Wal-Mart will do whatever it can to exceed the expectations of customers with more demanding expectations. He said the company will use a wide variety of technology to meet the customer where they want to do business.

To that point, McMillon said a majority of e-commerce traffic comes from mobile phones than desktop computers or other devices.

A unique product and service Wal-Mart may provide is 3D printing. McMillon said it’s possible, for example, that Wal-Mart can “print small replacement items,” that customers could pick up at a store.

The company will also add “collecting points” in which customers may order products and pick them at a non-store location. For example, the company is experimenting with collecting points in a subway in London and a train car in Ontario. He said someday “a school in Dallas” may be a collecting point to allow parents to pick up items as they pick up their children.

“All of these changes are a good thing for us … (and) only limited by our imaginations,” McMillon said. “We are picking up the pace of our change to better service our customers.”

He also said the company has to change in order to meet employee expectations, noting that new Wal-Mart employees never knew a world without the Internet or smart phones.

“You think they are going to expect more of Wal-Mart?” he said.

For several years the central message and mission around Wal-Mart’s business strategy was growth, leverage and returns. Analysts from around the country noted a different message at this year’s annual shareholder meeting held Friday (June 6) in Fayetteville.

The notion of change and growth through tech innovation at the expense of lower returns in the midterm was constant throughout the speeches from Wal-Mart’s top executives over the past two days. CEO Doug McMillon, who also addressed the media following the Friday’s meeting, said in this new role assumed in February that he was able to let go of things that happened in the past as the leader of a complex international business and was given the freedom to think about what could be for the world’s largest retailer,

“I have tried to approach this role with high energy, while looking forward to many new possibilities,” he said. “Our people are going to be the magic that makes it happen.”

McMillon said change is inevitable and Wal-Mart, though a large company, is nimble enough to flex its offerings to fit what customers want and need – which is key to continued retail success in an ever-changing world.

“Retail has moved from a push system — where we pushed goods out to stores in hopes that you would buy — into to a pull system where consumers are pulling us along  and telling us what they want and where,” McMillion said.

When Wal-Mart sees something operationally that works well in a test phase the company must be ready to accelerate the pace and work with a sense of urgency to deliver, McMillon said.

“I would like to move a little faster, but not in a reckless manner,” he added.

Neil Ashe, CEO Wal-Mart Global eCommerce, said the talent the retailer has amassed in its WalmartLabs division is raising the bar on reducing cycle times for new platform and program launches from two years down to 20 days, something they recently accomplished on a technology platform for Sam’s Club members.

Bill Simon, CEO of Walmart U.S., said the retailer accelerated its new store projects by 150 additional units in the same fiscal year they were announced. 

“We have to be about the new and the now, and adding 150 additional stores within a year is pretty significant evidence that we move quickly to acceleration when it makes sense,” Simon said.

He was asked to define the limits that Wal-Mart’s infrastructure could handle in terms of speedy expansion. He said adding 300 smaller formats and 150 supercenters and remodels this year the retailer is likely pushing the limits. In a build-to-suit program with the neighborhood markets, Simon said the constraints will be in talent.

Simon was asked if these small formats are a game-changer for a retailer with 4,000 large stores in the U.S. alone.

“If there are 300 of these small stores in the universe it’s not very exciting, but if there is 2,000 (his vision) it gets much more interesting,” Simon said.

This change and tech innovation doesn’t come cheap. In terms of tech talent acquisitions last year the costs shaved 11 cents from the annual per share earnings. This year the company tagged 2 cents to 4 cents in per share earnings which will be sacrificed for more e-commerce acquisitions and growth opportunities in future quarters.

For the top Fortune 500 company, every cent earned or forfeited is highly scrutinized by Wall Street each quarter, but execs with the retailer and emerging tech company say investments in the “now” will be key to their broad goal of seamlessly merging the physical and digital retail worlds.

An analyst also asked if this constant catering to every consumer whim would likely be detrimental to margins in the long run. McMillon said his gut reaction about the investment payoff in the long term is positive because of operational efficiencies that are gleaned overtime. But it’s the mid-term — three to five years — that are the hardest to read as the company goes through transition with many new formats and delivery options.

“It’s not returns that I am worried about. We are a strong company and the returns will be okay overtime. I am concerned to make sure we are positioned for growth and executing what we have today. As long as we take care of that, I think these returns are going to work themselves out,” McMillon said.

When asked what was the most challenging aspect of his new role, McMillon told an analyst in attendance that he has been quoting him since October after a brief conversation the two had at the retailer’s annual analyst meeting.

“In years past when you visited Wal-Mart you said you saw leaders, but now what you see are managers,” McMillon shared. “Had we gotten so big that it took all of our time to manage that there was no time left for leading change?”

Continuing, McMillon said: “That question stuck with me, and it’s clearly one of the most challenging aspects of this new role. As a leadership team we have begun making time to collaborate on central issues and we all contribute so that when we reach the solution it is much better than any one of us could have reached on their own. We are looking forward more today than we have in the past two or three years,” McMillon said.

As the last two A-10 Warthogs departed the Air National Guard base in Fort Smith on Saturday (June 7), a small boy looking to the sky was excited about what might happen next. “Do the drones come now?” he asked his mother.

The child will be as disappointed as those who didn’t want to see the A-10s leave. The drones will not physically come to Fort Smith, at least not those used on the business end of the new mission for the former 188th Fighter Wing. But the “remotely piloted aircraft” mission – don’t call them drones, the media has been told – is officially the new mission for the rebranded 188th Wing.

Several hundred members of the unit, former unit members, their families, dignitaries and the media attended a Saturday morning “Conversion Day” ceremony in which “Fighter” was removed from the 188th Fighter Wing moniker.

Broad cuts in U.S. defense spending – possibly up to $500 billion over 10 years – included the removal of 20 A-10 Thunderbolt fighter planes from the 188th Fighter Wing in Fort Smith. It was announced in 2012 that the A-10 Thunderbolt fighters of the 188th would be lost and the unit’s mission would change to an intelligence, surveillance and reconnaissance (ISR) mission.

188THHISTORY
The unit began in October 1953 as the 184th Tactical Reconnaissance Squadron. The unit has been home to nine aircraft types, beginning with the RB-26, a twin-engine modified bomber. The unit converted in 1956 to the RF-80, a jet aircraft, when the unit was assigned a daylight reconnaissance mission.

The RF-84F arrived in 1957, and was replaced in 1970 by the RF-101 (Voodoo). In 1972 the unit’s recon mission ended with the arrival of the F-100 Super Sabre. The unit was recast as the 188th Tactical Fighter Group. In 1979, the “Flying Razorbacks” handle was adopted by the 188th when it received the F-4C Phantom.

In 1988 the F-16A Fighting Falcon replaced the F-4C, and in 2000 the F-16s were upgraded to the F-16 A variant. A last-minute decision by the Base Realignment and Closure Committee in 2005 replaced the F-16 with the A-10. On April 14, 2007, the 188th received its first A-10.

Col. Mark Anderson, who will continue to command the 188th, said during the Saturday ceremony that the unit with its A-10 planes set several combat theater records for performance, and he also praised the unit’s 2005 history when its F-16 fighter plans flew in Iraq to support Operation Iraqi Freedom.

“We cherish the proud aviation heritage our members have worked so hard to build,” Anderson said.

Col. Brian Burger, commander of the 188th Operations Group, said the 188th is “exiting the manned flying mission at the top of our game.” He said the same performance would be part of the new unmanned mission in which “Arkansas airmen now take the fight to the enemy ... all day, every day.”

Without the A-10 Warthogs, aka “Flying Razorbacks,” to support, the 188th deactivated its Maintenance Group – a group with the unofficial motto, “We Make Pigs Fly.”

NEW UNITS
The primary component of the new mission for the 188th Wing is the 188th ISR (Intelligence, Surveillance and Reconnaissance) Group. The 188th ISR is comprised of the 123rd Intelligence Squadron, the 153rd Intelligence Squadron, the 223rd Intelligence Support Squadron, and the 288th Operations Support Squadron.

The 188th ISR is commanded by Lt. Col. Robert Kinney, a career intelligence officer with more than 24 years in the Air National Guard. In 2012, Kinney was named chief of “ISR Plans and Integration,” a role in which he would lead the planning for more than 20 new ISR Guard units.

The 123rd is commanded by Lt. Col. Tina Lipscomb and has 120 members. The 123rd role is to conduct “near real time exploitation of imagery intelligence data, collected by” ISR units with that info then delivered in a useful manner to “combatant commanders and war fighting forces.”

The 153rd is commanded by Major Sarah Stigler, and will have 107 members. The unit provides “targeting production capability” based on gathering data and other intelligence from “a number of sources.”

Lt. Col. John Easley commands the 223rd, which has 50 members. This group “develops and trains Cyber systems professional and provides critical cyberspace communication services” for the 188th’s missions.

Major Paul Needham commands the 52 members of the 288th. This group “provides support to the daily operations of the 188th ISR Group, including training, plans, mission management, and weapons and tactics functions for the AN/GSQ 272 ‘SENTINEL’ weapons system.” This unit is also part of the Distributed Common Ground System of the U.S. Air Force.

Overall, the 188th ISR Group will have 347 members, and at some point will operate from a planned $12.5 million, 40,000-square-foot facility to be built on the 188th base that Col. Anderson has said could help the 188th become an “ISR Center of Excellence.” Counting operations, security, medical and other groups, the 188th will have more than 900 personnel who will train and operate from the Air National Guard base in Fort Smith.

Anderson said Saturday that the new intel and “space-focused targeting squadrons” are staffed by “highly skilled personnel” with top secret clearances. He also said the Fort Smith metro business community could benefit from those who will staff the new mission.

“I encourage our business leaders to leverage” this new talent pool, Anderson said.

Anderson closed his comments by saying the new mission is an important mission to the nation’s defense.

“We will be relevant. We will succeed.”

That may be, but one of the 188th crew members who worked the flight line as the two A-10’s were prepped for departure was not ready to see the war birds leave.

“Pretty sad,” the airman said when asked what he thought about helping prep the final A-10 to taxi away from the hangar area.

Wal-Mart executives dedicated their 52nd annual shareholders festivities (June 3 -7) to their 220 million weekly customers around the globe. The messages of CEOs Doug McMillon, Bill Simon and Neil Ashe and other top execs were clear regarding the retailer’s efforts to woo new customers and retain the ones they have with more than just low prices.

About 2,200 Wal-Mart employees from across the nation and 4,800 from Walmart International heard directly last week that they make the difference in customer service. 

“The reason we are all here is the customer,” Gisel Ruiz, chief operating officer for Walmart U.S., said during the retailer’s U.S. meeting on Wednesday (June 4). She told the Wal-Mart employees to strive to make a difference through top customer service.  Walmart U.S. CEO Bill Simon said that each one of them had the opportunity to impact real change through stellar customer service.

Unfortunately, the buzz of shareholders week of activities was muted somewhat following an New Jersey accident in which comedian and Saturday Night Live alum Tracy Morgan was critically injured when a van he was in was hit by a Wal-Mart tractor-trailer. The wreck killed comedian James McNair. The driver of the Wal-Mart rig reportedly fell asleep.

“This is a tragedy and we are profoundly sorry that one of our trucks was involved. We are working quickly to understand what happened and are cooperating fully with law enforcement to aid their investigation,” noted a Saturday afternoon statement from Wal-Mart Stores.

WAL-MART PERCEPTION
In multiple surveys during the past year, Wal-Mart ranked behind other retailers (Trader Joes, Kroger, H-E-B)  in customer service. That said, Wal-Mart is still the most shopped retailer in the world, boasting combined net revenue of $473 billion last year.

Much is written about Wal-Mart’s stagnant and lackluster comp sales in the U.S. segment, but companywide, annual sales have grown at a compounded annual rate of 3.4% over the past five years through ongoing economic recovery. Most of that growth has been in e-commerce, ($10 billion last year, and $13 billion expected this year) an area the retailer says it will continue to invest in talent and tech acquisitions in the mid-term, even if it slightly dampens shareholder returns.

McMillon told shareholders during Friday’s (June 6) annual meeting that first and foremost, “we will be a customer-driven company. We've always said the customer is our boss and we'll make decisions based on how we can serve them better.” He also said investing in talent and innovating for the future round out the retailer’s three main ares of focus looking forward.

CUSTOMER-CENTRIC
Simon said the retailer continues to introduce more services like cheaper money transfers and insurance comparisons and expanded merchandise like Wild Oats organics in its customer-centric agenda. This is on top of everyday low prices with a money-back guarantee and the Savings Catcher initiative that will be rolled out and expanded later this summer.  

Nearly a million receipts have been processed with Savings Catcher in the limited trial of the past two months, the company said. Simon said it’s been the most successful program test at Wal-Mart thus far. Stephen Quinn, executive vice president of marketing for Walmart U.S., said Savings Catcher is changing customer behavior.

“They (shoppers) don’t have to clip competitor coupons and closely check sales circulars because Wal-Mart will do that work for them when they sign up for Savings Catcher,” Quinn said.

Later this summer the savings will include produce and general merchandise which are expected to bring more shoppers into the program. Analysts have said the Savings Catcher and soon-to-be-offered e-receipts will give the retailer more insight into individual shopper purchases that may then be used to create shopping lists for the customer in the coming months.

“The best shopping lists are those you don’t have to create yourself,” said Gibu Thomas, senior vice president of mobile and global e-commerce. Thomas said Wal-Mart will continue to use technology in exciting ways to get closer to the customer. 

CONVENIENCE PLAY
Simon said Wal-Mart is also providing increased convenience with more smaller formats that are linked to 7 million online items, many of which can be delivered within two days thanks to a third online fulfillment center coming to Indiana later this year.

Wal-Mart also uses 50 supercenters to pick online orders, a program that will be expanded to at least 150 supercenters this year. Wal-Mart’s click-and-collect program where consumers order online and pick up at a local store is being expanded from 300 stores to 600 stores next year following positive tests in the Denver market.

Simon said in markets like Denver where the majority of consumers drive to work, the click and collect option is popular. Other markets where mass transit is popular the click and collect can take another form where consumers pick-up their online order at a train station or near their children’s school.

McMillon said the goal is to adopt something like he saw at ASDA recently. He said the grocery order was placed online to pick up at the store. But on the way to the store, the shopper remembers three or four items left off the online order. When arriving at the store, the shopper can run inside and gather the three items left of the list and have them packaged with their online order and loaded in their vehicle.

CUSTOMER STUDY
While all retailers are studying consumer behavior, McMillon said Wal-Mart has accumulated 30 petabytes of shopping data.

“In case you don’t know how much that is, one petabyte will hold enough music to play for 2,000 years,” McMillon said.

From that data Wal-Mart attempts to give consumers everything they want, and even some things they might want but don’t know yet. The retailer is gleaning many “learnings” from its ASDA grocery business in London. Those ideas and the woman behind many of them — Judith McKenna —recently transferred to Bentonville to oversee the development of new store formats, such as Wal-Mart's smaller-format convenience and grocery stores.

McKenna said lessons learned from ASDA and the Denver test – which was combined with home delivery – indicate consumers tend to move quickly to the online order and pickup grocery model. She said home delivery requires someone be home to get the order, and in many cases it’s more convenient to pick up the order while on the way home. McKenna is part of Wal-Mart’s innovation and small store/online strategy team.

INNOVATION FOR CUSTOMERS
Inside Wal-Mart innovation labs the retailer is constantly looking for ways to use technology to enhance the shopping experience, as well as increased store efficiencies designed to leverage its massive physical presence with its emerging online business.

Simon said last week the retailer is testing several programs simultaneously. One of the most important in the mix is the Express store build out. Wal-Mart has about 20 Express stores, with plans to build 100 more this year. The hybrid stores offer food, fuel and pharmacy with limited onsite general merchandise. However, the store is “tethered” all the products in a nearby supercenter, which is “tethered” to the 7 million online items at Walmart.com.

“The comps in these hybrid stores are very good, and this build up in store units this year to 150 or so will give us more insight into how the consumer will use them,” Simon said.

McMillon has been talking up 3-D printing in the media lately, because he believes it has  “retailtainment” capabilities on a novelty level and much bigger implications in product replacement. The retailer tested 3-D printing in a few sites around the globe in recent months. Neil Ashe, CEO of Walmart Global e-Commerce, said the highest comp day in history in the San Bruno Wal-Mart was the day the store had the 3-D printer.

Tyson Foods on Monday (June 9) placed an $8.55 billion bid on the table for Hillshire Brands causing bidding competitor Pilgrim’s Pride to fold. The Tyson offer, the biggest meat deal in U.S. history, has not yet been accepted. Pilgrim’s said it will not make a counter offer.

“The Hillshire Brands acquisition would represent a defining moment for Tyson Foods,” Donnie Smith, Tyson’s president and CEO, said in a statement. “Our strategy has been to grow our prepared foods business, and it has been our aspiration to be a leader in retail prepared foods just as we are in chicken. Now we will have those iconic #1 and #2 brands in numerous categories.”

Officials with Tyson Foods and Hillshire Brands acknowledged the $63 per share cash offer Monday which would require Hillshire to walk away from its pending $6.6 billion acquisition of Pinnacle Foods, a deal announced May 12. 

Pilgrim’s Pride CEO Bill Lovette said $55 was their top offer.

"As a disciplined acquirer, we determined that it was in the best interests of our shareholders not to increase our proposed price of $55.00 per share in cash," Lovette said in a statement. Pilgrim’s Pride is owned by Sao Paulo, Brazil-based JBS S.A.

Hillshire execs confirmed the offer from Tyson, but said the deal is far from a sure thing.

“The Hillshire Brands board of directors has not approved the Tyson Foods offer, has not changed its recommendation regarding the Pinnacle merger and is not making any recommendation with respect to the Tyson offer,” Hillshire management noted in a release on Monday. “Hillshire Brands does not have the right to terminate the merger agreement with Pinnacle Foods on the basis of the Tyson Foods offer or enter into an agreement with Tyson Foods prior to its termination. There can be no assurance that any transaction will result from the Tyson Foods offer.”

Bidding for Hillshire began in late May when Pilgrim’s Pride offered $5.52 billion for the company. Tyson Foods countered a few days later with a $6.8 billion ($50 per share) offer. Pilgrim’s countered that with a $7.7 billion ($55 per share) offer on June 3.

Tyson would also be asked to pay the $163 million termination fee to Pinnacle if Hillshire accepts the Tyson bid which will stand until the termination of the Hillshire/ Pinnacle deal on Dec. 12, 2014.

Jimmy Dean, Ball Park and Hillshire Farm are a few of the brands owned by Hillshire.

“The combination of Tyson and Hillshire Brands would reposition Tyson as a clear leader in the retail sale of prepared foods, with a complementary portfolio of well-recognized brands, including Tyson, Wright Brand, Jimmy Dean, Ball Park, State Fair and Hillshire Farm,” Tyson Foods noted in the statement. “In particular, the strength of Hillshire Brands’ products in the breakfast category would allow Tyson to capture opportunities in this attractive and fast-growing day part.”

The pro forma company would give Tyson the No. 2 market share ($3.3 billion) in the frozen value-added category, leap frogging ConAgra in retail sales, according to Tyson. Tyson now has the No. 3 spot with $2.4 billion, and Hillshire ranks eighth at $1.3 billion.

The prepared foods segment is now 9% of Tyson Foods’ $35.4 billion in annual sales. If the deal happens, the combined companies would annual revenue of around $39.4 billion, with 18% of that coming from prepared food sales.

Alexia Howard, a senior research analyst at Sanford Bernstein, has said the deal at $50 made sense for Tyson because its gives them more brands at the end of the of supply chain. Those “value added” products deliver higher margins than food service and commodity meat sales at Tyson Foods.

Analysts were a bit more concerned with the $63 offering. They quizzed Tyson officials as to why they would offer a hefty price for the maker of Jimmy Dean sausages.

Smith said Tyson scouted Hillshire for “a long time.” Tyson Foods said the deal could boost earnings within the first fiscal year after the deal is completed. Company officials also predict more than $300 million in synergies – savings through reducing or eliminating duplicative tasks, operations and personnel – through purchasing, supply chain and marketing efforts.

Shareholders were uncertain with this latest Tyson bid and began to sell off shares in the morning session with the price tumbling 4.66% to $38.26. In late afternoon trading, the share price fell more than 6.5% and was trading around $37.45. The share price closed Friday at $40.12. During the past 52 weeks, the share price has ranged from a $44.24 high to a $24.74 low.

Contributing analysts on CNBC agreed the 16.7 times earnings valuation for Hillshire in the Tyson deal puts the Springdale meat company on the edge of comfort with retaining its investment grade credit rating. Tyson justified the 16.7 times earnings valuation and said it will decline to 10.5 times when the $300 million in operational synergies are realized over the next three years.

BB&T Analyst Brett Hundley downgraded Tyson Foods from a “buy” to a “hold” citing the bidding between it and Pilgrim's Foods. Hundley noted to investors on Friday that the bids were getting too rich to make the numbers work.

"Bidding wars can sometimes leave casualties. The situation with Hillshire is starting to approach this level," he noted to investors.

Tyson Foods said it is not going to gamble away its investment grade credit rating, but it is prepared to issue debt and equity as needed. The transaction would be funded by cash on hand and a bridge loan from Morgan Stanley Senior Funding Inc., and JP Morgan Securities. Tyson anticipates the substantial cash flow from the combined companies will enable it to rapidly pay down debt.

Community bank soundness is another sign of the local economic recovery in Benton and Washington counties as well as the Fort Smith metro area. Through the first quarter of 2014 the majority of local banks are profitable, but a few remain in troubled waters given their high Texas Ratios — a standard measure of a bank’s credit troubles.

The Texas Ratio looks at a bank’s non-performing assets and loans delinquent 90 days or more divided by tangible capital equity and loan loss reserves. A ratio of more than 100, or 1:1, is considered a warning sign, according to Investopedia.

HIGH AND ELEVATED TEXAS RATIO NUMBERS
222.15% – Pinnacle Bank in Rogers
126.35% – Allied Bank in Mulberry

Other local banks with elevated Texas Ratios of more than 50% include:
57.91% – Signature Bank of Fayetteville
55.59% – First State Bank of Lonoke
61.43% – Chambers Bank of Danville
77.67% – Decatur State Bank, Decatur

Each of the above listed banks remain under enforcement actions by federal regulators because of their higher ratios of non-performing loans to the bank’s overall capital equity levels. That said, all but one of the six banks listed each returned profits in the recent quarter and ended 2013 on a positive note.

NET PROFITS
Signature Bank
1Q 2014: $473,000 
Fiscal 2013: $1.044 million

Chambers Bank
1Q 2014: $2.547 million
Fiscal 2013: $4.349 million

Decatur State
1Q 2014: $1.158 million
Fiscal 2013: $1,100

First State Lonoke
1Q 2014: $164,000
Fiscal 2013: $254,000

Pinnacle Bank
1Q 2014: $8,200
Fiscal 2013: $158,000

Allied Bank Mulberry
1Q 2014: $18,000 loss
Fiscal 2013: $3.121 million loss

SLOW RECOVERY
The financial health of the Northwest Arkansas banking sector is recovering and helping to fuel bank mergers among some of the distressed banks in need of capital infusion. Metropolitan National, Decatur State and First Community Bank of Crawford County were among merger deals completed in 2013.

John Dominick, a bank consultant and professor of finance at the University of Arkansas, has said the banking climate is improving in Northwest Arkansas, the most competitive market in the state. He said it takes time for banks to work through the high levels of real estate remaining on their books following the local housing and commercial building booms and busts in the past decade.

He said local banks are making money again, but some are having to set aside large reserves for potential loan losses and that is expected to continue for a few more quarters. These provisions to reserves come at the expense of higher profits but are required by regulators closely watching a handful of local banks still operating under enforcement actions.

Other banking analysts say more mergers are likely, particularly with smaller family owned banks being bought by larger institutions like Simmons First National, Home Bancshares, Bank of the Ozarks and Arvest, all of which completed acquisitions in recent months.

Mark Saunders, managing director for Bank Street Partners, recently told The City Wire that with fewer bank failure deals to acquire through FDIC actions, aggressive banks are seeking strategic acquisitions to help them grow regional market share. He said the timing is ripe for more consolidations of smaller banks that cropped up in the past decade with plans to sell when valuations rose.

Saunders said the small banks have a tougher time competing on loans, and their regulatory oversight costs are rising to the point where earnings are squeezed.

FIS RATINGS
Another rating indicator for banks on the watch list of federal regulators is the FIS Rating, which evaluates a bank’s liquidity, asset quality, capital adequacy and earnings. 
The overall rating is determined by weighting the individual component ratings. The best score that can be achieved is 1 and the worst score is 5.

By FIS standards Allied Bank and Pinnacle Bank each rank poorly at 4.19 and 4.15, respectively, at the end of the first quarter of 2014. Those rankings were the same to end 2013.

Signature Bank had a FIS Rating of 3.8 at the end of the first quarter. Chambers Bank had a rating of 3.54, the Bank of Fayetteville’s rating was 3.48 and Arvest was 3.52. At the high end of the rating, First Security posted a 1.56.

In the Fort Smith metro area FIS Ratings ranged from 3.59 at Benefit Bank to 2.93 at First National Bank of Fort Smith.

It is no secret that education systems in the 21st century faces an ever-increasing pressure to keep pace with the pace of change. And while students and teachers have seen changes in technology in the classroom, it is nothing compared to what some area schools are starting to implement and on a wide scale.

Springdale Public Schools is getting closer to the fall opening of a new School of Innovation, which Principal Joe Rollins said is an idea that "is actually very simple."

"We're trying to deliver what we see as a 21st century education by delivering the tools to our kids and making it as personable as possible," he said.

The school will begin with a cohort of eighth graders in August and will use what Rollins called a "blended learning environment" to teach students in a new way. Students will have access to tutorials and online access to teachers and advisors, as well, even if the student happens to be out sick or away for an extracurricular activity.

"It allows for flexibility throughout the day, so you can spend more time on certain things and move at your own pace," he said, adding that students will also have online access to teacher lectures day or night.

With educators and guidance counselors so involved, Rollins said they will create "whole learner" profiles for students that will provide more in-depth advisory between the student and counselors they will begin eighth grade with following all the way through to graduation.

And even though the School of Innovation will be a high school, students will have the opportunity to earn college credit from NorthWest Arkansas Community College through concurrent classes, which Rollins said would lead to some students "graduating with an associates degree at the same time as their high school diploma."

The school, to be housed at the Jones Center for Families, is partially funded through a $25.9 million federal Race to the Top grant, which Rollins said has assisted in some technology acquisition necessary to outfit each of the school's incoming students with laptop computers to be used for project-based learning and out of class study.

And even though it will use methods not common in traditional learning environments, Rollins said the state testing requirements will be no different for the School of Innovation than to any other school.

The creation of the School of Innovation could also alleviate the need for the construction of a third traditional high school for the district in the near future, though Rollins said with the School of Innovation enrolling 200 students per year, it will itself be a large school once peak enrollment takes place in five years, maxing out at 1,200 students.

OTHER SCHOOL MOVES
Springdale is just one local district looking at ways to innovate for the 21st century. Rogers and Van Buren launched "New Tech" high schools within their respective districts that focus on project-based learning "heavily infused with technology."

And in Fort Smith, the school district is not waiting until students enter high school to introduce technology and project-based learning to the classroom. According to Dr. Barry Owen, assistant superintendent for instructional services, the district will introduce a one to one computer initiative with three pilot schools — Ramsey Junior High, Morrison Elementary School and Sunnymede Elementary School.

Owen said the program will place computers in the hands of every student at the three schools and would shift focus from textbook-based teaching to technology based learning.

Dr. Benny Gooden, superintendent of Fort Smith Schools, told a gathering of educators at Thursday's (June 5) Partners in Education event that waiting until students were in secondary grades to make an attempt at innovation would simply not cut it when educating the leaders of tomorrow.

"The instructional use of technology is our future," he said. "Some who are pursuing initiatives like this are focusing on only high schools or only on the middle grades, but as you know, that may be a short-sighted approach because by engaging our youngest students, we position them for many years of life-long effective learning."

In making the case, he disputed assertions that what has worked or is being attempted in other districts should be tried in Fort Smith.

"Sometimes I am challenged by those who have read an article or saw a news clip on television or read something on the Internet about some new and supposedly innovative initiative and they tell me we ought to quickly adopt that and board the train to the future. However, anyone who sees what you're doing now must realize that you're on a steady pathway that's reaching students in every school to provide new and rich learning experiences to make them college and career ready."

‘CLOSE THE DIGITAL DIVIDE’
As a way of introducing the pilot program to be introduced next year, Gooden introduced Dr. Scott Smith, chief technology officer at the Mooresville Graded School District in North Carolina, who literally wrote the book on one-to-one technology-based learning and whose model Fort Smith is largely based upon.

Smith said the introduction of technology to students at all levels (third grade through high school) had allowed the district to "close the digital divide," leveling the playing field and giving students access to relevant instruction, though he said what Mooresville did and what Fort Smith will do in the fall is not simply about using technology for technology's sake.

"We joke a little bit and say, 'OK, we drank the Kool Aid,' but we are all in because it's best for kids. What does it look like for us? Again, it's not a technology project. It's an instruction change effort in terms of changing that teaching and learning environment. We put that meaningful instructional tool in the hands of every student."

Smith said instructors can be precise and meet the needs of each student through the technology.

The cost for Mooresville is about $1.50 per student per day and Smith said test results show that the district is getting a good return on investment, adding that while the results are "not miraculous," they do show steady improvement.

He pointed to a variety of examples, though the biggest improvement came in terms of academic achievement, with Mooresville ranked number two in the state in the 2011-2012 school year, where before the one-to-one initiative the district ranked in the middle of North Carolina's more than 100 school districts.

Owen said past attempts at innovation in Fort Smith have included participation in the Western Arkansas Technology Center at the University of Arkansas at Fort Smith, which the school has participated in since its creation in 1998. He said that as many as 200 students are participating in the program from Fort Smith in half-day increments — attending a Fort Smith high school for half the day and UAFS for the other half of the day.

And much like how School of Innovation Students could earn an associates degree at the same time as a high school diploma, Owen said the same thing often happens for participating students in Fort Smith.

LOOK AT MODELS THAT HOLD PROMISE
Attempts by various Northwest Arkansas and Fort Smith area school districts to innovate, whether it be by implementing the "new tech" program, creating the School of Innovation or focusing on technology-based learning with younger students, education advocates are applauding local efforts.

"Innovative traditional school district leaders in Arkansas are finally acknowledging that public education is not either/or, but all," said Gary Newton, president and CEO of Arkansas Learns, a private sector alliance dedicated to excellence in education.

He said the continuing innovations in public schools proves that "one size or method doesn't fit all."

"When public education focuses on the best interests of individual students, instead of protecting the self interests of collective delivery systems, students, families and communities win."

As for what educators and administrators can do in other districts to innovate and adapt, Rollins said they have to figure out what being a 21st century school looks like for their communities.

"This particular model holds promise," he said of the School of Innovation. "I think this is something they should look at and see if it is something they can apply to their own districts."

A Utah man who allegedly took $272,500 from the Southside High School band that was intended to pay for a 2012 band trip to Hawaii was in Fort Smith on Monday (June 9) where he was handed a three-count indictment for wire fraud.

Calliope “Ope” Rocky Saaga, 40, of Saratoga Springs, Utah, was arraigned Monday before U.S. Magistrage Judge James Marschewski on charges that were handed down May 7 by a Federal Grand Jury.

According to the indictment, Saaga in August 2011 contracted with Southside High School to provide travel arrangements for a spring 2012 band trip to Hawaii. Band officials sent Saaga, operating as Performing Hawaii Tours and Present America Tours, three payments for the trip. However, Saaga used the money for personal use and the band trip was eventually cancelled.

“The scheme resulted in defrauding the Fort Smith Southside Band, students, and parents of approximately $272,500,” noted the statement from the office of Connor Eldridge, U.S. Attorney for the Western District of Arkansas.

Saaga could face up to 20 years in prison if convicted.

Dr. Gordon Floyd, deputy superintendent of Fort Smith Public Schools, said the parents, students and faculty harmed by the fraud will likely “never see full justice in terms of restitution,” but at least they will know Saage now faces the legal consequence of his actions.

“We are happy he is being brought to justice. He cheated a lot of students out of money that was a result of their hard work and deprived them of a chance to take a trip that would have been for them the trip of a lifetime,” Floyd said.

Saaga also faces indictments on 12 charges of wire fraud and three counts of money laundering from a Federal Grand Jury in Springfield, Mo.

In that case, Saaga is charged with stealing $360,000 from the Willard High School Band Boosters, which forced the cancellation of a trip to Hawaii for more than 300 students and chaperones. This case was investigated by the FBI. Assistant United States Attorney Mark Webb is prosecuting the case for the United States.

“As alleged, this case involves defrauding high school students and their parents out of money set aside to take a once-in-a-lifetime band trip,” Eldridge noted in his statement. “It is unfathomable that someone would take money from students seeking to do something worthwhile – in this case travel to perform as part of the Southside High School Band. We will continue to prosecute this case to the fullest extent of the law.”

A decision has not yet been made on if or when voters may decide on whether to approve a millage increase for the Fort Smith Public Library, but it is not keeping supporters of the library from drumming up support for their cause.

At a noon meeting of the Fort Smith chapter of the League of Women Voters on Monday (June 9), Library Director Jennifer Goodson made her pitch, explaining what the money would be used for should voters approve taking the millage from one mil to three mils.

Goodson said the library would focus on offering more of "nearly everything" offered by the library, including an expanded selection of traditional books, audiobooks and DVDs, in addition to a larger selection of eBooks, online magazine, Spanish language and large print books. The increased millage would also provide the library with faster Internet speeds, as well as more WiFi and on-site computers for library patrons.

"For one thing, traditional library services are still very well utilized in our libraries," she said, pointing to statistics that show nearly 434,000 visits to Fort Smith Public Library branches last year, as well as nearly half a million checkouts of books, videos, audiobooks, music CDs and magazines.

She said on average, 414 library cards are issued to Fort Smith residents each month, with 4,973 issued during all of 2013, including 635 issued to non-residents at a cost of $35 per year.

But according to Goodson, while traditional use of the library is still being utilized, patrons of the library are in need of new offerings available in other libraries around the country. Some of these could be available at Fort Smith's library in coming years with the approval of the millage increase, she said.

Among the items included in the library's vision presented Monday are offering live online tutoring for students resume and job hunting assistance, as well as online video software tutorial videos and offering new online video streaming to library members, similar to a Netflix-type service.

"There are a couple of products out there for libraries," she said. "So how about we buy Hoopla (a streaming video provider for libraries) and/or Freegal movies ... let's say we buy Hoopla and we buy Freegal movies and you just get your streaming video for free through your library card? How's that sound? That sounds like a pretty good idea. Well, that's part of the plan, too. Those are all digital services offered 24/7 that we're not currently offering and in some cases we're actually referring to other libraries because we don't have them."

The increased property tax revenue would also go toward digitizing microfilm offerings, as well as creating Redbox-style kiosks for books and DVDs all over Fort Smith. Another idea is creating a "maker space" that would offer all sorts of resources to residents, including 3D printing, video filming and editing, and media conversion services.

No building projects have yet been proposed as part of the millage increase discussed by Goodson and other library supporters. All the monies would go to expand services.

The budget for the library sits at $2.7 million, Goodson said, $1.4 million of which comes from one mil of property taxes passed in 1957. By increasing the millage rate by two mils, the library would increase the operating budget to $5.5 million assuming collection of an additional $2.8 million in property taxes to support the library.

What it means for the typical Fort Smith resident is an increase of property taxes on a $100,000 home of about $40 per year, brining total taxes paid per home to the library to about $60.

In the most recent home sales report for Sebastian County, the average home sale price was $129,284, meaning the average person just moving to Fort Smith or purchasing a new home in the city could expect paying an average of $78 in property taxes to the library.

Additional funding for the library includes 6% of the city's share of the county sales tax, which amounts to nearly $900,000; about $200,000 in state funding; grants; and about $100,000 in fines and fees, including non-resident fees, which Goodson conceded could triple should the millage pass, bringing the non-resident fee in line with what residents of the city would pay in property taxes. The library now uses about $100,000 from its capital reserves to fund operations, Goodson added.

Library board member Ben Shipley said residents who constantly compare Fort Smith to the more prosperous Northwest Arkansas should consider the value libraries add to communities, as well as the economic impact libraries make on communities as explained in a Gates Foundation study commissioned in 2007.

"This is a wonderful opportunity to become state of the art in terms of library services that are offered to folks," he said.

The Fort Smith Board of Directors will hold a special meeting Tuesday (June 10) to determine whether to hold an election for the millage increase. If approved, the city Board will also determine the date of the election. If the election is held August 12 as the library board has requested, Goodson said it would front the $30,000 cost of the election.

Arkansas is among the majority of states where foreclosure fillings are subsiding to five or six year lows as the housing market recovery shows strength in a slowly improving economy. There were 391 foreclosure filings across the Natural State in May, down 53.89% from a year ago, according to Irvine, Calif.,-based RealtyTrac.

Nationwide, there were 109,824 filings for default notices, trustee sales, and bank repossessions in May, down 26% from a year ago and the lowest monthly level since December 2006, RealtyTrac reports.

All but 11 states posted annual decreases in their foreclosure filings in May.

“It’s not surprising that some of the states with the longest foreclosure timelines are those with markets still dealing with increasing foreclosure activity even as the country as a whole continues to hit new lows,” said Daren Blomquist, vice president at RealtyTrac. “On the other hand, the increase in bank repossessions in some states with shorter foreclosure timelines like California and Oregon demonstrates there is still some pent-up foreclosure activity in those states as well.”

Arkansas is a non-judicial state, which means there is typically a shorter foreclosure timeline as a judge does not have to sign the order. The average foreclosure time in Arkansas is around 290 days, but it can happen as soon as 120 days if there is no second lien and the homeowners vacate the property prior to the scheduled sale date.

Sebastian County reported five new foreclosure filings in May, down 80% from a year ago. The rate of incident last month was one in every 10,934 households in Sebastian County. At the market peak the rate was one in every 739 households.

In smaller Crawford County, RealtyTrac reports six new foreclosure filing in May, a 33% reduction from a year ago. The incident rate was one in every 4,331 households in May, down sharply from one in every 562 housing units in December 2009 deemed near the market foreclosure peak.

In recent years Benton County consistently led the rest of the state in foreclosure activity fueled in part because of the rising home prices and easier loans made in a hyper competitive banking climate. Local real estate experts believe those days are gone as the number of new foreclosures are getter fewer and farther between.

RealtyTrac reports there were 42 filings in Benton County during May, down 74.39% from a year ago and ranking No. 10 in the state. In the height of the real estate market correction in January 2009, Benton County had 559 new foreclosures pending, according to RealtyTrac – or one in nearly 145 local households during all of 2009.

Filings per household in Benton County are down to one in every 2,213 mortgages in May, RealtyTrac reports.

In Washington County, there were were just 13 new filings in May, down 79% from the year-ago period. At the market height the county reported 235 new filings in January 2009. The rate of incident is down from one in every 340 households at the market peak in January 2009 to one in 6,728 households in May.

Jim Long, a real estate agent with Crye-Leike Real Estate in Bentonville, said there are 205 foreclosure for sales in the local multiple listing service, which includes all four of the counties in this report. The number of listed homes are up from 153 in the listing service last month, but have trended lower over the past year. In December 2013, there were 322 listings of foreclosures in Northwest Arkansas and the Fort Smith metro area.

All part-time school and state employees as well as many spouses of full-time employees would be ineligible for insurance benefits under two draft bills discussed during a meeting of the House and Senate Education Committees Tuesday.

If consensus can be achieved, a special session could be held “in the next few weeks,” said Sen. Jim Hendren, R-Gravette, who is chairing a task force charged with drafting the legislation.

Hendren said legislators could expect to see final drafts “hopefully tomorrow” with a special session occurring in the next few weeks. Consensus support would have to be obtained by majorities in the House and Senate before Gov. Mike Beebe would call a special session.

A special session would have to be held by the end of August because school insurance operates on a calendar year.

The task force was created after the Legislature met in a special session in October to address soaring public school employee health insurance rates. Legislators poured $43 million in one-time money into the plan and added another $36 million annually from other sources as a quick fix. The task force was created to find more permanent solutions to the continuing problem.

The recommendations also would affect state employees, whose health insurance system is in better shape financially.

In one bill, which Hendren said is more controversial, employees who work less than 30 hours per week would not be eligible, saving the school employee plan $10.2 million and the state plan $2 million.

That drew opposition from two Republican lawmakers. Rep. Bruce Cozart, R-Hot Springs, said he grew up in his father’s school bus shop and was concerned about how the legislation would affect part-time employees. Rep. Sue Scott, R-Rogers, said that bus drivers may offer a student the first smile they see each day and that cafeteria workers offer extra food to students they know need it.

Hendren said state and public school employees were being offered health benefits not offered in the private sector. After the meeting, he said, “I think we’re on the right path. I think people understand the alternative is our teachers are going to take a big hit, and that was our task is to stop that from happening.”

In the other bill, employee spouses who have health coverage through another group health plan would not be eligible for school and state benefits. That would save up to $4 million in both the public school and state plans. The bill also would require verification of dependent eligibility, which would save each plan up to $4 million. It also would require employees with high-deductible plans to be enrolled in a health savings account.

The final draft of that bill also would provide more flexibility in covering bariatric surgeries, such as gastric bypass surgery. That change would save the school and state employee plans $8 million each.

The task force is charged with meeting until June 2015. These two bills focused on “the quick changes that will make a cash difference immediately,” Hendren said. Other options, such as combining the state and school employee plans, will be considered in future sessions.

The U.S. Marshals Museum Board is boosting its 2015 public relations budget more than 500% as the museum staff prepares for several events geared toward raising money and awareness for the planned Marshals Museum in downtown Fort Smith.

Board members met Tuesday (June 10) in Fort Smith to approve an operating budget of $3.556 million, up 54.5% compared to the 2014 budget. The budget included staff expenses estimated at $467,255, up 18.89% over 2014, and a marketing budget $138,500, well ahead of the $23,000 budgeted in 2014. Denver Peacock, owner of Little Rock-based The Peacock Group, has been hired to help the museum with public relations and marketing.

Marshals Museum President and CEO Jim Dunn said the budget changes reflect an upcoming cycle of “very high profile events” as the effort to build the museum begins to ramp up to a scheduled opening of 2017. Funding issues – primarily related to the timing of $10 million in a tax credit program – the museum opening was delayed one year.

In January 2007, the U.S. Marshals Service selected Fort Smith as the site for the estimated 20,000-square-foot national museum. The cost to build the museum — including exhibit work — is estimated at around $53 million. Although the announcement was made in 2007, formal fundraising activities did not begin until the latter part of 2009.

One of the high profile events includes the museum groundbreaking on the riverfront in downtown Fort Smith set for Sept. 24, 2014. The date coincides with the 225th anniversary of the creation of the service in 1789. The U.S. Marshals Service is the oldest American federal law enforcement agency and was established by President George Washington.

Other events include the unveiling of the a U.S. Marshals commemorative coin that will be sold in 2015 to market the 225th anniversary year of the service. The museum could collect up to $5 million from sales of the coin. Money from the coin directed to the museum is restricted to fund “the preservation, maintenance, and display of artifacts and documents” at the Marshals Museum. Revenue from coin sales will also go to the Federal Law Enforcement Officers Association, the National Law Enforcement Museum, and the National Center for Missing and Exploited Children.

“Denver is in touch with local people ... and others to help with unveiling of the coin,” Dunn told the Board, adding that coin designs could be unveiled soon.

Public relations is also a focus of the Winthrop Rockefeller Distinguished Lecture Series. The three-year series, funded by a $100,000 gift from Mrs. Listene Rockefeller, will welcome leaders from the executive, judiciary and legislative branches of the U.S. government to Fort Smith to speak about the Marshal’s history as it connects to each branch. A schedule has not yet been set for when the series will begin.

Dunn said it is “crucial” that the right speakers are chosen for the series and that “public relations is lined up for that” in order to increase awareness of the mission of the Marshals Service and the museum.

Another of the events is a fundraising gala to be held in early 2014 in Fort Smith. Dunn said philanthropists Mary Young and Kathy Babb – Young is the wife of ArcBest Board Chairman Robert A. Young III, and Babb is the wife of Doug Babb, CEO of Cooper Clinic – are organizing the gala. Dunn teased that the gala may be attended by well-known out-of-town guest.

Pat Lile, a member of the Marshals Museum Board and the board’s marketing committee, said Crystal Bridges Museum of American Art Deputy Director Sandy Edwards has pledged to help the Marshals Museum staff on efforts related to museum awareness and operations.

In closing Tuesday’s business portion of the Board meeting, Marshals Museum Board Chair Judge Jim Spears said all efforts to promote and build the museum should be considered a “big deal.” He noted that the museum, when built, will be an “economic development engine that will benefit this area and this state more than people understand.”

EASEMENT LINE ISSUE
Marshals Museum Board member Rick Griffin said there is a small chance an easement held by the U.S. Corps of Engineers could change where the museum is built. If the easement, first marked in the 1960s, is not relinquished or altered, the museum may have to be built further away from the Arkansas River (McClellan-Kerr Arkansas River Navigation System) instead of near the river. Griffin said the issue was recently discovered, and the Corps has been asked for information about the easement.

“(Because of dealing with the Corps) I can’t imagine that that process is going to be fast,” Griffin said when asked about a timeline on getting an answer to the easement.

Griffin also said Arkansas’ state and federal political leaders may be asked to intervene.

“We may have to have some top down help,” Griffin said.

“I think we can probably arrange that,” Spears responded.

Any chances of an auditing firm reviewing billing by the Daily and Woods Law Firm to the city of Fort Smith appear dimmer after a Tuesday (June 10) study session of the Fort Smith Board of Directors.

When the issue was brought up for discussion, City Director Philip Merry again made his motion to request an independent audit of billings from the law firm to the city, as well as appointing a committee to review whether the contracted arrangement with Daily and Woods was the best for the city, or whether hiring counsel onto the city's staff was the best route. He had previously made a motion at the conclusion of the June 3 regular meeting of the Board, but Mayor Sandy Sanders said the motion was not proper since Merry had not added it during the beginning of the meeting, when the mayor had asked for additional items.

Merry had made clear that he was not accusing the firm of wrongdoing, but instead wanted a neutral group to review allegations brought to light by a series of posts by attorney Matt Campbell on his Blue Hog Report blog. Campbell, it was pointed out several times during the study session, represents clients in three different lawsuits either against the city or involving the city.

"We are stewards of other people's money. It is not our money. The challenge for a Board member is when to just go and when to pursue the transparency. I feel quite certain there's nothing wrong. More importantly, it doesn't matter what I think or what this Board thinks. I'm recommending and what I've had many a citizen to recommend is a neutral, transparent approach to the dialogue."

He also said the Board was "too close to the rhetoric" to make any judgments on the questions of whether the firm was over-billing the city or billing for work not completed, as Campbell accused the firm of charging the city for phone calls he said were never made in the first place. City Attorney Jerry Canfield and City Administrator Ray Gosack have said there was nothing to Campbell's allegations following an internal investigation by Daily and Woods into its billings of the city.

In challenging the need for an independent audit, City Director Keith Lau said directors must look at the "bigger picture."

"We've got a city attorney who's been with us for 40 years of service, impeccable service. There's no tarnish on his firm's record or his record. We've got a city administrator who has given view of the situation and said there's no improprieties. On the other side I see Matt Campbell. …The one thing that comes to mind is no matter where you stand on those reports, Matt Campbell is not an unbiased participant. He represents an interest which is counter to what we're trying to do, which is be good stewards of our taxpayers' money."

Lau continued, saying Campbell was "wagging our tail" by making the allegations, with the Board possibly acting based upon said allegations.

"Do I want Matt Campbell to wag my tail and make me go into an analysis of whether or not we're going to have a third party or an in-house attorney? I don't want him to wag my tail. And to be quite honest, with all the information, I can't make a decision. I'm not qualified to review those phone records or to say (what the city should pay for an attorney). And all I know is I feel like my tail is being wagged and I don't like it."

City Director Mike Lorenz said conducting an audit based on Campbell's allegations would set a bad precedent for the Board.

"If we were to go ahead with a three year audit, we as a board would be taking something that is being claimed on a blog by some by definitely non-partial third party that has everything to gain by distracting the real issues of his lawsuits, we're taking that and spending taxpayer money for a very expensive audit over an accusation of a couple of phone calls. We're not talking (about) an accusation of millions of dollars in ill-conceived bills. We're talking about a couple of phone calls. … I think it sets a huge, hugely bad precedent if we were to say we're going to react to that comment and that accusation by this attorney by auditing Daily and Woods. I just think it sets the wrong precedent because you've got people and attorneys that would take advantage of that in the future because you can distract attention from what our attention needs to be on. Now from a purely budget standpoint on whether or not we're better off with a contracted service or an in-house service, that's a whole different conversation. To me, that's a budget conversation."

Vice Mayor Kevin Settle, who officiated the study session in the absence of Sanders, conducted an impromptu poll of the Board and found only Merry and City Director Pam Weber in favor of moving forward with an audit. But with Tuesday's meeting only being a study session, the vote does not stand and a motion by Merry and a second by Weber placed a vote on the agenda for the June 17 Board meeting.

City Director George Catsavis, who said he had complete trust in Daily and Woods and specifically City Attorney Jerry Canfield, said he would have questions if the allegations were proven to be true and it was a repeated occurrence, but he said at this point, he is skeptical and against an independent audit.

"I know Jerry personally and I just feel this is just being blown out of proportion. This could be an honest mistake, you know? But in 40 years, for the first time for something like this to come up, I'm questioning this."

Speaking after the meeting, Gosack said he was pleased that the Board largely expressed confidence in the city administration and the billings of Daily and Woods.

Campbell’s past investigations have resulted in the resignation of former Lt. Gov. Mark Darr for misspending official funds and the withdrawal of Circuit Judge Mike Maggio from a Court of Appeals race this year after some questionable online activities were outed. Gosack said neither of the previous instances should matter with this situation with the city and Daily and Woods in terms of credibility for Campbell.

"I think each case stands on its own. Just because you were successful on a previous case does not automatically make you successful on the next one," he said. "Each case lives or dies on its own merits."

Gosack said if the Board ultimately decides to appoint a review committee to look into the hiring of in-house counsel for the city or keep current contracted representation, he said it would likely take the Board about two months to advertise for appointments and form the committee, with an additional few months of work. He said the city administration would offer staff assistance as requested. Such a review, he said, could be completed by the time the city begins review of the Fiscal Year 2015 budget later this year.

In other business, the Board approved an Aug. 12 special election on a millage increase for the Fort Smith Public Library. Library Executive Director Jennifer Goodson said private funds were secured to fund the $30,000 election.

The long and bitter battle for the Republican nomination for Arkansas attorney general has come to an end, with Leslie Rutledge pulling out a victory against challenger David Sterling.

Unofficial election results late Tuesday (June 10) show Rutledge won with 59.07% of the vote to Sterling's 40.93%.

Being the only major race on the runoff ballot, turnout was predictably low for the election required under state law after neither Rutledge or Sterling were able to garner 50% of the vote to avoid a runoff in the May 20 primary. Rutledge came closest, with 47% of the vote to Sterling's 39%.

In the final days of the campaign, the election turned nasty with both candidates going after the other's Republican bonafides.

Talk Business, a content partner with The City Wire, reported June 2 about Sterling's charges that Rutledge had voted in Democratic primaries from 1998 through 2008 and had not voted in Arkansas elections during both 2010 and 2012. He also pointed out a political donation by Rutledge to the Democratic Party of Arkansas.

Talk Business reports that Rutledge fired back, saying Sterling represented in his legal practice a company peddling pornography, an act she says contradicts his Christian and family values platform which she said should be troubling for someone seeking office to oversee a division dedicated to Internet predators.

The race also saw big spending by outside groups in support of Sterling.

A June 5 mailer by the Judicial Crisis Network is just one example of an outside group that involved itself in the race, with the JCN sending out an "Arkansas Conservative Attorney General Guide" that compares and contrasts seven "principals" between the two candidates, Talk Business reported.

The direct mail piece went after Rutledge on many topics, including the charge that she was not a supporter of a stand your ground law. But she hit back, saying it was not true and touting her rating by the NRA, as well as revealing that she is a concealed carry license holder.

In the end, the attacks were not enough to defeat Rutledge, who spoke with Talk Business after her victory.

“Although we were outspent 10-to-1, our grassroots hard work prevailed and Arkansans were not fooled by D.C. beltway bandits,” Rutledge tells Talk Business & Politics. “As Attorney General, I will always stand my ground to protect Arkansans.”

In a telephone call to The City Wire, Sterling said he was "fine" with the outcome of the election even though he did not pull out a win.

"It's fine with me. I did everything I could. I don't have any regrets about what I did or didn't do in the race. I feel like I left it all out on the field. I turned it over to God 16 months ago to follow his will and I feel like I've done that the last 16 months. I put it all in His hands and I will do that tonight and see what he has in store for me."

Sterling was not ready to endorse Rutledge's run for attorney general Tuesday, but he said conversations would take place between the two about an endorsement.

"She and I will talk about that later this week," he said. "I just need to process what has gone on the last few weeks and the election results."

The Republican Attorney Generals Association Chairman Alan Wilson also congratulated Rutledge, who tied Democratic Sen. Nate Steel of Nashville, his party's nominee, to the Obama administration.

“I want to congratulate Leslie Rutledge on securing the Republican Party nomination in tonight’s Arkansas Runoff Election for attorney general.  I am looking forward to joining Leslie on the campaign trail this year to help him become the first Republican attorney general in Arkansas history," Wilson said. “Voters in Arkansas have a clear choice in this year’s election. They can either vote for Leslie, who will be a great advocate for states’ rights and a strong protector of the Constitution, or vote for Democrat Nate Steel, who will serve as a rubber-stamp for Obama and Eric Holder’s liberal agenda. Leslie will fight against an overreaching Federal government and stand up for all Arkansans. I have all the confidence that Leslie will make a great Attorney General for the people of Arkansas.”

Another runoff of note on the far edge of Northwest Arkansas involved Rep. John Burris, R-Harrison, and opponent Scott Flippo, who were fighting for the District 17 Senate seat. Burris, who is term limited in the Arkansas House, lost with 47.71% of the vote to Flippo's 52.29%.

The only local runoff was for Benton County Justice of the Peace District 1. Republican Ron Easley beat opponent Mike McKenzie 49 votes to 34.

Arkansas’ economy gained strength in 2013 as the state’s gross domestic product (GDP) grew at 2.4% in 2013, ranking The Natural State 16th among the 50 states, according to new statistics released Wednesday by the Bureau of Economic Analysis (BEA).

Arkansas’ growth was well ahead of the U.S. average in 2013, which slowed to 1.8% in 2013 after increasing 2.5% in 2012, according to the statistics from the U.S. Labor Department analysis arm.

Still, real gross domestic product (GDP) increased in 49 states in 2013, but the surprise takeaway from the yearly report is that U.S. growth was widespread but lost momentum. Per capita real GDP ranged from a high of $70,113 in Alaska to a low of $32,421 in Mississippi. Per capita real GDP for the U.S. was $49,115.

In the Southeast region, Arkansas only trailed West Virginia – which grew at a whopping 5.1%. Virginia had the lowest GDP at 0.1%, while the entire 12-state region came in at 1.6%.

‘UNUSUAL’ GROWTH
John Shelnutt, head of the Arkansas Department of Finance and Administration’s Economic Analysis and Tax Research division, called the sources of growth in Arkansas “a little unusual.” He said the state experienced robust gains in the service and agriculture sectors, but saw contraction in construction and manufacturing. The government sector in Arkansas also lost momentum, mainly in the number of federal and Postal Service jobs.

But the most unusual source of growth came in the mining sector, which saw a huge decline in 2012 as natural gas prices and low rig counts buffeted the Fayetteville Shale. This year, that sector rebounded with vigor.

“That is a little odd because it is a volatile sector where (growth) doesn’t persist year after year, or multiple years,” Shelnutt said. “It could be seen as a one-time contribution. It is a rebound from the negative year in 2012, but goes beyond a simple recovery.”

Just last month, severance tax collections in 2014 set new record highs as Arkansas continues to reap the benefits from higher natural gas prices and steady production levels primarily in the Fayetteville Shale, state revenue statistics show.

For the first three months of 2014, gross natural gas severance tax revenue came in at $19.9 million, up 29% from $15.4 million in the same period of 2013. At the same time, monthly collections of $7.3 million and $9.1 million in March and April, respectively, were the highest severance tax revenue totals posted since the state began keeping such records.

Overall, severance tax collections for January, February, March and April all came in well above $6 million, also a first for the state of Arkansas. The fiscal year for the state of Arkansas begins on July 1, 2013 and ends on June 30, 2014. In fiscal 2013, the highest monthly severance tax collection was $5.8 million in June. The severance tax data is compiled by the Revenue Division of the Arkansas Department of Finance & Administration using monthly tax reports filed by producers.

Shelnutt added that Arkansas’ growth in 2013 could be an anomaly.

“It is nice to get those,” said the state’s chief economist, noting the growth in the mining sector. “But you can’t count on them.”

Growth in GDP does not necessarily translate to job growth. The number of employed in Arkansas stood at 1.228 million in December 2013, down 0.19% compared to December 2012, and down 2.19% compared to December 2011. The number was also down 5.76% – or more than 70,000 employed – compared to peak employment of 1.299 million in March 2008.

The number of employed in Arkansas during April 2014, the latest month data is available, was 1.235 million, down from 1.238 million in March, but up from the 1.227 million in April 2013.

MANUFACTURING STRENGTH
GDP by state is the state counterpart of the Nation’s gross domestic product (GDP), the Bureau’s featured and most comprehensive measure of U.S. economic activity. Real GDP by state is an inflation–adjusted measure of each state’s production based on national prices for those goods and services produced within each state.

Overall, nondurable-goods manufacturing; real estate and rental and leasing; and agriculture, forestry, fishing, and hunting were the leading contributors to real U.S. economic growth.

And although mining was not a significant contributor to real GDP growth for the nation, it did play a key role in several states, including Arkansas. This industry was a large contributor in five of the fastest growing states: North Dakota, Wyoming, West Virginia, Oklahoma, and Colorado. Growth in those states was propelled by the recent development in liquids-rich shale plays that are attracting billions in new investment.

Meanwhile, real GDP increased in all eight BEA regions. Growth accelerated in the Rocky Mountain and Plains regions. The Rocky Mountain region grew the fastest, led by Wyoming, which increased 7.6%.

Nondurable–goods manufacturing was the largest contributor to U.S. real GDP by state growth in 2013. This industry increased 5.3% in 2013 after declining 0.5% in 2012. It was the leading contributor to growth in three of the eight BEA regions and in 10 states. Nondurable–goods manufacturing contributed 2.65 percentage points to growth in Louisiana and 1.19 percentage points to growth in Texas.

Real estate and rental and leasing were also a leading contributor to U.S. real GDP by state growth. This industry increased 1.6% in 2013, down slightly from 2.2% in 2012. It contributed to growth in all eight BEA regions and was the leading contributor to growth in the New England region. Real estate and rental and leasing contributed 0.5% or more to growth in North Dakota, Nevada, and Massachusetts.

Agriculture, forestry, fishing, and hunting contributed to real GDP growth in all eight BEA regions and in 49 states and the District of Columbia. It was the largest contributor to the growth of GDP in the Plains region. This industry contributed 1.36 percentage points or more to growth in North Dakota, South Dakota, Iowa, and Nebraska.

POTENTIAL FOR 2014
Looking ahead, GDP growth may also be strong in 2014 for Arkansas. Mark Zandi, chief economist for Moody’s Analytics, also reported Wednesday that U.S. economic growth “looks set to accelerate in the coming months, although significant challenges still remain.”

He said real GDP is tracking near 4% in the second quarter, with some of the strength coming from the rebound in activity from the unusual first quarter winter weather. And while Zandi does not anticipate continued 4% real GDP growth, he said second quarter results suggest “consistently stronger growth in coming quarters.”

However, Zandi also noted that U.S. employment is not keeping pace with GDP growth.

“Although the labor market has improved, unemployment and underemployment remain frustratingly high,” Zandi said in his report. “Job‐market slack is estimated at nearly 2% of the labor force. For context, in the wake of the tech‐bust in 2000, job‐market slack peaked at no more than 1% of the labor force.”

Continuing, Zandi wrote: “The U.S. recovery completes its fifth year this month. This is significant, as the average expansion since World War II has been about as long. But it is also a disappointment, because the economy has yet to experience the rapid growth that has characterized past recoveries.”