story by Michael Tilley
mtilley@thecitywire.com
An informal survey of the Fort Smith Board of Directors places the odds against the city reinstating a business license fee to cover a shortfall in the city’s pension contributions for police and fire employees.
The fee was dropped more than 30 years in exchange for business support of a sales tax increase.
According to City Administrator Ray Gosack, the city’s LOPFI (police and fire pension) fund will be insolvent by 2021. And that insolvency was pushed from 2019 to 2021 by a recent Board vote to reduce benefits under the pension plan.
During a June 23 study session, the Board looked at three options on reinstating a license fee. The first option could generate $1.976 million. It would collect $20 per employee for businesses with employees from 1 to 500. The fee would be capped at $10,000.
The second option could raise at least $1.435 million with a plan that would charge a business $20 per employee from 26 to 500 employees with a cap at $10,000 a year. Businesses with 25 or fewer employees would not pay a fee.
The third option would charge a flat fee of $150 for all businesses and raise an estimated $761,550 a year. The cost to manage all three options is estimated to be $107,000 a year.
The City Wire on Monday asked members of the Board, including Mayor Sandy Sanders, about the feedback they have heard from the business community and if they support any of the license fee options.
Director Tracy Pennartz, who said June 23 that a license fee is a “viable option,” said all options should be on the table but preferred “making further cuts to the 2015 Budget before taking any action on the revenue raising options.”
Director and Vice Mayor Kevin Settle does not support reinstatement of the business license and does not believe it should be an option in addressing he pension shortfall.
Director George Catsavis does not support reinstatement and says it should not be an option.
“The feedback I have received from several business small and large has been unsupportive of this fee. Some say it will hinder future business growth in Fort Smith (and) some say it would create a financial burden. I look forward to working with the board and input from the citizens to achieve reasonable cost saving measures In the near future,” Catsavis said in his response to The City Wire.
Director Keith Lau said the business community is against reinstating the license, and he doesn’t support any of the options.
“I want to see cuts to the general fund of 3%. The city is going to have to show the public serious real cuts in expenses/spending before they will support any fee or tax increase,” Lau noted.
However, he believes all options should remain open for discussion.
“I think we should make 100% sure we know how much it will cost to fix the fire and police retirement problem. Then make real cuts to drop our expenses, then build the gap between cuts and costs. If we can't fix with cuts then we will need to increase fees. My fist choice is to raise franchise fees and as last resort add a business license fee,” Lau explained in his response to The City Wire.
Raising franchise fees is another option presented to the Board by city staff. The proposal would increase franchise fees on electric, telephone and gas from 4% to 4.25%, and increase franchise fee on cable from 4% to 5% to generate $554,000 a year – maximum rate state law allows.
City staff is expected to present refined options during a July 14 study session. The Board could vote on other options to address the pension shortfall at a July 21 board meeting.