From chicken processors to pork packers the fallout of the recent Avian Influenza outbreak is a concern and worth examining, according to Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist.

The U.S. Department of Agriculture’s APHIS (Animal and Plant Health Inspection Service) reports that the toll is nearly 34 million birds depopulated since the outbreak earlier this year. The majority of these are laying hens, followed by turkeys, with relatively few broilers, Peel noted. As a result, the biggest and most immediate impact for consumers is in egg markets, especially in the north central part of the country. The reduced supply of table eggs as well as breaking eggs used in food service will impact consumers directly and indirectly, Peel said.

Tyson Foods CEO Donnie Smith recently told media during the company’s earnings call that every time another case of bird flu is detected the clock is restarted with regards to export resumption. He said with 40 or more countries banning all poultry exports there is a risk of dark meat saturation in the U.S. market. 

He said the risks to Tyson Foods are small given the company’s buy-versus-grow plan that allows it buy the pieces it needs to fill customer orders which is primarily breast and wings. This ensures there is not leg-quarters stacking up in the freezer while exports are shut off.

Pure play commodity chicken processors could have extra leg-quarters piling up unless they are able to market them in the U.S.

Peel agreed with Smith that the impact on poultry meat supply is minimal and likely to remain so. He said the depopulation total of 33.8 million birds is 0.38% of the 2014 poultry slaughter of 8.9 billion birds. While the turkey segment was hit harder by avian influenza, Peel said the depopulation to date represents about 3% of the U.S. turkey slaughter planned for this year.

“Both broiler and turkey production are still expected to surpass year ago totals unless the outbreak expands significantly,” Peel said.

He said domestic consumption is more likely to be affected from the direct loss of birds in the poultry segment. Peel also cites the export bans as the biggest risk to the meat markets overall. In 2014, 8.2 billion pounds of poultry were exported from the U.S., which is 18.2% of the 45 billion pounds of total poultry production. He said broiler and turkey exports, already struggling in 2015, are forecast to decrease even more in 2015 as result of the outbreak. 

“Broiler exports are expected to be down roughly 9%, though the situation is very dynamic and the impact could get larger or smaller depending on what happens in the coming weeks,” Peel said.

When the chicken is not sent abroad that means product is stacking up in the U.S and that can result in downward price pressure amid retail promotions to move the product. Wholesale Georgia Dock pricing of leg-quarters are already trading lower at 49 cents a pound. A year ago they were bringing 55 cents a pound.

Peel expects domestic broiler consumption to rise 6.5% this year. He said pork production also is expected to expand this year as much as 6.7% over last year. 

The laws of supply and demand could mean the added meat on the market will come a little cheaper for consumers given that pork often competes with chicken, particularly in the summer grilling season.

Beef production is expected to decline between 1% to 2% from 2014 and beef prices are likely to remain high. 

Peel also said total meat consumption of U.S. consumers will increase 4.2% from a year ago because of the added supply of poultry and pork.

Faced with the expiration of the federal highway funding law and the impending insolvency of the federal Highway Trust Fund, the U.S. House of Representatives Tuesday passed the stopgap Highway Transportation Funding Act to continue highway funding authority through July.

The vote was 387-35 in favor of passing the extension. All four members of Arkansas’ congressional delegation voted yes. The bill next goes to the Senate.

The current highway funding law, MAP-21, was set to expire May 31, leaving Congress with no funding authority to replenish the Highway Trust Fund, which is expected to become insolvent in August.

Seventy percent of Arkansas’ highway construction funding comes from the federal Highway Trust Fund. Uncertain about those reimbursements, the Arkansas Highway and Transportation Department has withdrawn 70 projects this year with an estimated construction value of $282 million.

This is the second time Congress has extended MAP-21. It was extended last year shortly before it was set to expire with a 10-month, $10.8 billion funding patch paid with revenues from the next 10 years. This bill would extend it for two more months.

Fourth District Rep. Bruce Westerman said Tuesday on the House floor that he plans on Thursday to introduce the Prioritizing American Roads and Jobs Act, which would fund highways by reducing Medicaid expenditures. The bill would reduce the 100% reimbursement rates provided to the Medicaid expansion population under the Affordable Care Act to the level of traditional Medicaid, which is reimbursed by the federal government to Arkansas at a rate of 70%. In Arkansas, that population is served by the so-called private option.

Westerman said the bill would add $15 billion a year to the Highway Trust Fund.

Third District Rep. Steve Womack released the following statement: “Safe and reliable transportation infrastructure is essential for sustained economic growth in Arkansas, and I will continue to advocate for a long-term solution for our highways. Piecemeal funding is inadequate and unacceptable, but we mustn’t allow our roads and bridges to crumble while we work towards returning solvency and dependability to the Highway Trust Fund once and for all. As such, I support extending Highway Trust Fund authority through the end of July, preventing a critical interruption in transportation investment as we work to finalize a larger agreement.”

First District Rep. Rick Crawford said in a statement, “Our debt crisis continues to overextend precious resources for critical projects, like continued investment in our nation’s infrastructure. To be successful, a long-term solution must combine a consistent funding mechanism with financial transparency: our current system, through shortfalls and opaque applications of funding, has lost the trust of Americans, who don’t know where or how their tax dollars are being invested. Both the Transportation and Ways and Means Committees will have to consider new, creative funding alternatives to find a fiscally sustainable solution to this chronic problem.”

Second District Rep. French Hill said in a statement, “A 21st century system of roads, highways, bridges, tunnels, and railroads is essential to a 21st century economy. Unfortunately, our current infrastructure is outdated and will continue to limit our economic capabilities until it receives a serious makeover. While today’s vote is not the final answer to this problem, it will give Congress the time needed to create a long-term solution that puts no additional burden on the taxpayer, encourages job growth, and promotes commerce throughout Arkansas and the rest of the country.”

There was no disagreement Tuesday (May 19) on adopting new rules for food trucks in the city, but members of the Fort Smith Board of Directors were not in complete agreement over a change in how the city manages its budget, and hiring associated with the city’s federally-mandated program to improve the sewer system.

Wally Bailey, director of development for the city of Fort Smith, said the proposed mobile food truck ordinance is a result of several months of city staff and the Fort Smith Planning Commission studying ordinances of other cities and meeting with those who own food trucks.

The new rules would allow mobile food trucks in the downtown Fort Smith area, which is zoned C-6, and in “moderate” use industrial areas zoned I-2. Key features of the new ordinance include:
• Downtown parallel parking spaces for mobile foods trucks would be available from 9 p.m. to 2 a.m. to capture after hours customers after restaurants close;
• Exemption of non-profit events if operating at a site less than five consecutive days;
• Mobile trucks must be at least 300 feet from a public or private school;
• Permits would be issued annually instead of just for 120 days, with the annual permit also allowing for multiple locations; and
• Insurance with higher coverage levels for mobile food trucks operating in a public right of way.

Bailey said in November he plans to return to the Board with a six-month analysis of progress on implementing the new rules. Prior to the Board vote, Bailey also said the Planning Commission unanimously recommended the Board approve the new ordinance.

Director Tracy Pennartz said the new rules should have a “positive impact” with events and festivals in the city. She also thanked Bailey for planning to return to the Board with a 6-month update. Director Kevin Settle said he hears much support for new food truck rules, but was disappointed that Arkansas law does not allow food trucks on Garrison Avenue – a state highway – in downtown Fort Smith. Settle suggested to other Board members that they work with the city’s legislative delegation to see if a change in state law is possible.

With no other discussion, the Board approved the ordinance by a 6-0 vote. Director George Catsavis did not attend Tuesday’s meeting.

Bailey said the work begins to put the new rules in place.

“Now we just get into the implementation phase and hopefully it will be what everyone expects it will be,” Bailey told The City Wire after the Board approved the ordinance.

He said updating the mobile food truck ordinance was a goal set in the Fort Smith Comprehensive Plan approved in 2014 by the Board.

FINANCIAL POLICIES
Several members of the Fort Smith Board have during the past few months battled Fort Smith Mayor Sandy Sanders and city staff over the city’s budgeting method. Some of the Board members prefer a “structural” method they say presents a real world financial picture. The city now uses a “cyclical” method that factors in fund balances from previous years.

City Finance Director Kara Bushkuhl has noted in a memo to the Board that advantages of a cyclical budget include familiarity, conservative revenue estimates, multi-year perspective provides better future financial planning, spending for actual needs, and avoids negative changes in service levels because of changes in available funding. Her note did say a disadvantage of this budgeting is the possibility of “spending above current year revenues.”

Sanders said Tuesday night he has a “significant problem with changing from our current form of budgeting.” He said the existing budget method is “long-standing and (a) very effective budgeting process.” He rejected concerns that existing budgeting process does not provide flexibility and does not allow the board to see real status of funding levels. Sanders said the Board should consider some changes to how the city budgets, but he was not supportive of “a wholesale change.”

However, the Board voted 4-2 for changing the budget format, with Directors André Good and Don Hutchings against the plan. In moving to the next item on the agenda, Sanders said: “Thank you. We may be discussing this again.”

SEWER SYSTEM SUPPORT
As part of an estimated $480 million in federally mandated sewer system improvements between now and 2026, the Board was asked Tuesday to approve the funding for hiring 28 people to improve the city’s “Capacity, Management, Operations and Maintenance” (CMOM) programs. The 28 new jobs would be realized in 2015, and are part of a plan to hire 75 new people by fiscal year 2017.

Speaking to Utilities Director Steve Parke, Director Settle reiterated his opposition to hiring people to comply with the federal order.

“I just don’t have confidence, Steve, that this is the way we should be going,” Settle said, adding that if the city was in the private sector “we’d be going out of business.”

Settle also questioned what happens when Parke retires and his successor has a different opinion about how to comply with the federal order.

Director Hutchings and Mike Lorenz disagreed with Settle, saying that hiring more people may not be popular but it is required to meet the federal order. Lorenz said the vote to fund the 28 new positions doesn’t mean that all 75 positions will be filled, but it is the best thing to do to “fix the problems that we’ve got.”

Only Settle voted against the primary ordinance funding the new positions.

Consumers likely spent 40% of savings from lower gasoline prices on necessities such as groceries and rent, according to a new research from Bankrate.com, a publisher, aggregator and distributor of personal finance content on the Internet.

Necessities were the leading answer among all age, education and income groups.

U.S. pump prices have fallen for a year or longer. And, in spite of recent increases to a U.S. average of $2.70, consumers are still paying a dollar less than a year ago, according to the U.S. Department of Energy.

“In a testament to tight household budgets, more Americans spent the savings from lower gasoline prices on necessities than anything else,” Greg McBride, chief financial analyst for Bankrate.com, said in the report.

The number of Americans spending any savings realized from lower gasoline prices rather than splurging on discretionary spending is no surprise to University of Arkansas economist Kathy Deck, director of the Center for Business and Economic Research.

“It’s not terribly surprising,” Deck said. “That 60 percent did not spend their savings on necessities is more surprising.”

That could be a signal that many Americans are paying down credit card debt or some other debt or saving more, she said.

The survey found that 23% of Americans saved (19%) or invested (4%) the extra savings. Millennials were more likely to have saved (26%) or invested (6%) the money than any other age group.

One thing seems to be that the savings is not flowing into the retail sales sector, Deck said.

“Retail sales growth is quite soft,” she added. “It’s surprising (the gasoline savings) hasn’t flowed into retail sales.”

Deck has said Arkansas’ improving employment and income situation, along with lower gasoline prices at the pump have given consumers a boost in perceived current conditions and near-term expectations. A semi-annual survey by Arvest Bank in March reflected Deck’s assertion, showing less total dollar spending on gasoline, while deposits in consumers’ checking and savings accounts generally have risen

Just 14% of respondents in the Bankrate survey reported spending their gas savings on dining out or a vacation. Millennials (young adults ages 20-30) were most likely to have spent on non-essential items while senior citizens were the least likely.

Not much of a surprise to Deck. noting the purchasing power of millennials lis a topic of much discussion among economists.

Millennials are the most indebted age group, Deck said.

“I wouldn’t read too much into that,” she added.

Other findings in the report, released Monday, show:
• 27% of Americans feel less comfortable  with their savings while 22% fell more comfortable with savings;
• 11% of Americans feel less secure in their jobs than a year ago;
• Americans reporting higher net worth than one year ago outnumber those reporting lower net worth by more than 2 to 1 (29% to 14%); and
• 16% of Americans say their overall financial situation has deteriorated over the past year. This is just half of what was seen  when the poll began in 2010 and down drastically from a high of 35% recorded in 2011.

There were also demographic differences in how gas savings were spent.
• Half of women surveyed said they used money saved from low gas prices to pay for necessities, compared with 31% of men.

• The higher the income, the more likely it was that the money went to savings. People who earned the highest incomes were twice as likely as those who earned the lowest incomes to say they saved the money.

• Among parents, 49% said they spent it on necessities, compared with 37% of non-parents.

• Democrats were almost twice as likely as Republicans to spend their extra dollars on meals out or taking a vacation.

• The survey was conducted by Princeton Survey Research Associates International in telephone interviews with a national representative sample of 1,000 adults living in the continental U.S.

The savings could continue throughout the summer as some experts predict pump prices will remain low through the summer months. In Arkansas, motorists are paying an average of $2.44 per gallon, according to the AAA’s daily fuel guage.  Prices range from a low of $2.35 in Northwest Arkansas metropolitan area to a high o $2.49 around Texarkana and the state line. In Fort Smith, motorists are paying about $2.44 a gallon on average.

Gov. Asa Hutchinson on Wednesday (May 20) made the official call for legislators to meet in special session beginning May 26 to vote on helping lure the military’s new Joint Light Tactical Vehicle production facility to Camden, moving Arkansas’ 2016 primary elections from May to March and moving the fiscal session from February to April, and merging seven state agencies into three.

According to a press release from Hutchinson’s office, legislators will vote on issuing bonds to help Lockheed Martin build 55,000 JLTV vehicles in Highland Industrial Park near Camden. Lockheed Martin is competing with Oshkosh and Humvee maker AM General. Talk Business & Politics sources say the bond issue will be in the $85 million to $90 million range.

Lawmakers will consider moving Arkansas’ primary elections from May to March to participate in the so-called “SEC primary” involving other Southern states. Supporters of the move hope to make Arkansas more relevant in the presidential nominating process. Meanwhile, lawmakers will vote on moving the even-numbered-year fiscal session from February to April.

The release said Hutchinson also is asking legislators to merge the following agencies to “provide efficiencies, better services and savings”:
• Arkansas Department of Rural Services and the Arkansas Science & Technology Authority with the Arkansas Economic Development Commission;

• Arkansas Building Authority with the Department of Finance and Administration; and

• Division of Land Survey with the Arkansas Geographic Information Office.

Hutchinson also is asking legislators to make a minor change to the state’s DWI law. The Associated Press reported earlier this week that the state risks losing more than $50 million in federal highway funding after the Arkansas Supreme Court ruled last month that state law requires a person to knowingly drive while intoxicated to be guilty of the crime.

Other items on the call include:
• ensuring that state law aligns with federal law concerningfarm-equipment traffic on an interstate highway section;
• correcting technical errors made to bills passed during the legislative session during the amendment process;
• confirming gubernatorial appointments; and
• honoring Johnson Country Deputy Sheriff Sonny Smith, who was killed last week while searching for a burglary suspect.

The changing food segment is too big for Wal-Mart Stores to get wrong. Groceries and consumables comprised 56% of Walmart’s U.S. sales last year. But consumer trends and points of sale continue to change and Walmart U.S. is just one of many retailers scrambling to better connect consumers of varied demographics.

It’s no longer just about stacking products high and selling them cheap, because while price still matters that’s just part of what consumer’s expect, according to Steve Bratspies, executive vice president of food for Walmart U.S.

Bratspies spoke to a room full of suppliers Wednesday (May 20) in Bentonville at the Wal-Street Speaker Series, an event of the Bentonville-Bella Vista Chamber of Commerce. He explained some of the work going on behind the scenes at the nation’s largest grocery/retailer.

FRESH BUTTON
One of the hottest buttons in grocery today is “fresh” and Bratspies said Walmart U.S. is doubling down in this area “to get better in the fresh business.”

“People are eating more fresh food in their diets today. Sometimes it’s intentional but in others is more natural and has evolved over time. We are going to continue to see significant growth in the fresh food business for the foreseeable future,” Bratspies said.

He said Wal-Mart has expanded its global sourcing offices so it can provide fruits and vegetables year-round to its U.S. shoppers. The retailer has staffed up in San Antonio, Texas, so it can focus on how to compete with H-E-B in fresh. Bratspies said store workers are being trained and retrained on how to handle fresh products with the primary rule being if they wouldn’t buy it it’s not suitable for customers.

“We are there so we can get the fresh business right and better compete with H-E-B who does fresh extremely well. We are investing resources in this area,” he said. “We are doing it in Michigan for categories like asparagus. We have people in the fields making sure we get the best possible product to put in our stores.”

He said the local food initiative is also strong and Wal-Mart continues to work with farmers across the country to supply local product when and where it can.  

Fresh is more than just fruits and vegetables it’s also deli and bakery where Bratspies said there is an intense effort to clean up the departments. He said there also is much planning behind the scenes so that when a baker reports to work in the morning they know how much French bread to bake that day. 

Last year, Wal-Mart began to highlight fresh baked bread loafs in its store for $1. The bread is often displayed near heating trays featuring rotisserie chicken placed near the check out area. The bread has become a big seller for the retailer. That is also an idea it poached from H-E-B who offers fresh, warm bread baked daily at its stores in Texas for $1 per loaf.

He also spoke of the supply chain changes, upstreaming and field offices that help to get product to the stores more quickly so it has a longer fresh shelf life.

CENTER OF THE STORE
But getting “fresh” right is just part of the job. Bratspies said the retailer also is working to re-energize the center of the store to better serve consumer wants. He said clean and concise labels are a big deal with customers who now more than ever want to know what’s in the product and where it comes from.

“Clean and transparent labels are a must these days. You can look at products on Wal-Mart shelves and in some of them it would take a Ph.D. in food science to pronounce the ingredients. We must do better than that because we know products with clean and transparent labels are favored by consumers,” he said.

Bratspies also spoke empty shelves, saying store labor is being re-aligned to have more workers on the floor and less in the back rooms. He said product is supposed flow through the backdoor and backroom out to the floor and then out the door. But for too long store labor has moved product to the floor and then back out to store rooms when it didn’t sell, he said.

He said the product now will flow just one way and there will be no more shuffling back and forth from the backrooms because the store labor will be working to ensure the shelves are replenished.

“You saw yesterday our store traffic was good (in the quarterly earnings report), but we have got to do a better job converting that traffic into buyers. Keeping the shelves properly stocked should help,” he said.

Bratspies admitted that making the changes to improve store traffic and sales are easier said than done. He said aside from clean aisles and properly stocked shelves, the retailer also is looking at category space planning and hopes to do a better job with mass merchandising the center aisles. Product areas Wal-Mart is focusing improvements and expansion include adult beverages, organics, gluten-free and sugar-free, and premium frozen.

SERVICE AND INNOVATION
Another area of focus in the grocery stores will be a “services” desk at the front of the store that clearly identifies where shoppers may pick-up online orders, transfer money or get some other ancillary service. Bratspies said look for more services to be added in the future.

“It’s like turning around a battleship, it takes a while, but the team at Walmart U.S. is focused on improving store operations. The investment in our store worker wages is already helping with the service piece. We know that service has to improve because customers demand it,” he said.

Not changing at Wal-Mart is the retailer’s plan to be a one-stop shop and its focus on the everyday low cost model. He told suppliers they will be asked to work with the low cost model and he urged them to bring their best product innovations to the table because Wal-Mart is buying.

Airport traffic in Northwest Arkansas and Fort Smith is back on a positive track in April after a March decline. However, traffic at the Bill & Hillary Clinton National Airport in Little Rock – Arkansas’ largest commercial airport – continues to decline and is on a trend that could result in three consecutive years of declines.

Enplanements at XNA totaled 193,641 in the January-April period, up 4.28% compared to the same period in 2014. XNA ended 2014 with 640,537 enplanements, up 10.15% over 2013, and more than the record of 598,886 enplanements in 2007. The 2014 gain also marked the third consecutive year of increased traffic at the airport.

XNA had 54,027 enplanements in April, up 4.41% compared to April 2014. April enplanements also set a record for the month.

The airport is served by five airlines that provide connections to 10 U.S. cities. XNA’s first full year of traffic was 1999, and the airport posted eight consecutive years of enplanement gains before seeing a decline in 2008.

Enplanements at the Fort Smith Regional Airport total 28.377 for the first four months of 2015, up 1.46% compared to the same period in 2014. Enplanements at Fort Smith totaled 92,869 in 2014, up 9.87% compared to 2013.

April enplanements at Fort Smith totaled 7,466, up 2.63% from April 2014. The airport offers flights to Atlanta and Dallas-Fort Worth through Delta and American Airlines.

The Bill & Hillary Clinton National Airport in Little Rock posted enplanements of 210,287 for the first quarter of 2015, down 9.12% compared to the same period in 2014. (The airport did not have April enplanement data as of May 20.) The airport was the only one of Arkansas’ largest commercial airports to not post an enplanement increase in 2014. Enplanements in 2014 totaled 1.038 million, down 4.32% compared to 2013.

March enplanements in Little Rock were 79,689, down 9.73% compared to March 2014.

NATIONAL TRENDS
Airline traffic is expected to reach new records this summer, according to Airlines for America, the trade group representing major airlines. The group said May 18 that summer 2015 air travel (June 1 - Aug. 31) is projected to rise 4.5% and reach an average of 2.4 million passengers a day – an increase of 104,000 passengers a day. Airlines are planning to boost seat availability by 4.6% to meet the demand, said the trade group.

“The continued rise in U.S. consumer sentiment and employment is leading to more people traveling more often, and air travel remains one of the best consumer bargains in America,” John Heimlich, A4A vice president and chief economist, said in this report. “With 13 of the 15 busiest air travel days of the year falling in the summer months, U.S. airlines are well-prepared to accommodate the increased travel demand by adding flights and seats, and deploying new and larger aircraft, along with a boost in staffing to enhance the customer experience.”

Heimlich also said February 2015 was the 15th consecutive month of employment gains at U.S. airlines, having added nearly 9,500 jobs over the past five years.

ENPLANEMENT HISTORY (Fort Smith Regional Airport, since 2000)
2014: 92,869
2013: 84,520
2012: 86,653
2011: 86,234
2010: 86,129
2009: 78,432
2008: 87,030
2007: 99,127
2006: 94,717
2005: 102,607
2004: 92,928
2003: 90,493
2002: 87,944
2001: 95,419
2000: 104,182

ENPLANEMENT HISTORY (Northwest Arkansas Regional Airport, since 2000)
2014: 640,537
2013: 581,487
2012: 565,045
2011: 562,747
2010: 570,625
2009: 540,918
2008: 571,845
2007: 598,886
2006: 586,320
2005: 583,940
2004: 511,714
2003: 448,228
2002: 400,063
2001: 374,122
2000: 367,157

Acxiom Corp. announced that it is getting out of the IT services business as the Little Rock technology company continues to streamline its operations to focus on its core marketing and data services business.

At the same time, Acxiom fourth quarter earnings improved year-over-year although it reported net losses of eight cents per share from continuing operations on revenue of $257 million. That compares with losses of 33 cents year share on sales of $269 million in the fourth quarter of fiscal 2014.

Company officials said Boston-based private equity firms Capital Partners (Charlesbank) of Boston and M/C Partners agreed to purchase Acxiom IT for $190 million as part of management’s three-year process to “tighten our strategic direction.”

“This transaction represents the next phase in our journey to focus Acxiom on growing its core Marketing and Data Services business, and extending its leadership in onboarding and connectivity,” Acxiom CEO Scott Howe said.

The sale of the company’s IT business is expected to close in the second quarter of fiscal 2016, company officials said, following the satisfaction of regulatory requirements and other customary closing conditions. Acxiom will report the sale as a component of discontinued operations beginning in the first quarter of fiscal 2016.

Company officials said the Little Rock data marketing giant will use proceeds from the sale to pay down debt and to fund the expansion of its share repurchase program.

Added Howe: “We are excited about the future of Acxiom IT under the new ownership group. Their deep expertise, substantial capital base and commitment to IT outsourcing will give Acxiom IT a strong platform for growth and enhance its ability to deliver innovative solutions to its customers. Charlesbank and M/C Partners are gaining a deeply talented team that I am confident will flourish under their direction.”

In a fact sheet accompanying the announcement of the deal, company officials said Charlesbank and co-investor M/C Partners were selected to purchase Acxiom IT because of their “lengthy track record of successfully working together.”

Since 1991, Charlesbank has invested approximately $3.9 billion in 72 companies, and currently has more than $3 billion in capital under management.

“Over many years, Charlesbank has maintained a consistent focus on the middle market, investing across a broad range of industries. The firm seeks companies that offer competitive advantages, strong senior management partners and excellent growth prospects,” Acxiom said.

M/C Partners was founded in 1986, and invests in emerging, high growth segments of the communications, media and information technology sectors. The firm has invested over $1.5 billion into nearly 100 companies in those sectors.

Acxiom also said various steps will take place over the next few months in preparation for the closing of the deal and the formal transfer of ownership. While the time required to receive regulatory approval can vary, company officials said they expect the transaction to close over the next 45-60 days. After the transaction is closed, the new company will be privately owned by Charlesbank and M/C Partners.

Meanwhile, Acxiom’s full-year financial results largely mirrored fourth quarter earnings. The Little Rock data marketer reported net losses of 12 cents per share, compared to 14 cents a year ago. Yearly revenues were also slightly down to $1.02 billion, compared to $1.06 billion in fiscal 2014.

Under the terms of the deal with Charlesbank, total potential cash consideration is nearly $190 million, comprised of $140 million in cash at closing and up to $50 million in contingent payments subject to certain performance metrics. In addition, Acxiom will receive a 5% profits interest in the go-forward company.

In other financial events, Acxiom’s board of directors has increased its share repurchase authorization by $50 million to $300 million and extended the duration of the share buyback program through Dec. 31, 2016. Since inception of the program in Aug. 2011, the company has repurchased 12.9 million shares, or nearly 16% of the outstanding common stock, for $202 million.

At the close of business Wednesday, Acxiom’s shares (NASDAQ: ACXM) were up 10 cents at $17.49 on the Nasdaq stock exchange. The company’s stock has traded in the range of $16.04 and $23.32 over the past year.

Sebastian County Prosecuting Attorney Dan Shue has asked Arkansas Attorney General Leslie Rutledge for an opinion on the legality of Sebastian County Quorum Court Member Denny Altes being named the state’s Drug Director.

Gov. Asa Hutchinson on May 14 named Altes, a former legislator from Fort Smith who was elected to the Sebastian County Quorum Court in November, as the state’s Drug Director. The State Drug Director oversees and coordinates the activities of the Arkansas State Drug Abuse and Prevention Coordinating Council and is responsible for coordination of all alcohol and drug abuse prevention/treatment initiatives in Arkansas.

Altes, 67, served in the House of Representatives from 1999-2003 and represented Senate District 13 from 2003 to 2011. He returned to the House of Representatives in 2011 and represented the 76th District until January 2015.

In a letter sent Wednesday (May 20) to AG Rutledge, Shue noted that Altes’ role on the Quorum Court could have potential financial conflicts with his new job as drug director.

“In that regard, Sebastian County has a Drug Task Force (the Twelfth Judicial Drug Task Force) and two Sebastian County employees are funded by grants that come from both Federal and State funds – the Twelfth Judicial District Drug Task Force Coordinator (through the Prosecuting Attorney’s Office) and an Investigator (through the Sebastian County Sheriff’s Office). These are budgeted, salaried positions that must be voted on each year,” Shue noted in the letter.

He added in his letter to Rutledge that Altes’ position as a Quorum Court member places him in the budgeting process with funds that come also come from his newly appointed state office.

Shue’s three questions to Rutledge are:
• “Is it a violation of the Arkansas Constitution for the Arkansas Drug Director to serve as a member of the Sebastian County Quorum Court?”;

• “Is it a violation of any statue for the Arkansas Drug Director to serve as a member of the Sebastian County Quorum Court?”; and

• “Is it a violation of the common law doctrine of incompatibility for the Arkansas Drug Director to serve as a member of the Sebastian County Quorum Court?”

Shue told The City Wire he is not alleging there is or is not a conflict, but chose to seek an opinion out of “an abundance of caution.”

J.R. Davis, spokesman for Gov. Hutchinson, said it would be Thursday before the office would have comment or decide to comment. Davis did confirm that the office of Drug Director is a full-time job based in Little Rock, but does not have a rule requiring the job holder to live in Little Rock.

Altes’ appointment drew criticism from the Arkansas office of the American Civil Liberties Union (ACLU). The group referred to a November 2007 e-mail written by Altes in which he commented about being “overrun” by illegal immigrants and “out populated by the blacks.”

Altes wrote: “All politics are local and I am for sending the illegals back but we know that is impossible. We are where we were with the black folks after the revolutionary war. We can't send them back and the more we piss them off the worse it will be in the future. So what do we do. I say the governor needs to try to enforce the law and sign the letter of understanding with the INS and at least we can send the troublemakers back. Sure we are being overrun but we are being out populated by the blacks also. What is the answer. Only time will tell.”

ACLU officials questioned whether Altes should “be put in any position of public trust.”

Banks taking back more homes across the country is the primary reason foreclosure filings rose 9% in April from a year ago. Irvine, Calif.,-based RealtyTrac reports 125,875 U.S. properties were in the midst of foreclosure last month, which was an 18-month high on the heels of what has been a downward trend for more than two years.

On a local level, foreclosure filings rose in Benton, Crawford and Washington counties, while Sebastian County bucked the trend. Statewide foreclosures rose 46% from a year ago, and were also fueled by bank repossessions – which boosts a bank’s “real estate owned” (REO).

“The REO increase in April was foreshadowed by a 23-month high in scheduled foreclosure auctions in October 2014,” said Daren Blomquist, vice president at RealtyTrac. “Many of those scheduled auctions are now taking place, and properties are going back to the foreclosing lender.”

He said at foreclosure starts continue to decrease, and are running consistently below pre-crisis levels. This indicates that the overall increase in foreclosure activity in April is a continuation of the clean-up phase of the last housing crisis, not the start of a new crisis, he said.

REO UPTICK
Last month there were 45,168 bank repossessions across the country which was a 27-month high led by Florida, Maryland, Nevada and New Jersey. Bank repossessions rose 50% from a year ago. 

Just 12 states ranked higher than Arkansas for increases in REO property last month. Arkansas reported 293 foreclosure completions last month, up 76.5% from April 2014.
Montana had the highest increase in foreclosure completions last month up 500%.
New Jersey ranked the second highest with a 375% increase in foreclosure completions last month.

Experts say while the uptick in REO properties breaks trend, the level is still 56% below market peak in September 2013.

REO PRICING
“While distressed sales typically have a stifling effect on the housing market, in this particular market an influx of distressed inventory could actually help stimulate sales during the spring and summer buying season as new listings become available, often in the middle to lower ranges of the market,” Blomquist added. 

“Banks are liquidating these distressed properties in a seller’s market with a low supply of inventory for sale, which should help them sell quickly and at a price that is relatively close to full market value,” he said.
 
REOs sold for 87% of estimated market value in first quarter, but RealtyTrac said in many markets these distressed properties are selling at a much higher price-to-value ratio.

Local agents said that is the case in the Northwest Arkansas and Fort Smith metro areas.

Jim Long, agent with Crye Leike Real Estate in Bentonville, said there are 182 foreclosure listings in the two metro areas. That is a small fraction of the 2,500 homes on the market as of April 15 from Bella Vista to Fort Smith.

Local foreclosure listings peaked as high as 322 in December 2013. A year ago there were 153 foreclosure listings for sale in the local MLS data base.

Kevin King, broker with Weichert King Real Estate in Fort Smith, said foreclosures are a tiny part of that local market, and are almost nonexistent. Crye-Leike agent Vicki Briolat of Bentonville said area foreclosure listings do not stay on the market long. She said more often now banks are investing in home improvements before they put them on the market. 

“This is a no-brainer for banks to replace flooring, paint and spruce up the property because they will make the money back by gleaning a higher sales price,” she said.

Briolat said the first thing a bank does when they get a property back is order an appraisal which will be used to set the listing price. Given that appraisals are comprised of area comparable sales, Briolat said if there is just one foreclosure listing the impact to other home prices in the neighborhood will be slight. But, if the majority of home sales in a neighborhood are distressed properties the impact on pricing will be much greater.

MARKET RECOVERY
She said the inventory levels are low overall relative to buyer demand which is lifting prices for everyone. 

In three of the four counties noted in this report, home prices through April have posted strong gains so far this year. Crawford County median home prices rose 15% to $107,500. Median sales price rose 14.5% in Benton County to $175,500.  At $155,300 median home prices in Washington County are up 6.5% from a April last year, while Sebastian County home prices are up 1% this year over last, according to MountData.com

“We are seeing additional improvement in housing market conditions due to a decline in the serious delinquency rate to 3.9% far below the peak of 8.6% in early 2010,” said Frank Nothaft, chief economist with CoreLogic.

He said the percentage of homeowners struggling to keep up remains well above the pre-recession average of 1.5%.

FORECLOSURE FILINGS
Benton County
2015: 59
2014: 39 

Crawford County
2015: 7
2014: 3

Sebastian County
2015: 9
2014: 14

Washington County
2015: 24
2014: 13

The retail sector reported mixed results this week and Bentonville-based Sam’s Club was among the losers – again. Sam’s Club CEO Rosalind Brewer also gave a cautious outlook as the wholesale club tries to reinvent itself to better compete with Amazon, Wal-Mart, Costco and a host of other retailers offering values.

“Our first quarter results were disappointing, as comp sales missed guidance, and we delivered softer net sales and profit than last year,” Brewer said in the recorded earnings call. “We continued to invest in our initiatives to drive growth, and while we made progress in some areas, we still have upside opportunity in others. This year is one of investment and testing, and we’re very focused on strengthening our foundation for business improvement in the longer-term. We’ve been focused on four initiatives designed to improve our foundation.”

Sam’s club delivered a 0.4% comp excluding fuel and a 3.8% comp decline including fuel, results that continue to frustrate Wall Street and Wal-Mart management.

“Sam’s Club performance has been frustrating but we hope that management’s focus on merchandise assortment, marketing, member rewards, and e-commerce investment will drive future traffic and ticket improvement,” noted Budd Bugatch, an analyst with Raymond James & Associates.

Brewer briefly outlined a strategy for recovery in the press release on Tuesday (May 19). She said a new chief membership officer was put in place this quarter to oversee data scientists and marketing professionals with a goal of improving customer engagement.

One thing that made the performance look worse was that membership increased 7.4% in the quarter but despite the added members operating income fell 10.9% to $427 million. Even without the fuel impact, operating income declined 8.6% to $436 million in the period.

Part of the added expense that lowered operating income was related to the Plus Cash Rewards program, which was rolled out nationwide in the quarter. The reward system pays members to shop, a strategy that could lower margins.

Brewer attributed the weak quarter to negative comps in electronics, technology, office supplies, and food deflation in the fresh categories. She also said baby care products had some supply chain holdups which hurt sales. On a positive note, Brewer said traffic counts and ticket sales were up in part because of strong double-digit growth in the Club Pickup comps from online orders.

NEW GAME PLAN
Brewer explained the first step in the new game plan addresses merchandise assortment.

“We are driving newness and differentiation. For example, we increased our organic offerings by 20% since the beginning of the year, and these are important to various demographic groups, including millennials,” Brewer said.

The second step of the game plan is focused on membership and decision sciences. Brewer said the new chief member officer reporting to her will own membership data and analytics. 

“This role, which was put in place at the beginning of the quarter, oversees a new team of data scientists, marketing and insights professionals. I’m pleased that the team’s recent new targeted membership efforts give us optimism for the rest of the year,” she said.

The third step addresses new programing to enhance member value.

“One example is a groundbreaking new pharmacy program called ‘Free/4/10,’ which provides Plus members with free or discounted prescriptions for five costly diseases, including Alzheimer’s, diabetes, mental health, vitamin D deficiency, and prostate health. This program contributed to a number of Plus upgrades since its rollout,” Brewer said.

Brewer said the fourth step is a long-term investment in the e-commerce business. 

“We re-launched Club Pickup in every club in the country, resulting in a 37% sales increase in the Club Pickup Program. Members love the convenience benefits of online ordering and easy pickup at the club. I am encouraged that our investments will pay off in the near future,” she said.

THE EXPERTS SAY
All retailers are wooing the millennials, and some market watchers say Sam’s Club has an opportunity to do more.

“I think Sam’s Club is in a position to offer an ‘online only’ membership to the millennials that could also provide some of the services like subscription shipments that compete with Amazon Prime,” said Sam Lazenby, founder of #OnShelf in Bentonville. 

Lazenby said Sam’s could probably do it cheaper than Amazon and this would give them a jump on Costco, which they often trail. He said perhaps a combo membership option could also work for consumers like himself who would use the pickup option. 

Annibal Sodero, supply chain expert at the University of Arkansas, said recently that Sam’s Club could be hurt by Walmart.com’s subscription-based delivery program. He said Costco is feeling some pain from Amazon’s Prime Box and Dash programs. 

The experts agree that Sam’s Club could mitigate the damage by offering its own subscription-based online program which could be an add-on to the regular membership. Lazenby said that while Costco has strengthened its brand by staying focused on consumers, Sam’s Club’s dual purpose for small businesses and consumers has not been as fruitful.

Rather than chase after every bright shiny object, Lazenby said Costco has maintained the same strategy and much of the same management team for years. They have a disciplined merchandise approach that only offers one or two varieties for many of their items. One of those is usually the Kirkland private label, which has brand equity equal to many name-brand products.

Lazenby, a supplier development consultant, said on a positive note the Sam’s Club buyers he has worked with appear to be good merchants. He said they are willing to take risks and work with the supplier to get the products at the best values.

Typical membership club margins range between 13% and 15%, which is far less than the 30% to 40% margin at  discount retailers.

“Sam’s Club members should be getting the best values on high quality products, that should be reason enough to shop there,”  Lazenby said.

A somewhat “sexier” Dawson Meadow talks about Bass Reeves, Arkansas’ healthy tourism sector, what really makes a pig happy and an erroneous report that Fort Smith Directors will clean up behind the horses following the Memorial Day parade on Garrison Avenue.

This week’s report also includes information about not being able to jump into the water at the soon-to-be opened Parrot Island Waterpark immediately after competing in a mud run. Also, there is a Western Heritage event at which they are shooting mounted cowboys. Or maybe it’s a Cowboy Mounted Shooting demonstration.

The Video Wire is a collaboration between The CIty Wire and Things To Do In Fort Smith.

Gov. Asa Hutchinson outlined an $87 million, 25-year bond issue that he will present to lawmakers at next week’s special session, but also took the time before heading into the long Memorial Day weekend to announce a corporate-style plan to downsize state government that he said will save Arkansas taxpayers $10 million to $12 million over the next five years.

Hutchinson offered details of both plans on Thursday before a gaggle of news reporters at the State Capitol, where he called the state’s efforts to help defense giant Lockheed Martin win a $30 billion Pentagon award “the most important issue” for the May 26 special session that will bring lawmakers back to Little Rock. The bonds would be issued under Amendment 82 which allows such incentives for large economic development projects. (See the video below of Hutchinson's Thursday press conference.)

“This is the fundamental reason that we are calling the legislature back into session,” Hutchinson said. “We are trying to put Lockheed Martin, as the state’s partner, in the most competitive position to win this contract from the (U.S.) Department of Defense."

Grant Tennille, who served under Gov. Mike Beebe as executive director of the Arkansas Economic Development Commission, said ancillary effects of a new state-of-the-art military vehicle being built in Camden will be greater than the 600 or more new jobs from the production.

In addition to the workforce will be that Lockheed will build and operate for several decades one of the most advanced manufacturing facilities in the country. All of that gives Arkansas a “huge advantage” in the recruitment of other auto assembly plants and advanced manufacturing operations, Tennille said in a recent interview with The City Wire.

Hutchinson said Arkansas must help Lockheed “win” the deal.

“It is a competitive marketplace as to which company is going to produce the 55,000 vehicles …, and we want to do (our) part to make sure Lockheed Martin and South Arkansas is in a position to win this,” the governor said.

Once lawmakers are back at the capitol next week, they will vote on $87 million in bond financing to help Lockheed Martin build the so-called Joint Light Tactical Vehicle (JLTV) tactical vehicles in Highland Industrial Park in East Camden.

The DOD is expected to decide later this summer on the award of the final contract for the $30 billion JLTV project, which will replace the currently military version of the all-terrain armored vehicle used by the U.S. Army and Marines.

If Lockheed Martin wins the contract against rivals Oshkosh and AM General, the Maryland based defense giant has said it will perform final assembly of JLTV at its operations facility in Camden.

According to Hutchinson, $83 million from the bond financing will be handed over to Lockheed Martin for assistance in retraining its current 530-person workforce. Those funds will also be used to assist the company in expanding its facility, and it will allow the Maryland-based defense giant to double its labor pool to handle the Pentagon’s award that will last through 2040.

The remaining funds will be used for bond financing expenses and to set up a training center for the JLTV project at Southern Arkansas University (SAU) Technical school in East Camden.

If Amendment 82 incentives are approved, it will be the second time in less than three years the law will be used. Legislators in early 2013 approved a $125 million bond issue to support a $1.3 billion investment by Big River Steel to build a steel mill near Osceola in east Arkansas.

PROPOSAL TO MERGE FOUR STATE AGENCIES
While taking only three-minutes to explain the bond issue for the Camden superproject, Hutchinson spent the rest of the 20-minutes during the media briefing to highlight what he called his “efficiency initiative” to streamline state government. He said both of his approaches to aid companies like Lockheed Martin in bringing jobs to Arkansas as well as trimming the size of government are part of his overall economic development strategy.

“I want to stress that in managing government, small things also matter and can add up,” the governor said. “We are not just concentrating on big items, but we are looking at small items as well.”

Under his plan to scale back state payrolls, Hutchinson said he intends to merge the Arkansas Department of Rural Services and the Arkansas Science and Technology Authority (ASTA) into the larger Arkansas Economic Development Commission, or AEDC.

The transfer of the entire Rural Services department, along with “all of its powers, duties, functions, budgets, records and savings” into AEDC, would save the state more than $175,000 through the immediate elimination of two jobs, the governor said. Additional savings would be realized through an 8.4% reduction in agency operating costs and a 33% reduction in staff, he said.

Likewise, the transfer of the entire ASTA office into the state’s Economic Development division would save more than $450,000 in state general revenue funds with the elimination of six jobs. An additional $272,000 could be saved through attrition, Hutchinson said.

The governor’s plan also calls for the Division of Land Survey to be rolled into the larger Arkansas Geographic Information Office. That merger would eliminate two positions and save the state nearly $167,000 in general revenue funds.

The largest of the agency mergers would include putting the Arkansas Building Authority (ABA) under the umbrella of the Department of Finance & Administration’s management services division. That union will eliminate nine vacant positions and represents a 2.4% reduction in agency operation costs, and a 9.7% cut in the number of ABA jobs. Total savings for the changes would amount to over $1.1 million in attrition and personnel reduction costs.

“If you combine all four of these efficiency matters that we will present to the legislature, there are potential or approximate savings of $10 million over five years,” the governor said. “A small amount year by year, but it adds up both to a better delivery of state services, better coordination of economic development, as well as savings to the taxpayers.”

Hutchinson stressed that most of the millions of dollars in projected savings could be achieved through staff attributions and efficiencies that come through smaller government. He also said he was sensitive to the “human side” of possibly eliminating or reassigning some state positions, but said he has worked hard to make sure that job cuts were minimal.

At the end of his media briefing, Hutchinson also discussed his decision to ask lawmakers to move Arkansas’ primary elections from May to March to participate in the so-called “SEC primary” involving other Southern states.

In response to questions from reporters that some critics say the decision to move up the entire 2016 primary was solely to accommodate former Arkansas governor and presidential candidate Mike Huckabee, Hutchinson stressed his move was not political in nature but was put in motion to give Arkansas voters a chance to have a say in the presidential election.

“There is one compelling reason for me to want to move the primary from May 20 to March 1 …, and that is for the people of Arkansas to have a meaningful vote in deciding who is the next president of the United States,” Hutchinson said, adding that he has not had any conversations with Huckabee since the Hope native announced plans to run for president earlier this month.

Hutchinson also said he is asking lawmakers during the session to make a minor correction to the state’s DWI law simply to protect federal highway funding after the Arkansas Supreme Court ruled last month that state law requires a person who knowingly drives while intoxicated to be guilty of the crime.

It’s been a stellar year for used-car sales evidenced by the explosive growth of Bentonville-based America’s Car-Mart. The buy here, pay here car dealer reported net earnings for fiscal 2015, ending April 30, of $29.45 million, a gain of 39.6% from the $21.089 million the company pocketed a year ago. 

Total revenue topped $530.321 million for the year, rising 8.4% from $489.187 million in fiscal 2014. The company sold 46,760 automobiles last year, up 9.9% than in prior year. The company has grown its store count to 141 stores with more coming soon. CEO Hank Henderson said the company’s dealerships are spread across 10 states, having added seven new stores during fiscal 2015.  

“We currently have seven new location projects in process. Our next dealership opening will be in June in Rolla, Mo. We are very excited about our expansion plans as we will be adding a new state this year, Iowa. We have already secured a location in Burlington, Iowa and are currently looking at a few other prospects in the state,” Henderson said. “As always, we look forward to adding value to the markets we will serve. We are looking to pick up the pace of new lot openings in 2016 and the seven projects in process right now will certainly help. We are pleased with the top line growth and remain convinced that we are moving the company in the right direction."

EARNINGS MISS
Wall Street Investors expected solid numbers from the used car retailer as America’s Car-Mart shares (NASDAQ: CRMT) rose more than 2% in light trading on Thursday ahead of the after-the-market earnings report. Shares closed at $53.94, up $1.13. Car-Mart shares have traded from $35.40 to $57.55 over the past 52-week period.

Analysts forecast Car-Mart to earn $3.28 per share for the full year, which was three cents more than the $3.25 net income per share earned by Car-Mart. That said, analysts underestimated the top line revenue at $528 million, more than $2 million shy of the actual number.

In the fourth quarter which ended April 30, Car-mart earned 81 cents per share, a marked improvement over the 68 cents posted a year ago. Again, Car-Mart missed Wall Street predictions of 83 cents a share. Revenue exceeded expectations rising to $137.61 million, nearly $2 million more than expected and a 12.2% gain from the same period last year. Revenue benefited from a 7.5% comp sales number reported in the quarter.

Net Income totaled $7.240 million in the recent quarter, up 14.86% from the prior-year period. 

"As we expected, we saw a nice improvement at the top line for the (recent) quarter and are pleased to see the increase in sales productivity,” Henderson said. “We believe that we offer our local markets a better value by staying focused on customer success. Productivity, as reflected in the average retail units sold per month per store, increased from 26.9 to 28.1 for the quarter.”

While the company’s results speak for themselves, Henderson said competition remains tough as subprime lending options are more readily available today by larger dealerships also selling used cars. He said pressures from other dealerships is nothing new and Car-Mart will continue to focus on its niche business in smaller metro areas and capitalizing on repeat customers.

BETTER BALANCE SHEET

Car-Mart provides inhouse financing which comprised $14.342 million in the fourth quarter, a gain of 6.8%. For the full year the company’s net interest income earned totaled $57.752 million, compared to $54.683 million in the prior year. At the end of fiscal 2015, Car-Mart had more than 64,000 paying customers on its books. 

“For the quarter, we saw net charge-offs decrease to 7.8% from 8.3%. While it was nice to see the decrease, we were disappointed that losses weren't even lower as we were very optimistic heading into the fourth quarter,” said Jeff Williams, chief financial officer.

He said because of the competitive environment Car-Mart must be at the top of its game, especially as related to collections. At the end of the fourth quarter accounts more than 30-days past due rose to 5.8%, increasing sharply from 4.4% a year ago. Downpayment amounts also slid some to 9% from 9.7% a year ago.

“We are focused on the increase in our accounts over 30 days past due at the end of the quarter and the decrease in principal collected for the quarter. We are not happy with where we are in these two areas and are working hard to help our customers succeed,” Williams said.

Williams said the company remains aggressive with share repurchases fueled by increased cash flow.

“We repurchased 121,025 shares of common stock during the quarter for $6.4 million at an average cost per share of $52.81. Since Feb. 1, 2010, we have repurchased 3.7 million shares, or 31% of our company, for $120.7 million at an average cost per share of $32.96,” Williams said.

He said the company’s fiscal balance sheet remains strong following an active fiscal 2015. There were seven new dealerships opened with net capital expenditures of $4.2 million and they added more than 5,000 new active accounts with receivables growth of $38 million, repurchased $20 million in common stock, all while increasing total debt by just $5.7 million.

Car-Mart executives will hold a conference call with investors and analysts at 10 a.m. on Friday morning (May 22.)

Fort Smith Mayor Sandy Sanders has vetoed an ordinance approved Tuesday (May 19)  by the Fort Smith Board of Directors that changes how the city manages a more than $42 million general fund budget.

Several members of the Fort Smith Board have during the past few months battled Fort Smith Mayor Sandy Sanders and city staff over the city’s budgeting method. A majority of the seven-member Board preferred a “structural” method they say presents a real world financial picture. The city now uses a “cyclical” method that factors in fund balances from previous years.

City Finance Director Kara Bushkuhl has noted in a memo to the Board that advantages of a cyclical budget include familiarity, conservative revenue estimates, a multi-year perspective that provides better future financial planning, spending for actual needs, and the avoidance of negative changes in service levels because of changes in available funding. Her note did say a disadvantage of this budgeting is the possibility of “spending above current year revenues.”

The Board voted 4-2 to change the budget process, with Directors André Good and Don Hutchings voting against the plan. Director George Catsavis was not at the Tuesday Board meeting.

On Thursday Sanders sent a notice to Board members that he had vetoed the ordinance. Overturning a veto requires five votes, which makes Catsavis’ decision a potential swing vote. The Mayor’s office nor the City Administrator’s office notified The City Wire of the veto. News of the veto was forwarded to The City Wire by Director Keith Lau.

Sanders provided this statement in his veto notice: “The current process has a long history of providing a conservative and responsible balanced budget. Over the last 12 years the general fund year end balance has ranged from $5.2 million to $10.1 million. In three of the past four years the percent of the actual balance to operating expenditures has met or exceeded the 15 percent goal…the fourth year was at 14 percent. The current process provides the flexibility to reduce spending if income levels fall short of projections, especially during economic downturns, while still providing essential services. The other changes made within this resolution are positive and should be implemented in the future as part of the budget process.

“Accordingly, I have vetoed this resolution.”

City Director and Vice Mayor Kevin Settle said he was surprised by Sanders’ objection to the ordinance, “especially after all the work we put in and the hours and the study session after the Spring Break holiday and as a group worked through this and said, ‘This is the way we need to go.”

Settle told The City Wire that the ordinance is “the right way” to efficiently manage city funds because it allows the Board and city staff “get ahead of the curve” and monitor the budget throughout the year instead of learning at the end of the year if spending came in above or below revenue.

Director Keith Lau, one of the most vocal Directors pushing for the change, said the structural process also “makes the department heads more accountable” when the budget is being monitored in real time. He said that having a better picture of available city funds would allow the Board to better address potential liabilities like the looming shortfall in the pension program for fire and police employees.

“I can’t effectively do my job without more accurate data,” Lau said Thursday.

He also said the old way of budgeting depended on fund reserves from previous years to address budget deficits. He said the city’s fund balance in 2006 was $10.1 million, but ended 2014 at $6.7 million.

“We keep on that trend, on that path, and we’ll run out of money,” he said.

As part of the review process under Amendment 82, the state’s superproject amendment, lawmakers have received an independent consultant’s analysis of the proposed $87 million Lockheed Martin  Joint Light Tactical Vehicle (JLTV) bond issue that will be at the center of debate in next week’s special session.

Gov. Asa Hutchinson made the official call for legislators to meet in special session beginning Tuesday, May 26 to vote on helping lure the military’s new JLTV production facility to Camden. The new military vehicle will replace the long-running Humvee vehicle.

Legislators will vote on issuing $87 million in bonds to help Lockheed Martin build 55,000 JLTV vehicles in Highland Industrial Park near Camden. Lockheed Martin is competing with Oshkosh and Humvee maker AM General for the lucrative contract that could be as much as $30 billion over the next several decades.

Under the analysis from IHS, the consulting group hired by the legislature’s Bureau of Legislative Research, one of the conclusions of the group was: “The net economic benefits would be a positive $16.3 million using a discount rate of 3.38%, or the true interest cost of the proposed bond issue. The net economic benefit would be 19% than the npv of the costs, or the annual bond debt service.”

Other takeaways from the report included:
• In our judgement, there is a minimal downside risk to Arkansas several reasons.

• The nature of the contract under which the DoD will commit to purchasing almost 55,000 JLTVs at an agreed upon price reduces market uncertainty about the level of activity at the Camden plant.

• Arkansas plans to protect taxpayers by including appropriate claw back provisions in the incentive package if LM does not meet the specified levels of production and employment.

By contrast, the consultants said there is a lot of potential upside such that the net economic benefits are more likely to exceed our estimate than be smaller because:
• It is likely that prices paid by DoD per JLTV will be higher than the base figure for the reasons discussed above.

• The number of vehicles produced by the Camden facility over the analysis period is likely to exceed the contract amount because of sales of JLTVs to other countries, and from higher domestic demand to replace aging Humvees.

• Additional activities will be performed at the Camden plant such as the reset work noted above, which in turn would increase the level of direct purchases, and possibly employment generated by the plant.

“While there is always some risk when a state makes a long-term commitment to provide up-front economic incentives that are repaid indirectly over time by the hoped for increases in statewide economic activity, IHS’ conclusion is the proposed economic incentive package makes economic sense for the State of Arkansas, and that it is a prudent, responsible use of taxpayer resources. Finally, we note that a key part of the Arkansas’s ability to maximize the potential economic benefits of the JLTV facility will be its ability to provide targeted job training programs to ensure that supply of skilled workers in Calhoun and Ouachita counties is large enough to meet the projected demand. The challenge of meeting the demand for qualified technical workers in a rural part of the state would be much greater if LM had not already been successfully operating its Camden plant for many years,” the report concludes.

As lawmakers prepared for the Memorial Day recess, Congress faced several tough issues including highway funding and trade, and one representative is resurrecting a decades-old award.

The following is a breakdown of the week for Arkansas’ Congressional delegation:

‘GOLDEN FLEECE’ AWARD MAKING A COMEBACK
An award created four decades ago to show wasteful spending in government will shine the light on current examples of government waste, Rep. French Hill, R-Little Rock, said Wednesday. Hill said on the House floor he plans to re-establish the Golden Fleece Award, first created in 1975 by then-Sen. William Proxmire, D-Wisc.

“At a time when our nation is currently over $18 trillion in debt, we must carefully scrutinize our government programs to ensure that we are funding essential programs and projects while eliminating frivolous and wasteful spending,” Hill said. “Every day in the news, Americans hear of government waste, fraud, and abuse, and regulations that are hindering our small business and costing American taxpayers billions of dollars that could be better spent creating jobs and boosting our economy.”

The award will highlight some of the “most egregious examples of government waste of hardworking taxpayers’ dollars” and “shed new light on some of the rampant, unnecessary spending” by the federal government, Hill said.

Proxmire gave out the award on a monthly basis for 13 years, with the award becoming a mainstay in the Senate, Hill said.

“The Golden Fleece Award became a staple in the U.S. Senate during this time, and Senator Robert Byrd once stated that the awards were ‘as much a part of the Senate as quorum calls and filibusters,’ Hill said. “The Golden Fleece Award will once again serve as an important reminder to taxpayers about the need to provide necessary reforms to our federal spending.”

Hill said he plans to use social media and the Internet to hear from constituents on the issue.

Information on wasteful federal spending can be emailed to GoldenFleece@mail.house.gov, online at Hill.house.gov/GoldenFleece or on Twitter at #GoldenFleeceOversight.

PRESIDENTIAL TRADE AUTHORITY
Congress is considering whether to grant the president six years of “trade promotion authority,” which would enable him to to submit trade deals for Congress for a yes or no vote with no amendments added.

The authority is an important step in allowing President Obama to complete work on the Trans-Pacific Partnership, a 12-nation free trade agreement that also would involve Canada, Mexico, Japan, Australia, Vietnam and other countries.

What does Arkansas’ congressional delegation think about it? Sen. John Boozman’s spokesman, Patrick Creamer, said the senator intends to vote for trade promotion authority. Sen. Tom Cotton issued a supportive statement saying “Trade Promotion Authority is a valuable economic tool, but it is important for Congress to retain oversight of the administration’s negotiations.”

Rep. Rick Crawford said through a statement from his office, “TPA is an essential tool for enabling the executive branch to negotiate and ink trade agreements that open new markets for American products. However, I don’t believe that TPA should have no strings attached – Congress must set the trade objectives and have final say over TPA passage to ensure that the administration negotiates in good faith on behalf of American workers. Our goal should be to advance TPA legislation that ensures any trade agreement will promote American prosperity in the form of increased exports and the creation of U.S. jobs.”

Rep. French Hill expressed support for reauthorizing trade promotion authority during a recent radio interview with KARN. “That’s what we do these trades for … is to promote American manufacturing, American exports. … This gives us a chance to boost ourselves economically while diversifying trade in Asia.”

Rep. Steve Womack’s spokesperson, Claire Burghoff, wrote in an email, “Congressman Womack is generally supportive of fair free trade agreements and expanding economic interests abroad so long as safeguards and congressional oversight are in place. He believes that TPA will create new opportunities for U.S. small business and new jobs for Americans and is encouraged by Chairman (Paul) Ryan’s work to ensure Congress maintains an on-off switch.”

Rep. Bruce Westerman’s press secretary, Ryan Saylor, wrote in an email, “Congressman Westerman will be listening to constituents during the next week as he travels the district before making a final decision on trade promotion authority.”

HIGHWAY FUNDING BILL APPROVED
The House this week approved a two-month extension to the federal highway spending bill, with a future debate on the issue expected.

The House voted 387-35 Tuesday to approve the extension, which would run through July 31, 2015. The current bill is set to end May 31 if nothing is done. Nearly three-quarters of the highway spending in Arkansas is based on federal funding. With questions over when funding would be extended, state highway officials have been extremely cautious with new projects.

Nearly $280 million in projects have been cancelled so far this year in the Natural State.

The Senate also approved the short-term spending bill, but with plenty of caution from Senators, including Tom Cotton.

“[T]his patch does little to actually resolve the serious infrastructure funding issues we face. Arkansans deserve the certainty of a long-term highway bill and I am committed to finding a fiscally responsible way to fund our infrastructure without raising taxes or cutting other programs,” he said.

COOL RULING CREATES ANGST AMONG DELEGATION
A ruling Monday by the World Trade Organization against a product labeling regulation in the United States renewed calls for changes from the state’s congressional delegation.

The WTO ruled against the United States “Country of Origin Labeling,” or COOL, policy. The final ruling launches a WTO process to determine the level of retaliatory tariffs Canada and Mexico can impose on the United States, officials said.

The rules were made during the 2002 Farm Bill and amended later during the 2008 Farm Bill, according to a 2013 Congressional Research Service report. The regulation mandates food stores to allow customers to know about the country of origin of certain foods like fruits and vegetables, fish, peanuts and meat like beef, pork and lamb, officials have said.

The policy requires “most retail food stores to inform consumers about the country of origin of fresh fruits and vegetables, fish, shellfish, peanuts, pecans, macadamia nuts, ginseng and ground and muscle cuts of beef, pork, lamb, chicken and goat,” the report noted.

The rules took effect in March 2009, but drew opposition from Mexico and Canada.

CRAWFORD REQUESTS ‘STRONG ENFORCEMENT’ OF TRADE LAWS
Rep. Rick Crawford, R-Jonesboro sent a letter to Chairman Paul Ryan and Ranking Member Sander Levin of the House Committee on Ways and Means this week urging consideration of legislation granting stronger enforcement remedies for U.S. trade laws.

While the letter acknowledges the positive economic growth TPA (Trade Promotion Authority) and further trade agreements will allow, it also highlights the past transgressions of foreign nations in trade agreements and the need for vigilant protections of American businesses in the face of evasive maneuvers by our trading partners.

Twenty-four other members of Congress signed the letter requesting the judicious application of trade laws to keep American businesses competitive and on a level playing field. The steel industry in particular has suffered in recent years as it faces a flood of imports from countries that heavily subsidize their steel industry.

Crawford said there needs to be more teeth in trade agreements.

“U.S. trade with other countries opens new markets for American products and services around the world, but accountability and enforcement are essential for ensuring that our trade agreements aren’t just free, but fair. In the past we’ve seen that our trade laws aren’t always applied as judiciously as they should be, and my letter strongly requests the protection of American business by creating a level playing field as we move forward in this process,” Crawford said.

VA IMPROVEMENTS MOVE FORWARD
The Senate Appropriations Committee approved provisions this week introduced by Sen. John Boozman, R-Ark., to strengthen the United States Department of Veterans Affairs services in the Fiscal Year 2016 Military Construction, Veterans Affairs and Related Agencies Appropriations Act.

Boozman introduced a measure to improve the collection of money from third party insurers. A 2011 Inspector General report estimated that VA was failing to collect as much as $110 million a year from insurers that owe money for non-service connected care.

The measure directs the VA to establish an 18-month pilot program using a private company with a background in non-governmental sector revenue cycle management experience. The program will identify and execute actions to correct current gaps in non-VA care fee collection. Boozman also authored language included in the bill that requires a Government Accountability Office (GAO) report about VA’s pharmacy information technology systems.

At 25, Anna Morrison is an articulate entrepreneur running a successful and growing tutoring business blocks away from the University of Arkansas. She is the CEO and director of operations of Campus Concierge, located in the Hathcock Building at the corner of Dickson and Block streets.

She also is the 2015 Young Entrepreneur of the Year for the Arkansas District of the U.S. Small Business Administration.

As the name might imply, Campus Concierge doesn’t help students find a reliable dry cleaner or recommend a five-star restaurant when parents come to town. No, Campus Concierge focuses on one thing — helping students adapt to the freedom of college life and manage their time while providing assistance in their studies, including tutoring as necessary.

“I have always been organized. I use a planner and make to do lists,” she said.

And, not far in years from being a college student herself, she recognizes some of the challenges and pitfalls that many students face when they arrive on campus. For a $300 a semester membership, a student receives a detailed study plan for each course to help him keep up with the class work. Tutoring, workspaces, printing, parking and Wi-Fi are included in the membership.

“The study plan is intended to help a student see school as a job,” Morrison said.

Weekly contact with the member’s parents also is included in that membership to ease parental concern about their student’s adaptation to campus life.

“We’re kind of like mom’s academic support,” Morrison said. “We keep parents in the loop. Time management is a huge struggle; also, basic structure and accountability.”

Campus Concierge also offers tutoring packages in 10- and five-hour increments in an individual course through the employment of students as independent contractors to work as tutors. The company employed 78 tutors during the spring semester that just ended. Campus Concierge is targeted to incoming freshmen or sophomores who find themselves in a hole with their grades and need help to improve their grades.

“It’s hard to ask for help,” she acknowledged, having graduated in 2011 from the University of Arkansas with a bachelor’s degree in marketing. She started her business when she was 23.

“I’m 25 and a woman and I’m learning to be the boss and not lose the sense of who I am,” she said. “I’m learning to be a good boss and still be respected.”

The idea for Campus Concierge is steeped in a close relationship with her parents, Steve Morrison, a commercial contractor, and Beverly Morrison, human resources professional at Simmons Foods. The growth and development has been left to Morrison, who returned to Northwest Arkansas after a marketing stint in New York City.

Campus Concierge opened in April 2013 and the following year expanded its tutoring program to a sorority and a fraternity. Since, several Greek houses have joined the network. She readily acknowledges her challenges have centered on business development but she hasn’t hesitated to reach out for assistance from other entrepreneurs.

“I believe in the American dream,” she said. “It’s real. It’s cool to connect with all the resources in this community.”

Morrison also has established a student advisory group, which meets two times each semester to share ideas and make recommendations for change to stimulate growth.

Campus Concierge is offering an ACT preparation class leading up to the ACT exam in June. The ACT is a college admission test across the country, including the University of Arkansas. The company also tutored an Advanced Placement class at Fayetteville High School this past spring, she said.

“These sessions could make the transition to college even better,” she said.

In addition to the 78 tutors, who work on call, Morrison has two employees. Megan Boeving is the director of student services, and Aricka Lewis heads up public relations and graphic design. Three interns from UA will be on staff this summer.

Morrison, who said she is a “sucker” for handwritten notes, said she is “shocked and humbled” by the SBA award. A parent of a member in Dallas nominated her. The award is based on evidence of success as measured by sales and profits; increased employment opportunities created by the nominee’s business; development and/or utilization of innovative or creative business methods; and demonstrated entrepreneurial potential necessary for long-term business success and economic growth, according to the SBA nomination package.

“There are lots of perks and lots of challenges to make you own decisions,” Morrison said. The reward is “the impact you leave on these students by guiding students in the right decision with community resources.”

She holds on to a handwritten letter left on her desk from a student member of her company.

“I just wanted to thank you for everything. When I receive a good or great grade on a test I always thank you and say it was because of you. … What I have come to realize that it may be me taking the test but your program has given me the confidence in my studies that I never had before,” the student wrote.

That sums the joy she gets in knowing the impact her efforts have on students.

Another letter from a parent written in support of her nomination for Entrepreneur of the Year, noted: “It is very rare that a young entrepreneur is able to (i) identify a market need, (ii) develop a business plan that matches the need and the available resource, and (iii) convince customers to pay for that value at a premium price. Anna’s basic tutoring service is not ‘rocket science’ but her ability to create a business … out of that basic service is ingenious.”

She wants to see her business expand over the next two years to assist students at NorthWest Arkansas Community College, John Brown University and other institutions in the region and the state. Her five-year goal is to see Campus Concierge operating in other college towns in other states.

Wal-Mart confirmed plans to add a salaried position of an assistant manager to each of its more than 2,500 Walmart Tire and Lube Express centers within its U.S. stores. This move comes in addition to the deployment of department managers recently announced by Walmart U.S. CEO Greg Foran.

The expanded staffing is an effort to improve customer service ratings for the retail giant and, if the plan is successful, perhaps boost sagging supercenter sales.

“We began testing this back in 2012 in a couple of stores and it was gradually expanded to 600 stores. Now we are in the process of rolling it out nationwide because the tests have proven greater customer service,” Wal-Mart spokesman Kory Lundberg told The City Wire.

He said that half the assistant managers will come from the hourly ranks within the stores. The other half will come from current assistant managers or outside the store.

“It also provides a clear path for advancement for hourly associates working in auto care center,” Lundberg said.

He said the extra labor to stores will not result in a price increase in services because it is part of the $1 billion investment in wages, training and career opportunities announced in February by Wal-Mart Stores CEO Doug McMillon.

Wal-Mart execs recently said they plan to tweak and expand their services portfolio this year in response to customer requests. Improving overall customer service ratings is a one of the major goals for Foran and his U.S. team since he took over in October 2014. The retail giant took the bottom spot among retailers earlier this year in the American Customer Service Satisfaction Index rating report. It was Wal-Mart’s worst ranking since 2007 and executives have since vowed to address these issues with added store labor and services while also improving in-stocks and guaranteeing everyday low prices with an expanded options for delivery of online orders.

Foran said it won’t happen overnight but the retailer is making progress in recent months with much work still to do. 

Retail experts said expanded and improved services offered within Wal-Mart’s formats, are one way the retailer may draw more traffic, particularly in supercenters, given they are likely losing some share to competing Neighborhood Markets. 

Foran said he likes the supercenter’s full offering potential with vision and auto services which are two of the recent announcements out of Bentonville in recent days.

Consumers are often drawn to Wal-Mart’s car-care services because of the price. The standard oil change with Quaker State Oil retails for $19.88, and includes a battery check with rear and front tire pressures also checked. This is a value compared to the $29.99 cost for similar services at Sears.  

One main gripe from consumers is the time it takes to get a car serviced. Wal-Mart does not guarantee a time-specific service. It’s first come, first serve basis could mean up to a 2.5-hour wait, which was the case recently mid-week, mid-day at the new Walmart Supercenter in Springdale.

For consumers with an hour or more to spend, Wal-Mart is likely banking on them shopping in the store during that wait while the service is performed. Experts said tepid same-store comparables reported in the recent quarter are reason enough for Wal-Mart to invest in improved services. Edward Jones analyst Brian Yarbrough said customers may not think to go shopping while they wait, so it’s not a slam dunk.

Wal-Mart stores are equipped with free Internet so even if consumers don’t want to shop  in the store, the might shop online while they wait.

First quarter numbers in the overall freight sector suggested a robust U.S. economy for 2015. But recent declines in the American Trucking Associations’ Index and the Cass Freight Index have resulted in mixed views about U.S. economic conditions.

The April Cass Freight Index showed that shipments were down 2.5% compared to April 2014, and freight expenditures were down 4.7%.

Rosalyn Wilson, a supply chain expert and senior business analyst with Pasadena, Calif.-based Parsons, who provides economic analysis for the Cass Freight Index, said the U.S. economy got off to a slow start in 2015, but she expects growth in the remainder of the year.

“Production was soft in the first four months of 2015, but factory orders rose 2.1 percent in March after seven months of decline. A 13.5 percent jump in transportation equipment orders was responsible for much of the turnaround,” Wilson noted in her April report. “Consumer confidence is at its highest level in eight years, which is contributing to improved numbers for the retail sector. U.S. imports were up 9.1 percent in March (the latest month available) and are forecast to continue to grow.”

Cass uses data from $26 billion in annual freight transactions to create the Index. The data comes from a Cass client base of 350 large shippers.

TRUCKING NUMBERS
The American Trucking Associations’ Truck Tonnage Index was down 3% in April and followed a revised gain of 0.4% in March. Year-to-date, tonnage was up 3.8%.
 
The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, was 5.9% below March. Truck tonnage is down 5.3% from January.

“Like most economic indicators, truck tonnage was soft in April,” ATA Chief Economist Bob Costello said in his report. “Unless tonnage snaps back in May and June, GDP growth will likely be suppressed in the second quarter.”

Costello was not as optimistic as Wilson about economic trends.

“The next couple of months will be telling for both truck freight and the broader economy. Any significant jump from the first quarter is looking more doubtful,” he said.
 
According to the ATA, trucking serves as a barometer of the U.S. economy, representing 69.1% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 9.7 billion tons of freight in 2013. Motor carriers collected $681.7 billion, or 81.2% of total revenue earned by all transport modes.

Other notes from Wilson’s report included:
• Manufacturing should perk up in the coming months as demand increases. With the strong dollar, raw material prices are lower for imported materials;

• Although capacity is not a problem, many companies have already announced increased levels of capital investment to update and improve plant and equipment;

• Although construction spending slipped in March, first quarter 2015 spending is 3.2% higher than the same period a year ago. Drops in drilling and energy exploration accounted for a significant portion of the drop in non‐residential construction. With warmer months ahead, construction should pick up steam; and

• The global economic picture is not as strong as the U.S. picture, so exports will continue to be weak.

RAIL REPORTS
Slowing activity in the freight sector was also noted in a weekly rail report from Little Rock-based Stephens Inc. As of May 16, the Stephens report produced by Research Analyst Justin Long and Research Association Brian Colley, showed that week 19 rail carloads were down 3% year-over-year, and year-to-date carloads are down 0.3%.

The report noted: “Overall, the largest decreases in industry volumes came from coal (down 15.3%), metallic ores & metals (down 16.5%), non metallic minerals (down 10.6%), chemicals (down 5.0%) and petroleum & petroleum products (down 7.1%). The largest increase came from intermodal (+4.9%).”

However, the Cass report said rail shipments were up “substantially” in April, with intermodal traffic up 27.6%.