Gov. Asa Hutchinson said Thursday (June 11) he has spent considerable time studying concerns expressed by lawmakers on ways to improve and review a growing list of “high-risk” state contracts within the expansive state Department of Human Services.

In his first official “pen and pad” session at the Governor’s Mansion in Little Rock, Hutchinson spent the bulk of his time with reporters expressing concerns about a litany of troublesome contracts at DHS that “have a lot of money at stake on behalf of taxpayers.”

During his 45-minute intimate session that included a few testy exchanges, the governor handed out a two-page letter to reporters he said would be distributed to lawmakers who have publicly criticized a number of third-party state contracts where vendors have not completed work or met performance measures.

“I want the General Assembly to know the steps that this administration is taking to deal with these contracts that have been problematic, and problems that have surfaced last year have continued to fester,” the governor told reporters. “We have taken a number of steps in terms of oversight, not only for these contracts but also the entire procurement process.”

Hutchinson not only said he was looking at “systematic” procurement and contract issues at DHS, but was also taking steps to address specific concerns with past and current vendor contracts with the state.

In his letter to lawmakers, he listed questions surrounding a $4.8 million contract with C-H Mack, an Ohio-based company that provides software and technology solutions for DHS and other health and human services organizations nationwide. Officials with the Ohio firm, which recently changed its name to AssureCare, did not immediately respond to media queries from Talk Business & Politics.

Hutchinson had previously said that an internal review of that contract was made by his staff and Attorney General Leslie Rutledge in late May. In the letter he shared with reporters, Hutchinson wrote that the Ohio vendor has been referred to the AG’s office by DHS legal counsel “for possible legal action and collection efforts.”

“Both entities are working together on collecting documents and interviewing participants,” the governor said, reiterating the same statement in his letter.

But the letter also revealed three new contracts that were now being reviewed by state officials that had not previously been disclosed. The first related to the CoCentrix project, a new statewide software tool that DHS officials have said would “transform” financial and clinical delivery at four of the agency’s largest divisions – the Division of Aging and Adult Services (DAAS), the Division of Behavioral Health Services (DBHS), the Division of Developmental Disabilities Services (DDS), and the Division of Medical Services’ Office of Long Term Care (DMS/OLTC).

The governor said at his urging, DHS has increased management oversight of that project and is in talks with the CoCentrix to decrease the project’s estimated costs and improve the performance of the software management tool. That contract was awarded to Sarasota, Fla.-based provider of behavioral health software almost a year ago.

Hutchinson also said the state has hired Gartner Group at a cost of $410,000 to conduct a contract review of DHS’s Enrollment and Eligibility Framework software, the tool the state uses to determine the eligibility of Arkansans who receive Medicaid and Private Option benefits.

“This EEF software is critical to determine the eligibility of Medicaid (recipients),” the governor said. “This review will provide a roadmap of how to best spend taxpayer dollars on this program.”

In a discussion of an “unnamed” ongoing DHS contract that Hutchinson said has had $1.2 million in funds withheld, the Republican governor went back and forth with reporters on whether the name of the vendor should be divulged.

“We did not put that (information) in there intentionally,” the governor said. “We didn’t want to target the vendor … because this is an ongoing contract. We have contacted the vendor and told them we need them to perform.”

Later, a Hutchinson aide told reporters that the name of the vendor would likely be made available through state Freedom of Information request. Hutchinson spokesman J.R. Davis would not comment on whether the vendor was consulting group McKinsey and Co., which is under consideration for a $15.4 million contract to study elements of the state’s Medicaid program.

That contract was part of the discussion today (Thursday) during a Health Reform Task Force meeting at the State Capitol.

Hutchinson also said he is working with DHS Director John Selig on what he called a “systemic problem” with the lack of oversight within the state’s largest department.

“I think the greatest challenge is systemic management of these contracts,” the governor said.

In other topics discussed during the media roundtable, Hutchinson revealed his budget director Duncan Baird had taken a similar administration with the state Department of Finance and Administration. Baird is a former Arkansas House member who served as chairman of the powerful joint budget committee. The governor said he doesn’t expect to fill that position at this time.

Gov. Hutchinson also said his general counsel, Elizabeth Smith, had taken a position as Medicaid Inspector General. He also said that position will go unfilled for now.

The schedule in the nation’s capital this week was hectic as lawmakers dealt with national security, defense, trade and government waste among other issues. The following is a recap of activity.

SENATE COMMITTEE APPROVES EPA OVERREACH BILL
The Senate Environment and Public Works committee approved a bill Wednesday that would seek to push back on a “power-grab” by the Obama administration, U.S. Sen. John Boozman, R-Ark., said.

Boozman, who is on the committee, voted to approve legislation involving the “Waters of the United States,” sending it to the full Senate. The bill seeks to rein in Environmental Protection Agency overreach and gives the agency direction to write a rule that protects waterways without eroding the rights of landowners, Boozman said.

“WOTUS is an attack on property rights of all landowners that EPA touts as environmental protection. It is nothing more than overly burdensome and costly regulatory power-grab by Washington,” Boozman said. “Our bill protects Americans from the EPA’s gross overreach and requires the agency to write a rule that protects our waters while preserving the rights of landowners.”

Under the bill, agencies would be required to review the current proposal and follow certain principles, Boozman said.

“EPA wants Americans to think that the only way we can protect our environment is by giving Washington wide-ranging power to control our water and air. The reality is Arkansans know better than those in our nation’s capital. We take great pride in being called the Natural State, work hard at the state and local level to maintain that and we don’t need bureaucrats in Washington to protect our resources for us,” Boozman said.

HILL GIVES FIRST GOLDEN FLEECE AWARD
The Veterans Administration Medical Center in Little Rock received an award from Rep. French Hill, R-Little Rock, that takes a look at wasteful government spending. The first recipient of the Golden Fleece Award was given by Hill this week.

Hill sent a letter Wednesday to Veterans Affairs Secretary Robert McDonald to present the award. In the letter, Hill said the award “highlights the excessive, unnecessary and costly government projects and regulations that are wasting hardworking taxpayer dollars and hindering the growth (of) our economy.”

“Today’s Golden Fleece is awarded to the VA for the mishandling of the $8 million solar panel project at the Little Rock Veterans Affairs Medical Center,” the letter from Hill to McDonald read. “The VA has been plagued with costly construction projects over the years, and in February 2012, the VA received and designated an $8 million grant to build a 1.8 megawatt solar photovoltaic system in the parking lot of the Little Rock VAMC.”

The award was first created in the 1970s by then-Sen. William Proxmire, D-Wisc., to highlight waste in government.

HOUSE APPROVES DEFENSE AUTHORIZATION BILL
The House on Thursday overwhelmingly voted to approve the Defense Department budget with all four members of the U.S. House from the state voting yes. The bill, which passed 278-149, would appropriate $490.1 billion for discretionary spending and $88.4 billion for the Global War on Terror.

Reps. Steve Womack, R-Rogers, and French Hill, R-Little Rock, said the bill will provide needed funding in a dangerous world.

“From ISIL to Boko Haram, America faces new and growing threats daily. Now is not the time to weaken our military. That is why I am proud to support this thoughtful, well-crafted piece of legislation, which provides our troops with the equipment and training they require and the benefits and services they deserve, while also contributing to the GWOT account and providing our combatant commanders with the intelligence, surveillance, and reconnaissance capabilities they need to fight the ongoing war on terror and keep Americans safe at home,” Womack said.

“Earlier this week, the President said he doesn’t have a full strategy in place to train Iraqi soldiers to fight ISIS. This is indicative of a leader who isn’t committed to defeating dangerous enemies. Today’s vote to fund the Department of Defense for FY 16 is a signal to the President that Congress is serious about protecting the people’s national security interests and that it’s time he follow our lead by putting forth the plans needed to defeat ISIS and similar terrorist organizations,” Hill said. “In addition to fully funding our military operations around the globe, this bill also increases pay and benefits for service members and their families. I am proud to support it, and I will continue to work on behalf of Arkansans to ensure the entire government maintains its commitment to our national defense.”

TRADE VOTE MAKES FOR BUSY FRIDAY
Arkansas’ four U.S. representatives voted Friday to approve Trade Promotion Authority for the President, as the U.S. House voted down a key first part of the overall trade package.

The House voted 219-212 in favor of the second part of the trade package (Trade Promotion Authority), with Reps. Rick Crawford, R-Jonesboro, French Hill, R-Little Rock, Steve Womack, R-Rogers, and Bruce Westerman, R-Hot Springs, voting yes on the bill.

The vote was just minutes after the House overwhelmingly defeated a bill involving so-called Trade Adjustment Assistance by a 302-126 margin.

Crawford, Hill, Womack and Westerman each voted no on the Trade Adjustment Assistance bill, which is expected to go back before the House next week.

The trade adjustment assistance bill must be passed before the trade package can be signed into law, officials said Friday. On the assistance bill, 158 Republicans and 144 Democrats voted no while 86 Republicans and 40 Democrats voted yes.

Gov. Asa Hutchinson said Arkansas may shop for another federal venue to challenge the president’s controversial Clean Power Plan after the U.S. Court of Appeals for the District of Columbia threw out a lawsuit filed by Arkansas and 13 other coal-friendly states.

“We always knew that litigation with the D.C. Circuit was going to be problematic and an uphill climb because of the nature of the court and their leniency,” Hutchinson said of the federal appellate court.

“We’d like to get a venue outside of the D.C. (court) to take another crack at this issue,” Hutchinson told reporters during a “pen and pad” session at the Governor’s Mansion. “In talking with some of the other governors, I know that they are looking at perhaps a different venue to challenge the EPA’s rule.”

Originally, a dozen states filed a lawsuit in August to challenge the Environmental Protection Agency’s (EPA) regulation drafted nearly a year ago that would cut existing power-plant carbon emissions from 2005 levels by 30% by 2030. Those states include West Virginia, Alabama, Alaska, Indiana, Kansas, Louisiana, Nebraska, Ohio, Oklahoma, South Dakota, Wyoming and Kentucky.

In February, Arkansas Attorney General Leslie Rutledge filed a motion to intervene in a federal lawsuit against the EPA’s proposed 111(d) rule. That motion was granted in early March, allowing Arkansas to join West Virginia and the other 12 states in the case.

But on June 8, the D.C. court threw out the challenge, allowing the EPA to move forward with plans to draft final rules for the centerpiece of President Obama’s climate change policy that would cut carbon emissions at existing power plants across the U.S., including Arkansas’ coal-fired fleet.

“In effect, petitioners are asking us to review the legality of a proposed EPA rule so as to prevent EPA from issuing a final rule,” the federal appeals court ruling stated. “But as this Court has stated, a proposed EPA rule is not final agency action subject to judicial review.”

However, the court did leave the door open that it may take a look at the issue again, once the final rules are in place. “We may review final agency rules,” the court stated. “But we do not have authority to review proposed rules.”

Rutledge said she was disappointed in the D.C. court’s ruling, saying the EPA rule is still an “egregious overstep that will cost Arkansas jobs and the potential for economic growth.” The Arkansas AG also noted that the court ruling did not decide on the legality of the controversial ruling.

“The court indicates that the final rule is now imminent, and I stand ready to join attorneys general from across the country to protect our states,” she said.

Hutchinson told reporters Thursday that regardless of the court of appeals ruling, he still supports Rutledge’s effort to challenge the EPA’s authority, and added that the state is prepared for a protracted fight with federal environmental regulators.

“(This) will go on, but in the meantime it is important that we start to work on an implementation plan,” the governor said.

PSC Chair Ted Thomas told Talk Business & Politics that he and Arkansas Department of Environmental Quality (ADEQ) Director Becky Keogh have had conversations with Hutchinson concerning the EPA rule since comments were submitted to federal officials in December following several stakeholder meetings called by former Gov. Mike Beebe.

Although no consensus was reached during several panel meetings held over the summer, the ADEQ and PSC submitted a letter to the EPA on Nov. 26 that largely supported delaying the EPA proposed greenhouse gas regulations. Thomas said he expects the EPA final rules to land between Aug. 1 and Aug. 15. He said once a final EPA rule is issued in 2015 and it has been reviewed, the ADEQ and PSC will restart the meetings with stakeholder groups to develop a state implementation plan that would then be submitted to the EPA.

“But it is important for us to be able to maintain authority in Arkansas because if we don’t develop some type of plan that works for Arkansas, then we will be abdicating to the federal (government),” Hutchinson said.

Whether a school board member has children in the local schools isn’t a prerequisite to run for a seat on a local school board and shouldn’t make a difference since the board member is there to serve all children, say school officials and board members.

The annual election season for board members around the state is underway with election day set for Sept. 15. Prospective board members may file as candidates between June 30 and July 7, by getting 20 signatures of qualified voters on a petition. Petitions are now available at the county clerk’s office or at the school district administration offices. Candidates may begin circulating their petitions on June 7.

“That’s so subjective,” said Tony Prothro, executive director of he Arkansas School Boards Association. “I have worked with some really good school board members with kids and I’ve worked with some really good board members with no kids in the district. And, I’ve seen the adverse of that.”

Prothro said a good school board member is up to the individual. Prothro suggests a connection with the local schools, such as children or grandchildren, is good to provide “student-focused leadership” which is what school board service is all about.

State law doesn’t mention children as a qualification for a school board candidate, only that a candidate be a qualified voter and lives in the district or zone they will represent. The law also specifies a certain level of training for school board members. The school boards association provides that training. The association also has a 16-point Code of Ethics for school board members, which includes that board actions should focus on policymaking, goal setting, planning and evaluation and that decisions must be made as a whole with no personal promise and no private action that may compromise the board.

‘WHAT IS GOOD FOR THE KIDS’
Richard Abernathy, a former superintendent and now the executive director of the Arkansas Association of Educational Administrators, said he was never bothered by whether board members had children in the school.

“I was more concerned with providing good quality education for all kids,” Abernathy said. “My concern was to look at the issue or the data to make good decisions based on what is good for the kids.”

None of the Fort Smith School Board members have children in the district but Superintendent Benny Gooden doesn’t see that as a detriment to student-focused leadership. All of the board members at one time had children in the district, he said.

More importantly, Gooden said, the board members have served for several years and have become better board members, the longer they serve as they become more familiar with the language, laws and funding of education.

Fayetteville School Board member Justin Eichmann agreed, noting he has spent his first term on that board learning the ropes.

“I put in so much work to learn what I was doing, even the language, and how it all interacts,” said Eichmann, who plans to seek re-election to a second five year term on the Fayetteville board this year. He has two children in Fayetteville schools.

“My son was a motivation but not the entire reason for running the first time,” Eichmann said. “I come from a family of educators and I am a graduate of Fayetteville High School. I wanted to be involved in service. That’s important.”

“My decisions are not based on my children. I make a conscious effort not to. On the board, I represent the entire district,” Eichmann continued.

Travis Riggs, president of the Bentonville School Board, was first elected to the board 12 years ago when he had three children in Bentonville schools. That number has changed to zero since the third of his three children graduated in May.

Riggs said board service take a lot of time, estimating he spends 400 hours a year on board business, attending meetings, listening to constituents and researching issues.

“It’s a thankless job,” he said, for which there is not compensation.

STRUGGLE TO BE OBJECTIVE
A candidate for the Fayetteville School Board has a different view after serving a single term on the Benton School Board several years ago. Phil Jones is seeking the Zone 2 seat held by Bryn Bagwell, who is not running for re-election.

“I know from experience when a board member has a child in a district school, even the most disciplined board member has a very difficult time remaining objective and dispassionate when their child or a friend is involved in a school issue,” Jones said, who has two grown daughters.

In some cases, a child may consider himself to have a “get out of jail free” card if he has a parent on the school board or conversely, teachers and administrators may be hesitant to punish the child as needed, because they fear a vindictive board member, Jones said.

Riggs said five fellow board members in Bentonville do have children in Rogers schools. In Rogers, four of seven board members have children and In Springdale, five of the seven board members have school-age children, spokesmen in those districts said. Fayetteville also has five board members out of the seven with children in the schools. The other two Fayetteville board members were elected when their children were in school.

Wal-Mart’s corporate reputation lags almost all of its competitors according to a new report published by Reputation Institute for U.S. retailers in 2015. The Bentonville-based retailer has never been in the top 100 of the closely watched report.

“In 2015, Wal-Mart ranked No. 593 out of the approximately 600 companies we measured. And they have never ranked in the top 100 in our annual survey,” said Jennifer Villareal, corporate spokeswoman for Reputation Institute.

She said Wal-Mart’s reputation score of 56.82 is weak against its major competitors. Those competitors are:
• No. 1 Amazon at 84.08;
• No. 2 Publix at 78.36;
• No. 11 Kroger at 74.10; and
• No. 14 Target at 73.53.

The reputation score is calculated using a wide range of criteria that includes a company’s citizenship, governance, innovation, leadership, quality of service and the workplace. Each respondent is vetted and must correctly answer 80% of the company facts which range from governance to workplace before they can rate a company on reputation.

Brad Hecht, chief research officer at Reputation Institute, said the mission of the survey and corresponding report is done annually and is the largest U.S. reputation analysis. Hecht said his team collected 80,000 surveys in the first quarter of this year which were used to compile the report.
  
He said reputations are closely connected to emotions. Positive emotions surrounding a brand also increase consumer appeal toward its products, investors want to own the stock, employees want to work harder and are more efficient. When there are negative emotions around a brand the opposite is true.

STRONG RETAIL SECTOR
Hecht said the retail segment report which includes the top 50 scoring retailers had an average score of 69.51 this year. The top 10 ranking retailers in this survey included big box stores, grocers and specialty retailers. Following are the top 10.
• Amazon - 84.08
• Publix - 78.36
• Whole Foods - 78.15
• Tiffany & Co. - 78
• Costco - 77.52
• Lowe’s - 76.58
• Home Depot - 76.02
• Cabela’s -  75.72
• Ahold -  75.32
• Bath & Body Works - 74.56

He said a score of 80 is excellent and while Amazon was the only retailer to surpass an 80 the next three companies scored within 2 points of 80 and the entire top 10 list were within 5 points of an 80.

“A score in the mid 70s is still a very good ranking,” Hecht said. “Several retailers near the top continue to raise their scores year over year which has pulled up the average retail sector score.”

BOTTOMS UP
He said retailers like Wal-Mart who are near the bottom of the 600 company survey  have plenty of reasons to want to raise their scores because there is some direct correlation between corporate reputation and overall financial performance. For retailers, two-thirds of the reputation score has nothing to do with their products because workplace issues are a larger share of the score among retailers.

“Companies that are doing good things for their employees should be talking about it,” Hecht said.

That was precisely what Wal-Mart did with the 5,000 or so employees who recently attended the annual shareholders meeting in Fayetteville earlier this month. Aside from the raise in pay announced earlier this year, the company also tweaked its dress code, agreed to add back Wal-Mart radio, raise the temperature in stores, enhance its training protocol and unveiled a cash payout for the monthly winners of its Value Producing Items (VPI) contests.

Alan Ellstrand, corporate governance expert and professor at the University of Arkansas, applauded Wal-Mart for “listening to associates.”

He said many times a company’s corporate reputation is hard to detangle from its financial performance. When a company’s stock is performing well there can be a halo-effect on the rest of the company. 

Wal-Mart’s stock (NYSE: WMT) has lost 15% of its value this year. Shares trading at $72.43 on Monday (June 15) are down 7.3% in the past month. A component of the Dow Jones Industrial Average, Wal-Mart is an under-performer. Year-to-date the composite Dow Jones is up fractionally 0.43%. For the past month the Dow Jones is down 0.90%.

WAL-MART WORKPLACE
Wal-Mart’s workplace reputation is mixed but top U.S. executives are focused on decreasing turnover and giving employees more ownership in their jobs. Walmart U.S. CEO Greg Foran recently said turnover in the front-end of the stores has begun to abate since the retailer announced the wage increases. Foran said he can tell how profitable a store is by the turnover rate on the front-end.

“I know if the turnover rate on the front-end is high, then there is likely a customer service problem and sales will suffer. When turnover is low, that store is likely a solid performer,” Foran said.

Ellstrand was not surprised that Wal-Mart’s reputation score is lower than some competitors that are deemed “cool.” That said, Wal-Mart’s enormous size complicates things.

“Reputation on Wal-Mart’s expansive front lines can be difficult to manage. This is especially true when there are so many shoppers in their stores each day. Fights in stores, parking lot crimes and other negative incidents make the news creating a negative image which is often out of the realm of Wal-Mart’s control,” he said.

INTEGRITY TICKET
The ongoing investigation into the alleged Foreign Corrupt Practices Act by Wal-Mart also hangs over the retailer. Aside from the negative public perception that Wal-Mart cheated to fast-track its international growth, the cost to defend against the allegations and create future safeguards has cost the company at least $612 million since 2013.

During the recent shareholders week, each time a Wal-Mart exec spoke to employees in a large forum they talked about integrity and what is expected from each and every employee in that regard. Not only were workers told to do what is right without exception but they were also told to speak up when they see something wrong.

Wal-Mart Stores CEO Doug McMillon said the company will not take shortcuts in the area of integrity and corporate governance. He said efforts to turn U.S. store performance around are above board and will take several quarters to accomplish. Management has also said work abroad is managed strategically with regard to expansions which follow government and internal protocols.

McMillon said Wal-Mart is expected to “walk the talk.”

Hecht said retailers can bounce back after a reputation nightmare if they have built substantial brand equity beforehand. He said Target was often a top 10 retailer in the Institute’s survey. But the 2013 data breach and the retailer’ subsequent lack of transparency weighed heavily on Target’s corporate reputation in 2014 as it tumbled out of the top 50. By 2015, new management in Brian Cornell, a former CEO of Sam’s Club, helped Target rebound to No. 14.

Hecht said that would not have been possible if Target had not already achieved high brand loyalty.

Agents across Sebastian County have sold 557 homes through the first five months of 2015, outpacing 2014 by 6.7%, according to MountData.com. But the real story in the this region continues to be rising prices in an area that traditionally offers modest, if any annual increases.

Sales volume in Sebastian County rose to $78.143 million through May, an increase of 18.3% from a year ago. The sale of two $1 million homes in April is partially responsible for the higher yearly volume. But in May the median home price in Sebastian County rose to $117,200, a gain of 17.2% from the same month last year.

Kevin King, a broker with Weichert King Realtors in Fort Smith, said the rising prices are likely attributed to an active new home market that is finding the cost to build is more expensive than a year ago as lumber and other raw materials have moved up in price.

“Homeowners who stayed put during the recession have also upgraded their properties in recent years with granite and wood flooring that have raised those property values as well,” King said. 

He cautioned that while the median home price is higher this year, the bulk of the activity is centered around new construction and a few pockets around Fort Smith where commercial amenities are beginning to fill in.

King said some buyers are attracted to the Fort Chaffee area and the new construction there because jobs are moving in and so is commercial retail. He said the new Walmart Neighborhood Market going in on south U.S. Highway 71 will also be a nice amenity to buyers in the new Park Meadows subdivision where homes are prices between $180,000 and $230,000.

Overall, King said the Fort Smith Metro area market is growing at a modest pace over last year which is expected to continue with better macro economics and local expansion efforts.

Fort Smith somewhat resembles the national consensus as a mature city with a slow but steady growing economy.

“Consumers are exhibiting caution, and want to be on more stable financial footing before purchasing a home,” said NAHB Chief Economist David Crowe. “On the bright side, the HMI component measuring future sales expectations has been tracking upward all year, mortgage rates remain low, and house prices are affordable. These factors should spur the release of pent-up demand moving forward.”

Homebuilder sentiment is also high across the country based on the pent-up demand from cost-conscious and cautious consumers. Real estate developer and Arkansas Sen. Jake Files, R-Fort Smith, said building costs have risen consistently over the past four or five years but builders were hesitant to raise prices in the wake of stagnant wages. 

“I suspect what we have now is some cost inflation from the past few years finally catching up,” Files told The City Wire.

CRAWFORD COUNTY
This smaller Crawford County area reported flat home sales through the first five months of this year for units, but like Fort Smith saw its sales volume rise because of higher home prices. Total sales volume in Crawford County rose 6.7% this year over last despite one less home sold. The median sales price through May rose more than 10% to $107,500.

Crawford County’s median home price through May was 10% less expensive than in neighboring Fort Smith. North in Washington County median home prices are 48% more costly at $150,975. 

In May alone, the median home price rose to $115,944, a gain of 7.2% from a year ago. On a square-foot basis, the median price in May topped out at $71.70, a high so far for this year, according to MountData.com.

Sales volume rose 19.4% to $7.214 million in May with units sales almost flat against a year ago. More new home sales in Crawford County are also helping push the median home price upward. 

AREA HOME SALES
CRAWFORD COUNTY
Unit Sales (Jan.-May)
2015: 234
2014: 235
2013: 184

Sales Volume (Jan.-May)
2015: $27.13 million
2014: $25.403 million
2013: $20.03 million

Median Price (Jan.-May)
2015: $115,944
2014: $108,099
2013: $109,900

SEBASTIAN COUNTY
Unit Sales (Jan.-May)
2015: 557
2014: 522
2013: 451

Sales Volume (Jan.-May)
2015: $78.143 million
2014: $66.226 million
2013: $60.733 million

Median Price (Jan.-May)
2015: $117,250
2014: $111,000
2013: $111,750

Arkansas’ rig count has fallen to its lowest level in more than a decade as drillers and oilfield equipment companies have cut back substantially on upstream oil and gas capital projects for the remainder of the fiscal year.

According to the Baker Hughes weekly rig count, the number of rigs operating in Arkansas is now down to only five, a level not seen since the week of May 5, 2005. A year ago, there were 11 rigs actively drilling for oil and gas across the state of Arkansas.

Jack Dollarhide, CEO of Tulsa, Okla-based Longbow Asset Management, said as the U.S. energy marketplace approaches the one-year anniversary of the drastic decline in global crude oil prices, the domestic natural gas marketplace is mired in a nearly seven-year slump driven mainly by oversupply due to new drilling methods and technologies.

“Not surprisingly, the U.S. rig count for oil and natural gas have predictably declined over the past 6-7 months as volatile commodity prices have been under immense pressure punctuated last week when the Baker Hughes rig count fell for the 27th consecutive week,” said the Tulsa investment strategist.

Nationwide, the total number of rotary rigs exploring for oil and gas in the U.S. is only 859, down more than 53.7% from year ago levels of 1,854. Of That total, 635 are drilling for oil, 221 for natural gas and three for other purposes.

Overall, the number of natural gas-directed rigs is down 73% from its recent peak of 811, achieved in 2012. The all-time high of 1,606 was reached in late summer 2008. A year ago, there were 310 active natural gas rigs operating across the U.S.

Dollarhide said despite the downward pressure on coal and domestic oil prices, natural gas prices have failed to break out of its long seven-year bear market.

“In fact, many would argue that the pullback in the energy sector reflected in slashed drilling budgets, massive layoffs, and office closures can be blamed more on the inability of natural gas to make a sustained rebound than even the shocking decline in oil – which is not as shocking today since oil has recovered about 40% since its February lows,” said the Tulsa money manager.

In Monday’s trading session on the New York Mercantile Exchange, July natural gas futures jumped 13.7 cents, or nearly 5%, to $2.887 per million British thermal units (MMBtu). However, July crude futures on NYMEX fell 58 cents to $59.48 a barrel after gaining 1.4% in the prior week.

In its most recent short-term forecast, the U.S. Energy Information Administration (EIA) forecasts Brent crude oil prices will average $61 per barrel in 2015 and $67 per barrel in 2016. The 2016 price forecast is three dollars lower than in last month’s forecast. The nation’s benchmark crude, West Texas Intermediate (WTI), is expected to average $5 a barrel less than the Brent price in 2015 and 2016.

The spot price of natural gas at Henry Hub averaged $2.85 per MMBtu in May, after averaging $2.61 per MMBtu in April. EIA expects monthly average natural gas prices to rise somewhat through the summer as air-conditioning demand increases, but remain below $4 per MMBtu throughout the forecast period.

In every week since the April start of the natural gas storage injection season, weekly inventory builds have surpassed the previous five-year (2010-14) average. The 132 billion cubic feet (Bcf) increase in working gas inventories for the week ending May 29 was the largest injection in more than a decade.

EIA forecasts inventories will total 3,912 Bcf at the end of October 2015, which would be 115 Bcf above the previous five-year average.

The Arkansas Lottery Scholarship program may be struggling to make ends meet, but in the the past five years the 43 Arkansans who were million dollar winners through the program should have been able to tie up all loose financial ends.

Randall Irvin from Uniontown, Ark., was the first million dollar winner on Jan. 22, 2010. The most recent was Owen Cochran from Morrilton, who won $2 million on a $20 Gold Rush ticket, according to a press release on Monday (June 17) from the Arkansas Lottery Scholarship program. (The 43 winners are listed at the end of this report.

The 43 million dollar winners is a minuscule portion of Arkansas’ estimated 2.966 million  population (U.S. Census, 2014). By percentage the 43 winners are 0.00145% of the state’s population – granted, not all Arkansans are eligible to play.

Also, there are more Elvis impersonators in or near Arkansas than million dollar lottery winners. According to Gig Masters, there are 95 Elvis impersonators in or near Arkansas. Therefore, your chances of running into a guy in a jumpsuit singing “That’s Alright Mama” is greater than striking up a conversation with $1 million winners Robin Wheeler of Alma or Gary Howard of Fayetteville.

The program may need a loan from some of its past winners. Because revenue to the program has dropped in recent years, the Arkansas Legislature recently lowered scholarship awards. Incoming freshmen receive from $2,000 to $1,000. Sophomores would see their funding go from $3,000 to $4,000, while funding for juniors and seniors would continue at $4,000 and $5,000, respectively.

According to figures presented during the recent Arkansas Legislative session, program revenue has dropped from $96 million to around $72 million in recent years. The program needs about $100 million a year to break even.

Proceeds from the lottery program, which began in late 2009, are used to fund scholarships to Arkansas residents to attend public and private two- and four-year colleges and universities in Arkansas. According to the program, more than 168,000 scholarships have been awarded, and as of late 2014 the program had spent more than $450 million to fund the scholarships.

MILLION DOLLAR WINNERS 
2010
Randall Irvin from Uniontown, $1 Million
Harold Bailey from Conway, $25 Million (Bailey took the $12 Million cash option)
Carla Teer from North Little Rock, $1 Million

2011
Mary Dartt from Hot Springs, $1 Million
Robert Atchley from Pearcy, $1 Million
Gene Simpson from Sulphur Rock, $1 Million
Herman Clark from Diaz, $1 Million
Carol Manning from Little Rock, $1 Million
Sharon Jones from Beebe, $1 Million
Randy Wagner from Grubbs, $1 Million
Richard Spencer from Little Rock, $1 Million

2012
Ruth Simcox from Cabot, $1 Million
Mary Harper from Little Rock, $1 Million
April Burnside from Hamburg, $1 Million
Paulette Hodges from Blytheville, $1 Million
Huey Hicks from Prattsville, $1 Million
Frankie Williams from Forrest City, $1 Million
Frank Karnes from West Fork, $1 Million
Tat Sing Wong from Marion, $1 Million
Sherry Miller from DeQueen, $2 Million

2013
Stephen Weaver from Stuttgart, $1 Million
Martha Rusk from Hot Springs, $1 Million
Linda Newsom from Mayflower, $2 Million
Keith Nichols from Searcy, $2 Million
Amy Watson from Searcy, $1 Million
Robin Wheeler from Alma, $1 Million
Billy Bealer from Pine Bluff, $1 Million
Donald Duke from Marmaduke, $1 Million
Kenneth Dennis from Russellville, $1 Million prize

2014
Gary Howard from Fayetteville, $1 Million
Donald Hill from Morrilton, $2 Million prize
Harold Thompson from Little Rock, $1 Million
Miranda Huffman from Lepanto, $3 Million
Nancy Silvers from Berryville, $1 Million
James Osborn from Atkins, $1 Million
David Dahlqvist from Bella Vista, $1 Million prize
Susan Gray from Bryant, $1 Million
Shepeka Floyd from El Dorado, $1 Million

2015
James Brinkley from Brinkley, $1 Million
Driton Krasniqi from Van Buren, $1 Million
Roy Moody from Lonoke, $1 Million
Cynthia Johnson from Pine Bluff, $1 Million
Owen Cochran from Morrilton, $2 Million prize

Devon Ramsey, 19, has a great job. He’s just barely one year out of high school, making well over $75,000 a year, has a new truck, no student loan debt and is investigating retirement plans. He’s happy with his position in life so far, but also is a combination of angry and frustrated with an education system he says is dismissive of skilled trades.

Ramsey, now a welder working as a pipefitter in Hennipen, Ill. (southwest of Chicago), expressed that frustration in an early 2014 letter to Dr. Benny Gooden, superintendent of Fort Smith Public Schools. He was upset that Gooden did not agree to participate in the New Tech program– a project-based learning curriculum – founded in 1996 and adopted by 160 schools in 26 states. Van Buren and the Rogers public school districts are among the 160 schools.

“I’m sorry to say sir that I don’t see your way of educating succeeding. I look around each day at my school associates and see mediocrity, disinterest and out right boredom,” Ramsey noted in his letter to Gooden. “Fifteen years ago and so on men knew how to work on their cars, how to change blades on lawn mowers, knew about carpentry, knew how to use machines. Now they have become useless and dependent on the older generation to do things for them.”

Gooden responded by noting that students in the Fort Smith district have access to numerous skill development programs.

“Your concerns about access to technical education are right on track. While some opportunities are available, there is a need for more programs of this type. Students in Fort Smith are fortunate to have access to a number of programs including those offered at the Western Arkansas Technology Center (WATC) at UAFS during their high school years,” Gooden said.

In a recent interview, Ramsey admitted he was angry at the system when he wrote the letter, but still believes Gooden and others in public school leadership around the country push the college path and neglect or provide too few resources for skilled trade awareness.

“Yes, I was mad. ... I want my generation to succeed, to be builders, to be leaders. I don’t see that right now. I don’t see that push from them (education officials),” he said.

FROM TROUBLE TO REVELATION
For a time, Ramsey’s drive was in the wrong direction. He was a good student and would have been able to attend college, but began making bad choices between his 10th and 11th grade years. He admits to getting into trouble with “kids who had a silver spoon in their mouth” and could afford a little trouble. His parents, Bev and Stan, moved to separate Devon from the trouble. Stan, who sells industrial equipment, and Bev, a cancer survivor who sells clothing for cancer patients, decided their son needed a job. He began working on construction projects.

“I started working with Rick and Booger. They took me under their wings and I started working construction ... and almost from the start it was like a rush and an exhilaration to build things,” Ramsey said, admitting that he didn’t expect to enjoy what was intended to be punishment.

Looking back, however, he said the common form of punishment in his peer group would not have taught him a lesson.

“I thank them (parents) for making me do that, to get to work. ... They could have taken my smartphone or car keys, which is what you see happen with most of these kids, but that doesn’t teach them anything,” he said.

What Ramsey learned was that the college path wasn’t for him.

THE DECISION
Bev and Stan were shocked initially when their son said he was going to the Tulsa Welding School instead of college. Others were also surprised.

“My barber chewed me out for 15 minutes when I told him I was going to be a welder,” Ramsey said with a smile.

He finished welding school in about seven months. He wasn’t able to attend the graduation in Tulsa because he was hired immediately for a welding job in Springfield, Mo. There, he quickly learned about the “pipefitter network all over the country” and in about four months landed a better job near Donaldsonville, La.

His newest job in Illinois moves him even further up the pay scale. In less than a year after graduating from Tulsa Welding School, Ramsey faces a reality in which he could potentially earn $100,000 a year. His stop after a late May interview with The City Wire was to meet with a financial planner to talk about retirement fund options.

“If you do this right, you could work for 20 years and then retire and take it easy,” said Ramsey, who, based on his own assessment, could retire before he hits 40.

But Ramsey believes too few are taking advantage of the same career and financial opportunity he enjoys because they aren’t made aware of it. He estimated that 20% of his peer group in high school would make better career choices if the system exposed them to options other than college.

“It’s (skilled trade schools, vocational education) looked down upon by them (school officials) and that’s what bothers me. ... We need to wake up and see that the system is not working. These kids are coming out of college without a job but with these crazy student loan debts. And, again, I know I get mad, but what I’m doing is proof that there could be a better life for them,” Ramsey said.

‘PROFOUNDLY DISCONNECTED’
Devon Ramsey isn’t a youthful prophet or a lone passionate missionary. He’s an example. His reality and his message are nothing new to human resources managers around the world. And addressing the “skills gap” is the focus of celebrity Mike Rowe’s mikeroweWORKS Foundation.

Rowe, who became famous with the “Dirty Jobs” television series, uses his “Profoundly Disconnected” campaign to tackle “the absurd belief that a four-year degree is the only path to success.” That disconnect was Rowe’s message during an April 2014 address before the U.S. House of Representatives Natural Resources committee. (The video of his address is a the end of this story.)

“And still, we lend money we don’t have to kids who can’t pay it back so they can buy expensive four-year degrees and pursue jobs that don’t exist anymore. That’s the legacy of a society that embraces a cliché,” Rowe said.

Rowe’s foundation provides scholarships to schools around the country, including Midwest Technical Institute, Tulsa Welding School, The Refrigeration School and Universal Technical Institute. He told the House committee members that since 2008 he has tried to challenge “stigmas and stereotypes” created in the education community about vocational training.

“The skilled trades, once held in high esteem, are now seen as some sort of vocational consolation prize,” Rowe said during the committee hearing.

‘INADEQUATE TRAINING’
ManpowerGroup reported May 18 that 32% of U.S. employers report having a hard time fill job openings because of talent shortages. That is down 8% from the May 2014 report. Globally, the percentage of employers having trouble finding skilled workers rose from 36% in 2014 to 38% in 2015.

ManpowerGroup surveyed 41,748 employers in 42 countries and territories during the first quarter of 2015 to explore the extent of talent shortages within the global labor market.

“Inadequate training and negative stereotypes relating to skilled trades are further fueling a dangerous shortage of skilled workers,” Jeffery Joerres, Manpower Inc. chairman and CEO, stated in the report. “Employers and governments need to bring honor back to the skilled trades. They must look ahead to forecast their future skill demands in this area and start working to alleviate this now.”

In the energy sector, Manpower reported a “double squeeze” of skilled workers at entry level and senior positions. The factors causing the squeeze are:
• An aging workforce, creating a shortage of experienced talent;
• Rapid advances in technology that are changing skill requirements; and
• Limited focus on STEM education, resulting in fewer interested and qualified entry-level job seekers.

FAMILY CONSIDERATIONS
Ramsey doesn’t need to see survey results. He may not be aware of the Manpower survey. He sees firsthand the skilled trade workforce demographic.

“I haven’t seen anyone younger than probably 25 out there ... and the shame is that the older crew, these older guys, they are dying to give their knowledge away,” Ramsey said. “What I think that if this keeps going, then in 10 or 15 years what you will see is that the American labor force will be hurting. ... You can have all the chiefs in the world, but if you don’t have enough Indians to build the tents, then nothing happens.”

Ramsey said a few older Americans are leaving careers to learn a trade. He met a dentist – Ramsey estimates he was around 50 years old – at the Tulsa Welding School who was switching careers. He predicts more of that as people see that a skilled trade may be a good way to pay off college loan debt.

Welding and pipefitting work, especially in the energy sector, may not be the best job for married people because of the long hours and time away from home, Ramsey admitted. However, he knows of several fathers who work hard nine to 10 months a year, make “really good money,” and then are able to afford to a lot of travel during the summer with their families. He also said “shop jobs” are available that don’t pay as much as location work, but they allow a mother or father to have relatively normal working hours where they live and make more than $50,000 a year with good benefits.

On that point, Ramsey encourages women to consider the trades. His belief is that women are often better with detailed skilled work.

“Women are some of the best welders. If I had the choice between a woman welder and a man, and they had the same years of experience, I’ll pick the woman every time,” Ramsey said.

SHOW THEM THE PAY STUB
Ramsey also thinks high schools should pick people like him to talk to students about career options. What would he tell high school students?

“First, I would show them my pay stubs,” Ramsey said with a grin.

He also would be “honest and tell them it can be hard work,” but the rewards and opportunities should be considered with and compared to those possible from a college path. He also would share the intangible aspects of skilled work.

“Look, I get to travel all over, and have traveled, and I get paid for it. And there is a diversity in the people you meet. ... I’ve met people from not only all over our country but all over the world. And the other thing is, I think, that you grow up and you mature a lot faster as a person. It can be hard and dangerous work at times ... but, you know, that can be a good thing. It has been for me.”

Wal-Mart says its $1 billion investment in people is already starting to pay off as cashier turnover in the front-end of its stores began to slow the day the $9 minimum starting pay was announced in mid-February.

Walmart U.S. CEO Greg Foran recently told Wall Street analysts that not only did store turnover begin to slow soon after the pay hike was announced, but job applicants also increased. When asked how long it will take for the hefty investment to materialize in higher sales and better overall financials, Foran said the investment payoff will be gradual, with small improvements each quarter.

Analysts largely applauded Wal-Mart’s effort to invest in its workforce in wage hikes and training knowing that $1 billion, or 20 cents a share in lost earnings this year, won’t be recouped overnight.

Wal-Mart Stores CEO Doug McMillon told analysts that returning department manager positions to the stores is a key part of the investment and ongoing effort to improve traffic and sales at Wal-Mart U.S supercenters. He said department managers are key to customer service improvements because a good department manager runs their area like a store within a store. It also gives them ownership in the store. 

McMillon said Wal-Mart is at its best when store associates begin to identify as “my store, my space and I’m in charge of it,” and take tenure in that department. When that happens he said pride goes up, sales go up and end caps get stocked better than before. He said sales will rise when department managers are reintroduced across the stores and those managers begin to own that department.

“Our relationship with our associates and ultimately how they interact with our customers matters. We are focused on running great stores and clubs right now and doing what’s necessary to have highly engaged associates to help us do that,” McMillon  said. “I think in the U.S. you will see us improve week to week, month to month in the areas of customer service.”

Analysts asked executives how they plan to access and measure results gleaned from the investment in people and training.

“When you’ve got 4,500 stores and a bulk of the 1.2 million associates are on the front line out there serving customers these changes we’re making are a much more gradual process,” Foran said. “This is a journey. It won’t happen overnight. The simple metrics of items in the basket, comp sales will be the metrics that you see us report. But there will also be other metrics we will measure like our ‘Clean, Fresh, Friendly’ scores and associate turnover and worker attendance all which should improve quarter to quarter.”

Foran said the investment in training and additional hours and higher wages is a huge part of the solution but his team is also breaking down the 24-hour cycle of store operations and closely examining everything from foot traffic and restocking efforts to load delivery so that we can run a more efficient operation.

He said it’s important that employees feel they can complete the tasks they asked and that they have the tools, training and time to do so. McMillon also told analysts that store employees need not put up with bureaucratic systems out of Bentonville. 

“I was in a store about a year ago talking with a department manager in electronics and his department did not look very good. He explained to me that he had been on the phone for five hours with the home office trying to get somethings changed to avoid future problems. Not only did he spend five hours on the phone but the problem did not get solved. What I want our store associates to know is they don’t have to put up with that. That is unacceptable ... When a phone rings or an email comes in from a store associate  and they need something and it makes sense and there’s not data saying otherwise then the home office needs to help them take care of customers,” McMillon said.

He said the work underway by Foran and his team are in the process of turning that around and returning the home office operations into a role of servant leadership and empowering the store workers. There has to be accountability from the home office to the stores. 

“There are no cash registers in the home office,” McMillon said.

Only a half dozen years after the Great Recession, the auto industry is experiencing a strong resurgence in payrolls with more than 7.25 million private sector jobs in the U.S. economy, according to industry analysis compiled by the Center for Automotive Research (CAR).

Of that total, Arkansas’ expanding automotive sector contributed more than 62,000 jobs, or 4.8% of Arkansas’ 1.3 million person labor pool in 2013, the report shows. That total represents 0.9% of the 7 million-plus workers in the U.S. auto industry, which generated $500 billion in payroll and another $205 billion in tax revenues.

At the same time, auto-related taxes and fees generated $1.07 billion to the state revenue coffers in 2013, totaling 12% of the yearly totals from $6.43 billion in new car sales, the CAR report shows. Altogether, there were 68 supplier companies, 1997 dealerships and 4,180 aftermarket, repair or auto service facilities across the state, which has a total of 2.4 million registered vehicles.

The information in CAR’s 57-page 2105 jobs report highlights the economic contributions of the auto industry in all 50 states. The report was commissioned by the Alliance of Automobile Manufacturers (AAM), which represent 12 of the nation’s largest automakers. The group includes BMW Group, Fiat Chrysler, Ford Motor Co., General Motors, Jaguar Land Rover, Mazda, Mercedes-Benz USA, Mitsubishi Motors, Porsche, Toyota, Volkswagen Group of America and Volvo Cars North America. Link here for the AAM report on Arkansas.

Arkansas business leaders are pending their hopes that more auto jobs could be coming to the Natural State. Last month, state lawmakers approved $87 million in bond financing to entice the Department of Defense to award a contract to Lockheed Martin in Camden. The superproject is tied to a military vehicle, the Joint Light Tactical Vehicle (JLTV), that could produce 600 new jobs and 655 indirect jobs.

Overall, the CAR report shows that 14 automotive companies have numerous facilities in the U.S., with some companies supporting fully integrated operations in the country including research, development, design, engineering, headquarters, and manufacturing operations, while others have a much smaller footprint.

Beyond the number of jobs created, the industry contributes substantially to federal, state and local tax revenues, providing more than $200 billion to those governments.

These figures are likely to rise as well. CAR’s U.S. automotive employment forecast projects hiring will increase by approximately 10.8%, with a compound average growth rate of 2.1% from 2013 to 2018. U.S. production is forecast to continue expanding, growing at a compound average growth rate of 2.4%, resulting in a projected rise of 12.6% in production from 2013 to 2018. CAR’s econometric analysis also suggests auto sales over the next several years will continue to increase, from 15.6 million units in 2013 to 17.6 million units in 2018.

Other highlights of the report include:
• Direct Auto Employment: America’s automobile industry is one of the largest industries in the country. The industry directly employs over 1.5 million people engaged in designing, engineering, manufacturing and supplying parts and components to assemble, sell and service new motor vehicles.

• Major Customer of Goods and Services: America’s automakers are among the largest purchasers of aluminum, copper, iron, lead, plastics, rubber, textiles, vinyl, steel and computer chips.

• Jobs Dependent on Autos: When jobs from other sectors that are dependent on the industry are included, the auto industry is responsible for 7.25 million jobs nationwide, or about 3.8% of private-sector employment.

• Compensation: The contribution of automotive manufacturing to compensation in the private sector is estimated at more than $500 billion each year.

• Tax Revenues: People in auto-related jobs collectively generate more than $205 billion annually in tax revenues.

• GDP: Historically, the auto industry has contributed from 3 to 3.5% of America’s total gross domestic product.

• R&D: The auto industry invests billions every year in research and development, among the highest of any industry. However, unlike many other industries, only a small portion of R&D – just 1% – is funded through the federal government.

Predictions that Tropical Storm Bill will bring another six to 10 inches of rain to watershed areas of the Arkansas River could mean that normal transportation on the river system may not return until August.

AccuWeather report Tuesday (June 16) that Tropical Storm Bill, which hit Galveston early Tuesday, could will funnel copious amounts of moisture into a zone that had torrential rainfall in May. Flooding from that rainfall continues along some of the rivers in parts of Texas, Louisiana, Arkansas and Oklahoma.

Marty Shell, who owns Van Buren-based Five Rivers Distribution and operates the Port of Fort Smith and port operations in Van Buren, said June 11 that barring more heavy rains it would likely be June 30 before barges can move again on the Arkansas River. The tropical storm emerged just a few days later.

Shell said Tuesday that he’s talked to port operators along the Arkansas and Mississippi Rivers, and they aren’t optimistic about what Tropical Storm Bill may leave behind.

“‘Critical’ and ‘catastrophic’ are the two words I’ve heard the most today,” Shell said.

Continuing, he said: “It looks like we’re fixing to get as much if not more water than we did two weeks ago, and this will be the third time in three weeks that we have been flooded, moved back in, cleaned up, and had to move it back out. ... But, that’s what Mother Nature is giving us and that’s what we’ll deal with.”

RIVER TONNAGE DECLINES
Unusually heavy rains during May forced the closure of many locks along the Arkansas River waterway from Tulsa down to where the waterway connects with the Mississippi. May tonnage on the river totaled 347,336 tons, down more than 61% compared to the 898,523 tons shipped in May 2014, according to figures from the U.S. Corps of Engineers. For the first five months of the year, Arkansas River tonnage has totaled 4.065 million tons, down 18% compared to the same period in 2014.

The Arkansas River system (The McClellan-Kerr Arkansas River Navigation System) is 445 miles long and stretches from the confluence of the Mississippi River to the Port of Catoosa near Tulsa, Okla. The controlled waterway has 18 locks and dams, with 13 in Arkansas and five in Oklahoma. The river also has five ports: Pine Bluff, Little Rock, Fort Smith, Muskogee, Okla., and the Tulsa Port of Catoosa in Oklahoma. 

Without gains in the remainder of the year, the river system could see two consecutive years of shipping declines. Tonnage totaled 11.719 million tons in 2014, down from the 12.139 million in 2013 but better than the 11.687 million in 2012 and the 10.6 million in 2011.

Shell said it’s been around 20 years since he’s seen river levels create this level of disruption. High river levels into August or September could disrupt manufacturing and other operations in Northwest Arkansas, the Fort Smith area, and other regions served by goods moving into and out of Arkansas river ports.

STORM MAY MAINTAIN INTENSITY
AccuWeather Senior Meteorologist Alex Sosnowski said tropical systems often weaken rapidly when making landfall due to dry air choking off the moisture source needed to maintain intensity. However, recent heavy rain and waterlogged landscape could cause this storm to weaken slowly.

"While the best chance for strong winds will be at the coast, strong wind gusts could continue inland quite a ways due to the continued intensity of the storm," AccuWeather Meteorologist Evan Duffy said.

The storm will funnel copious amounts of moisture into a zone that had torrential rainfall in May. Flooding from that rainfall continues along some of the rivers in parts of Texas, Louisiana, Arkansas and Oklahoma.

The heaviest rain and hence the greatest risk of flooding on Tuesday into Thursday will be focused on the upper Texas coast, central and northeastern Texas and central and eastern Oklahoma. Many of these locations may receive double-digit rainfall this week. This, on top of 1-2 feet of rain that hit during May.
 
An arm of rainfall averaging 6-10 inches will extend as far to the north as southern Missouri. Locally heavier amounts are possible. The heavy rainfall will not stop over the southern Plains and the middle Mississippi Valley. Rain heavy enough to cause flooding will be funneled into part of the Midwest and the East.

A committee will soon be formed to provide citizen input on more than $20 million collected each year by the city of Fort Smith through its 1% street tax program. The Fort Smith Board of Directors voted 6-1 Tuesday (June 16) to create the committee that was not endorsed by a city department head.

Talk of a citizen committee to help prioritize infrastructure spending first arose during the recent runup to the May 12 special election to renew the city’s 1% sales tax for street, bridge and drainage work. That tax generates around $20 million a year, and was renewed for another 10 years by almost 80% of those who voted in the special election.

Since 1985, the money has been spent based upon priorities set in a five-year “Capital Improvement Program” (CIP) developed by city staff and approved by the Board. In a memo from Deputy City Administrator Jeff Dingman to City Administrator Ray Gosack, the purpose of the proposed committee “would be to serve in an advisory capacity to the Board of Directors regarding prioritization of capital improvement projects funded by the 1% sales tax dedicated to streets, bridges and associated drainage.”

Stan Snodgrass, director of engineering for the city, said during a June 9 study session that he opposed creation of the committee. He said the committee will be “another layer that we have to go through” and could cause delays in getting the plan to the Board.

Responding to a question from City Director Don Hutchings, Snodgrass reiterated his concern Tuesday night about the “layer” that will add time to what he said is already a time-consuming process.

“Something’s got to give,” Snodgrass said about the time element of working with a committee.

There was little discussion on the issue, and the only dissenting vote was from Hutchings.

Tuesday’s meeting also marked the final time City Finance Director Kara Bushkuhl will present the city’s “Comprehensive Annual Financial Report” to the Board. Bushkuhl, who has been with the city for 35 years, is set to retire Oct. 6.

“Since starting in 1980, Kara has worked with 7 city administrators, 4 mayors, and nearly 40 city board members. She’s prepared 35 audits and CAFR’s, 35 budgets, dozens of bond offerings, seen nearly 13 million water bills sent to customers, 700,000 payroll checks issued to employees, and made a gazillion journal entries,” City Administrator Ray Gosack said in a prepared statement during the board meeting. “Hallmarks of Kara’s work are her tremendous passion and attention to detail. Kara’s legacy will be her insistence on full disclosure, upholding the highest standards of integrity, implementing financial controls to safeguard the public’s resources, and encouraging staff development.”

According to city info, Bushkuhl and her staff during her tenure have earned 29 consecutive certificates for excellence in financial reporting and 26 consecutive distinguished budget presentations as determined by the international Government Finance Officers Association. The awards are based on specific criteria for budget reporting and comprehensive financial audit reporting.

The road between startup and success is long and tiring, but for entrepreneurial team Ram Ganesan and Pavan Kumar the prospects of raising a cool million dollars to further their venture has them going strong. It’s been three years since this tandem was one of three winners in the inaugural ARK Challenge 2012 held in Northwest Arkansas.

The ARK Challenge program, made possible from $2.15 million in federal funds, allowed 15 startups from the globe access to mentoring and seed money to try and launch their business ventures following a three-month bootcamp experience. ARK Challenge was a partnership between Winrock International, the University of Arkansas and NorthWest Arkansas Community College. 

Ganesan and Kumar traveled to Fayetteville from India to take part in the competition in 2012. As one of the winners they were awarded $150,000 to help further their efforts. Ganesan said to date MineWhat has raised $330,000 and is cash flow positive with revenue growing nearly 30% month-over-month so far this year.

GAME PLAN
MineWhat is a service platform that has evolved from providing analytical services to e-commerce businesses to now using automation software to help businesses grow their profit margins. Ganesan said the pivot was necessary for cash flow reasons as more business need help increasing their own profitability through higher margins.

Ganesan said he spends about half of his time in Bangalore, India, where MineWhat employs a small team of four tech developers. He and Kumar have set up shop in San Francisco as one of the participants in the prestigious Alchemist Accelerator. 

Ganesan said in the past couple years he and Kumar have learned much about the e-commerce world. For instance, he said up to 50% of products fail to perform, while just 20% perform at optimum levels which he said is a big opportunity for MineWhat who can help e-tailers with pricing strategies and ongoing analysis instead of post-mortem updates.

The MineWhat tandem seeks to raise $1 million in capital when they present their business venture at the Alchemist Accelerator Demo Day in September. Ganesan said the expertise they have been able to leverage with an office in San Francisco is invaluable. 

He said the plans are to expand the company’s U.S. presence and add more technology and sales jobs if the funding round comes through. In the meantime Ganesan said he will spend the next two months in India reinforcing the team on the ground there.

LOOKING BACK
Ganesan said he’s grateful for the time he spent in Fayetteville and the opportunity the ARK Challenge presented at the time. But future jobs will likely be added in India or San Francisco at one of MineWhat’s two home bases.

He said the biggest challenge MineWhat faced following the ARK Challenge win was the contacts they needed to market their product and, of course, more capital to keep it afloat until cash flow began to pick up.

“We have been able to sustain MineWhat and make changes and applications based on feedback the market has provided. It’s important to be nimble and test your product broadly,” Ganesan said.

He admits the last three years have been hard, time consuming and tougher than he first thought, but given that MineWhat is still up and running gives him a sense of satisfaction when so many of his original cohorts have folded. He said the earlier a startup can work with actual customers the better because it saves a lot of time down the road, if certain aspects of the product have to tweaked.

“The more customers a startup can work with the more valuable the feedback is going to be. Paying customers give the best feedback, so much more so than those piloting a product or service,” Ganesan added.

MENTORING MINEWHAT
Clint Lazenby, a mentor with the ARK Challenge, worked closely with MineWhat during their 3-month stay in Fayetteville. He said it’s rewarding to see two of the three winning teams in the first ARK Challenge still growing their companies because few things are harder than building a company from scratch.

“The ARK challenge has played a very positive role in Northwest Arkansas. It has created an opportunity for entrepreneurs, business people and service providers to discover each other and create the beginning of a formal ecosystem. This has increased both the capacity and sophistication of this ecosystem over the course of time,” Lazenby said.

He said successes and failures have been great learning opportunities and produced new ways the area can develop.

“For those of us who want to see the I-49 corridor flourish long into the future we collectively need to continue to learn and implement strategies/polices to create depth and density to the startup ecosystem. While I would not endorse the philosophy of build it and they will come, I would say if it isn't built there is no chance they will come,” Lazenby said.

Like it or not the retail landscape is reconfiguring itself for the future while much of the supply chain is planning with yesterday’s strategy, according to Leon Nicholas, senior vice president at Kantar Retail who spoke at the Emerging Trends in Retail Conference June 11 in Springdale.

Nicholas said disruption in the retail sector will intensify in the coming years and suppliers must be ready to adapt. He said there are four demographics reshaping retail. Nicholas classified the groups as the younger haves and the have nots and the older haves and have nots.

Millennial households earning under $62,000 annually are have nots. He said this group is looking at higher debt levels so they are smart, budget-conscious shoppers. They also use digital tools on their own terms and are always looking for something more.

Walmart’s Neighborhood Market is a huge opportunity to reach this group, he said, if the stores are merchandised with the items they want — alcoholic beverages, wild oats organics and fresh foods, both raw and cooked. Nicholas said (Walmart) suppliers are likely reaching this group, but the Millennial households earning more than $62,000 annually are not easily won.

“They are starting to make it and they have the money to walk the talk. While they are looking for values they also want transparency. This group is leading the disruption in the retail world today and responsible for the growth of online and speciality retailers. They have money but they are not spending it the same way their parents did,” Nicholas said.

He said growth in e-commerce sales also is responsible for fewer store shopping destinations. In 2007, consumers regularly shopped 12.4 retailers monthly, but by 2014 that list was trimmed down to 9.7. While there are fewer destinations, the number of trips are increasing. Nicholas said there are fewer outlets on a consumers’s list because they are using technology to broker commerce. 

He said it’s not just Millennials shopping online and pushing more sales to the virtual shelves.

“Suppliers must have a digital strategy today,” Nicholas said.

By 2020 Kantar Research expects 4% of all food and beverages will be purchased online, but 100% of those purchases will be influenced by technology. 

“Are you ready for 4% of your category’s sales to go online? What is your plan because your scale is going to be disrupted,” Nicholas warned suppliers.

He said one in five Wal-Mart shoppers are also Amazon Prime members and 32% of Generation Y are members of Prime which is a focus of concern for brick and mortar and the context for so many of the changes in retail. He said Amazon Prime is a problem for Wal-Mart supercenters because every Prime member who shops a Wal-Mart store has to wonder if they can get the same item cheaper and delivered to their home with Amazon, given they have already paid $100 for that membership.

Nicholas said older households earning more than $62,000 annually are looking for ease and enjoyment. These boomers and seniors have a “do-it-for-me” mentality which aligns with subscription-based ordering and health and wellness services which CVS, Sam’s Club and other retailers are chasing. They too are finding the ease of online ordering a convenience.

He said the older have nots are looking for private label alternatives. Aldi does a good job catering this segment because the stores are small, values are high and service is fast. He said smaller formats in general hold opportunities for all the groups. Nicholas also this demographic is the most concerned with preserving good health and will continue to look to those retailers who offer services in that area as well as strong values on prescriptions and other wellness products.

RECONFIGURATION UNDERWAY
Nicholas said shoppers must be re-energized today, not through selling as a strategy but by engagement in “multipoint lifestyle conversations.”

“Our job is to turn those conversations into commerce and move the relationships we build into revenue,” Nicholas said. “The marketing has to start way before she gets to the physical store.”

He said retailers engaging shoppers are trying to build trust on two levels. The first class is the procurement brokers. They deliver to the shopper reliable products, and things needed each day. He said consumers identify with retailers on this level because they know they can find a particular item anytime they need it.

The second type of retailer is a lifestyle “curator,” according to Nicholas. He said this shopper might not know what they need and for this they turn to lifestyle curators. He said those with limited budgets look to Dollar General because they know they have low opening prices points. He said Big Lots also fits this category because it caters to a lifestyle for shoppers on a tight budget, the same way Whole Foods does for its core consumer.

He said it’s important for vendors to look at the retailers they supply and make sure their products and marketing efforts line up properly with the retailer. A procurement broker and a lifestyle curator require two very different strategies. Nicholas warned that as retailers look for ways to engage their shoppers and reinvent their formats using technology, suppliers have to be careful that their products are not just the side show.

He said suppliers need to look for ways to align with a retailer’s services whether it’s vision care or nail salon or perhaps oil changes or selling insurance products. Nicholas said Proctor & Gamble did this by aligning with Wal-Mart’s dental care initiative.

Nicholas also said as brick and mortar formats are changing suppliers have been adapting. He said the new model for brick and mortar is to become experience centers where shoppers can touch, engage and try products before purchasing.

As brick and mortar formats are changing so will the online buying experience. Nicholas said the virtual stores are more apt to become less like a traditional shelf, search for and pick the item you want, to a more solution-oriented format. 

“Consumers can shop a lifestyle catalog and then click the images to buy from the scenario given,” he said.

Being seen as a lifestyle solution or a compliment to a needed service will be more important for product suppliers in the coming years, Nicholas said. He urged suppliers to sell a lifestyle, not products and categories.

“In an online post-shelf medium is there going to be any room at the end for you?” he concluded.

It’s possible that by Thursday (June 18), a U.S. Supreme Court decision will result in 68,232 Arkansans losing insurance subsidies provided through the Affordable Care Act, otherwise known as Obamacare. If that happens, state policymakers will have to decide how to respond.

At issue in the case of King v. Burwell is whether the IRS can provide tax credit subsidies for individuals who purchase health insurance through the online exchange established by the federal government. Section 1321 of the Affordable Care Act says that subsidies are available for individuals in exchanges “established by the state.”

The government (Burwell, as in Sylvia Burwell, secretary of Health and Human Services) argues that Congress did not mean to exclude states that now use the federal exchange. However, the plaintiffs say that under a strict interpretation of the law, individuals in states that do not have state-based marketplaces would not be eligible for the subsidies. That would include at least 34 states, including Arkansas.

Many say the loss of those subsidies, which help lower-income Americans buy health insurance, would result in a mass exodus from the insurance marketplace and the eventual collapse of Obamacare.

Rulings are expected to be issued on this and other controversial issues, including same-sex marriage, as early as 9 a.m. (CST) Thursday. If the court rules for King, the subsidies would go away. If that happens, it’s uncertain how President Obama and a Republican Congress could work together to create a temporary fix to Obamacare, much less a permanent one. Many Republicans see a pro-King ruling as an opportunity to end Obamacare.

ARKANSAS PREPARES
Arkansas is preparing for the various scenarios, said J.R. Davis, spokesman for Gov. Asa Hutchinson’s office. However, he said, “At this point, it’s difficult to say what our response will be because we don’t know what the ruling will be by the court.”

At the state level, a Republican-led Legislature that barely passed the private option, which provides private insurance to lower-income Arkansans through Obamacare, would be called upon to rescue another part of Obamacare.

State Sen. Jim Hendren, R-Sulphur Springs, who is heading a task force studying health reform in Arkansas, said legislators would have to meet in special session to react to a pro-King ruling. An opponent of Obamacare, Hendren said legislators would be obligated to do something, but it would be a “contentious debate.”

“To me, any time there’s that kind of turmoil and that kind of radical change in the administration of a program, it’s not only appropriate, but it’s our responsibility as legislators to come back in and address that,” he said.

Hendren said the issue would be further complicated by the fact that so many states would be in a similar situation. What happens if Arkansas converts to a state-based exchange but many other states don’t?

“(Thirty-seven) states that have federal exchanges are going to have to make similar decisions, and in fact, I think there’ll be a lot of discussion between those (37) states,” he said. “Are we all going to sink or swim together, or is it every man for himself, or how are we going to respond to this if there is a dramatic change?”

Dustin McDaniel, Arkansas’ former attorney general, said the justices can decide the case based on two competing legal theories. One way would be a strict constructionist view where the justices interpret the law technically. If Congress made a mistake in writing the law, then it’s up to Congress to repair the mistake. The other principle would be that the Supreme Court should not interpret the law to a “ludicrous outcome.” The law easily could be fixed with clean-up language, McDaniel said, but that would be unlikely coming out of this Congress.

Court watchers are counting votes trying to predict which way the justices will rule. McDaniel expects the justices to rule in favor of King.

“I just don’t see how they uphold the federal subsidies on the basis of the law as it’s written,” he said.

If the Supreme Court rules for King, could subsidies, thereby being illegal, end immediately? Hendren said he “can’t imagine” that happening. Arkansas’ exchange is run as a federal-state partnership, but under legislation passed in 2013 it is in the process of setting up its own state-run exchange. On June 15, the U.S. Centers for Medicare and Medicaid Services conditionally approved Arkansas’ application.

However, under Act 398 of 2015 by Hendren, the state is prohibited from setting up an exchange without legislative approval if the Supreme Court rules for King. Hendren said he sponsored the bill so the Legislature would have a say if the rules change.

Without a doubt, a pro-King ruling would have a huge effect on Arkansas’ health care landscape. Apart from the 68,232 Arkansans receiving subsidies, it would indirectly affect insurance ratepayers and those on the private option.

“There would need to be a great deal of analysis to really get a good sense of what sort of impact that would be and how much premiums could change,” said Amy Webb, spokesperson for the Department of Human Services. “For now, premiums are fixed through the end of the calendar year. We’d also want to see how Congress and the president respond.”

Ryan Herget, CEO and founder of Little Rock-based Chef Shuttle, has spread his wings from central Arkansas westward to offer a new restaurant delivery service in Rogers and Bentonville. The 2014 startup venture is already active in 19 other cities in the Little Rock metro, the Hot Springs area and around Memphis.

“I began to look for opportunities to facilitate last mile delivery in what has become an ‘I want it now’ scenario,” Herget told The City Wire Wednesday at the company’s grand opening in Rogers.

He said the fastest way to consumer loyalty is often through their stomachs, which is why he devised Chef Shuttle, a pure-play food delivery service that works in partnership with area restaurants.

The service has already grown to 25,000 customers in the central Arkansas market and Chef Shuttle drivers have already made more than 100,000 deliveries in the past 16 months. The company has grown from one to 20 employees since its February 2014 inception. Herget said a small management team of three or four work in each of the company’s markets and he oversees the entire operation from central Arkansas.

“We expect Northwest Arkansas to be a strong market for the company. Logistically there are more than 100,000 residents in the five zip codes we are delivering to in Rogers and Bentonville. We would have to cover more square miles in central Arkansas to reach that population,” Herget said.

The company employs about a dozen drivers in the local market to start, each who work as an independent contractor earning a small fee for every delivery and 100% of tips. Chef Shuttle kicked off its Northwest Arkansas service Wednesday (June 17) at 11 a.m. with five local restaurants signing on start. Those restaurants are IDK? Cafe, Mellow Mushroom, On the Border, La Antigua, and Boneheads.

Herget said the company plans to add four to five new restaurants to the service each week. Herget said Chuy’s, Genghis Grill and other restaurants with Little Rock connections will likely be the first ones added.

Consumers go online to Chef Shuttle and register as a user. They choose their entree from the restaurant list and pay the exact same menu price as if they were ordering in the store. There is a $4.95 flat delivery fee charged by Chef Shuttle per restaurant. Tips and driver gratuities are up to the consumer’s discretion.

Herget said his service is unlike any other in this market because Chef Shuttle negotiates its pay directly with the restaurants within the wholesale to retail margin so that consumers pay the menu price and the $4.95 delivery fee, which mostly goes to compensate drivers.

“We hire about 30% of the drivers who apply. We screen them thoroughly and make sure they present the professional image that Chef Shuttle requires. We have women, men, students, professionals and retirees among the 200 drivers in our three markets. Because the transaction is paid for online drivers are not carrying a lot of cash aside from any cash tip a customer may give them. Most of our customers tip online and wrap that into the final price so there is no need for any cash exchange at the door,” he said.

The minimum food order is $15 and food can be ordered up to 30 days in advance which comes in handy for catering lunch and dinner events or coordinating office parties.

Herget said when the order is placed online the order is dispatched to the driver on call out of the company’s central command center in Little Rock. There, he said, dispatch operators track driver moves and notify them of traffic issues, accidents or other obstacles that could delay delivery. The average delivery time is one hour, but consumers are given an estimated time when the order is placed. 

One aspect Herget is passionate about is that the dispatch call center is not outsourced. He said each dispatcher has been a driver and their top priority is to make sure the customer and driver get the order delivered promptly and correctly.

Chef Shuttle drivers use insulated bags that keep foods hot and cold as needed. The company operates 7 days a week from 11 a.m. to 10 p.m. every day but Sunday when it’s open from 11 a.m. to 9:30 p.m.

He said 75% of the company’s order are for dinner, but the average lunch ticket is three times more than the dinner tickets because they are often for the entire office. He said the service is popular with traveling professionals staying in hotels and Chef Shuttle gifts cards are popular for new moms and for families dealing with the loss of a family member.

“When new moms ask for these gift cards at their baby showers the average credit is $450. When families ask for them in lieu of (funeral) flowers the average credit is $1,500 which can be used as needed,” Herget said.

While Herget is eager to grow his NWA footprint, he said it’s important that customers, restaurants and drivers all grow in tandem. He did not share his timeline for expansion into Fayetteville but said it is coming once the Rogers and Bentonville markets are running smoothly and growing in sync. 

This is not Herget’s first company. At just 24 years old he began two other ventures – a power washing service company when he was just 15 years old and a beverage discount service called the Daily Quench in recent years.

He said Chef Shuttle secured its Series A funding from the Steve LaFrance family, the founders of USA Drug. Herget said he’s been fortunate to find capital in Arkansas as well as mentorship from his investors.

Dawson Meadows works through the static this week to walk us through the news and things to do and comparing his youthful “vodka-fueled” habits to those of successful welder Devon Ramsey.

Hank Hill from the popular cartoon series “King of the Hill” makes a brief guest appearance. Also making a guest appearance is Tugboat Willie.

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

Execs at the world’s largest retailer are all about new store formats and innovation, but they aren’t letting go of the big box. Wal-Mart Stores CEO Doug McMillon recently told Wall Street analysts that supercenters have plenty of potential and will be renovated as needed in the months and years ahead to ensure the lifecycle is extended.

McMillon said over time the supercenter has always evolved. While stores are now trending smaller, he assured analysts that the stock-up trip format is still relevant as efforts to intertwine technology and actively engage shoppers ramp up.

Some natural evolution that has already taken place involved reducing the size of the supercenter. Older stores, some up to 220,000 square feet are being rethought as the new format nearer 150,000 square feet. McMillon said future space configuration would be rethought as the retailer looks for ways to energize the experience. He can see emerging categories such as smart home connectivity gaining space from categories such as hardware.

“Supercenters today have room to improve that give them a longer life and better experience,” McMillon said.

Walmart U.S. CEO Greg Foran and his team are engaged in subtle makeovers across the retailer’s more than 4,500 stores, of which 76% are supercenters. Foran said during shareholder week that when you operate that many stores over a lifespan of 50 years the fleet is bound to be diverse. He told analysts June 6 that his merchandising team is always discussing space configuration and he would like to increase maternity apparel offerings and plus size fashions.

But equally important is the customer overlap between online and brick and mortar. In some categories, like seasonal lawn and garden, the retailer has set up kiosks in stores with virtual catalog displays of patio tables and other lawn furniture items. The shopper can browse the virtual catalog and purchase same day in the store and in most cases take it home immediately. This eliminates the need for valuable floor space as the boxed inventory can be stocked in the backed room or out of reach in the lawn and garden center. 

Other more subtle changes are underway according to Judith McKenna, chief operating officer for Walmart U.S. She recently pledged to the media and shareholders that Wal-Mart’s 4,500 U.S. stores would be “fast, friendly, clean and in-stock by the holidays.” While McKenna and Foran gave no actual timeline for the complete supercenter turnaround, they did impose a preholiday 2015 timeframe for the “fast, friendly, clean and in-stock” metrics they measure daily.

“Right now half of our customers like what we are doing and the other half doesn’t. That doesn’t mean you can go out and put a coat of paint of half your stores and fix it the problems ... but we are leaning into store remodels where they are needed and the entire operational workings within are being evaluated from the way we order paper towels to how technology is being used to increase store efficiencies,” Foran told the media June 4.

He said Wal-Mart measures consumer sentiment each week and store scores are gradually improving. At 50% approval, Foran said the scores are a lot better than they were in August when the new management team took over. McKenna said she under-estimated how much it takes it move the needle forward in a fleet of 4,500 stores. 

“It’s hard to wrap your hands around 4,500 stores. We are reinforcing the management count into stores and cities where it is needed and the simplification of processes underway is helping to give us a clear focus going forward,” McKenna said.

The supercenter format has been the predominant cash cow for the retail giant for three decades. But sagging comp sales in recent quarters indicate that cannibalization is underway from competing Neighborhood Markets, and that e-commerce growth and constant competition from dollar stores and discounters are eating away at supercenter sales.

McMillon said the disciplined management in place and changes underway to improve foundations in conjunction with the technology and people investments will make a difference in the next few years. Right now, he said Wal-Mart is focused on store experience.

“We have to get this right in order to grow. I think we can add $10 billion to $20 billion a year in sales,” McMillon added.

Americans paid off $34.7 billion in credit card debt in the first quarter of 2015 while racking up a whopping $55 billion in additional card debt so far this year, according to an annual study on credit card debt by CardHub.

The average household’s first-quarter credit card balance of $7,177 is the highest point in six years, according to the study. Local debt and finance experts said Americans will use credit cards at a fast pace for the rest of this year but that doesn’t spell disaster at this juncture.

CardHub (www.cardhub.com) is a credit card research firm that helps customers find the right card to meet their needs. It is owned and operated by Evolution Finance.

The findings of the study are in line with Kathy Deck’s data which she gets from the Federal Reserve and Federal Reserve Bank of New York, both of which track household indebtedness. Deck is the director for the Center for Business and Economic Research at the University of Arkansas. 

“Consumer confidence is higher now than in a recession and companies are extending more credit in an economic expansion,” Deck said. “It’s supply and demand.”

Mark Foster, spokesman for Credit Counseling of Arkansas, had similar comments.

“We’re coming out of the great recession when lenders tightened their belts on lending and consumers were building up savings,” Foster said. “Now, we’re starting to see more increasing debt.”

Credit Counseling has offices in Fayetteville and Fort Smith.

This year’s first-quarter debt pay down was 7% larger than those in 2013 and 2014, according to the CardHub study. However, the study indicates that debt reduction is common at the beginning of a year due to the timing of annual salary bonuses, tax refunds and follow up on New Year’s Resolutions. 

Other main findings of the study include:
• Defaults also declined by more than $350 million in the first quarter, compared to the first quarter of 2014, bringing this year’s default rate to its lowest point since 1995;

• This year’s first quarter pay down is still 29% below the most recent peak payoff of $44.6 billion in the first quarter of 2009; and

• If the average household transferred its credit card balances to one of the market’s best balance transfer credit cards, that household could save up to $1,700 in finance charges, depending on their payoff timeframe.

“It might be that folks feel more comfortable about charging again as the economy slowly improves,” Foster said. “People tend to be gun-shy after being burned with fewer raises, decreased hours and layoffs.” 

Normally, in a recessionary period, the credit counseling agency sees an increase in the number of clients seeking help with their debt. That didn’t happen in the most recent recession, Foster said. Rather, he added, “Some people jumped over us into debt settlement and bankruptcy.”

“As people are more comfortable, we expect to see credit card debt grow,” he said.

An interesting sidebar, Foster said, is that young adults are not using credit cards as much as older Americans, preferring instead the use of debit cards or prepaid cards. According to Bankrate.com, a website which tracks financial rate information, 63% of millennials – between ages 18-29 – don’t have credit cards while only 35% of people over 30 don’t have credit cards, Foster said.

Tightening credit restrictions and greater use of debit cards are causing concern, particularly among younger adults, he said.

NerdWallet.com reports that U.S. household credit card debt averaged $15,706 as of June 2015, when considering only those households carrying debt. Credit card debt is the third largest source of household indebtedness. Only the mortgage and student loan debt markets are larger, according to the Federal Reserve.

While credit card debt is rising for the average household, the rate of default continues to trend lower according to the S&P/Experian Consumer Credit Default Index released June 15. The bank card default rate reported its first decrease since January 2015 with a rate of 2.98%, a decrease of 0.20%, its largest reported decrease since October 2013, according the index. Mortgage defaults and auto loan defaults are also lower.

“Consumer credit default rates are below pre-crisis levels, at new lows and continue to drift down,” said David Blitzer, managing director and chairman of the Index committee at S&P Dow Jones Indices. “These low levels should not come as a surprise: interest rates haven’t turned up, consumer debt service as a proportion of household income is close to its record low, and the Federal Reserve reported that consumer wealth was at a peak in the first quarter of 2015.”

He said lower debt levels do not mean that no one is spending. On the contrary, Blitz said May light vehicle sales were the highest since July 2005 and retail sales jumped.

“The economy looks good, consumers are spending and credit usage is rising. The combination of low debt service and economic expansion should ease worries about the fallout some fear when the Federal Reserve boosts interest rates,” Blitz said.