Cave Springs tore an almost $400,000 hole in its budget for this year, and officials doubt the small town will be allowed to repair it.
The mayor and council agree personnel would have to be cut, but disagree on what positions. Mayor Travis Lee said the best option would be to eliminate the Police Department, while aldermen are eyeing city administration jobs.
The Cave Springs City Council will hold a special meeting Monday to discuss finances.
The meeting at the American Legion building will start at 6:30 p.m.
At issue is the city's property tax and whether it can be collected. A court will likely be asked to decide, attorneys for the city and county said.
"I fully anticipate that a judge would rule the tax is not valid," George Spence, Benton County attorney, said of the city's property tax due in 2017.
The county, which collects the tax, will probably ask a court for guidance, Spence said. What court that will be is a question he is researching, he said. It will either be Benton County Circuit Court or county court, he said. County court refers to the county judge, who retains jurisdiction in legal matters involving taxes within the county, he said.
The county also wants a court's guidance on whether it needs to send out new, corrected tax bills to Cave Springs residents if the city's property tax is not due, Spence said.
The council is required each year to pass an ordinance authorizing the collection of its property taxes. Then the county quorum court approves the collection. The county collects all the property taxes so taxpayers get a single bill.
It is the county's responsibility to distribute the money among the school districts, county road fund, cities and other entities that levy such a tax, all in the proper proportions.
Property taxes make up about $391,000 of Cave Springs' $1.7 million general fund budget, Cave Springs city attorney R. Justin Eichmann said. Cave Springs has about 3,800 residents.
City records do not clearly show that the authorizing ordinance was ever passed this year, Eichmann said. The county received notice that the ordinance was passed, but the ordinance proved to be a copy of the previous year's ordinance.
Eichmann expressed hope the city might receive its tax collections, but acknowledged 23 percent of the city's general fund revenue is at risk.
"I've advised them to draw up a city budget that does not include this money, and we should see that in the next week or so," he said of Cave Springs government.
Services like water and wastewater utilities would not be affected because those are paid for by fees. The general fund pays for services like police and city offices. The city spent much of its reserve funds in previous years, he said, so city finances were tight already.
Nothing like this has happened to an Arkansas city before, at least not to his knowledge, said Don Zimmerman, executive director of the Arkansas Municipal League. The league is a lobby that represents municipal governments across the state.
"I have heard of cities that have failed to levy the tax, but I have not heard of any who tried to get it back after failing to pass the levy," Zimmerman said. "That's not to say it has never happened, but I've never heard of it."
Lee said there is no way to cut city services by that much without cutting personnel.
"The only option would be to cut the payroll," Lee said. "I don't see raising franchise fees and such by that amount. And if we cut payroll, we'd have to cut the police department and rely on the county for protection."
Lee said the Police Department is the only place the city can rely on someone else and not have it cost the city that much.
Sgt. Shannon Jenkins, spokeswoman for the Benton County Sheriff's Office, said many questions would need to be answered before the office would get involved, like how to spare the extra man power not currently allocated for the area, knowing the city's population and call volume and the legalities of the deputies enforcing the law in an incorporated city.
Cutting employees outside the Police Department would do little to improve the city's bottom line because other city employees bring in revenue, such as when they collect fees.
"I don't want us to rely on tickets and arrests for revenue," Lee said. "The Police Department's job is to protect and serve, period."
Alderwoman Mary Ann Winters echoed Lee's sentiments on the need to cut city employees, but not on putting the Police Department first. The council has said it won't cut police unless it absolutely has to, she said.
Winters said the council is looking to cut people the mayor hired it did not feel were necessary and mostly are in the administration. She estimates those cuts would save about $300,000 to $400,000.
Ten people work in City Hall, Lee said, and if the council decides to cut them, he will refill the positions with police officers.
Alderman Larry Fletcher agreed with Winters.
"We're not going to cut the Police Department," he said. "One thing you have to have is a fire, police and ambulance service. We're committed to keep our citizens safe."
Cave Springs Police Chief Rick Crisman said he did not have an opinion on the mayor's statements. The department employs six full-time and about eight part-time officers, he said.
Meanwhile, Spence and Eichmann are conferring with each other and attorneys with the Municipal League and the Association of Arkansas Counties, both men said in telephone interviews.
More than $10,000 of property tax meant for Cave Springs this year has been paid, Eichmann said. The money was forwarded to the city before the authorization error was discovered. That money is being kept in escrow by the city until the legalities are resolved, Eichmann said.
Any more Cave Springs property tax paid before the matter is cleared up will be kept by the county, possibly to be refunded if it cannot go to Cave Springs, Spence and Eichmann said. Delinquent tax payments for previous years are not affected, they both said. Those taxes are still due.
NW News on 06/04/2017
Print Headline: Court likely to decide tax issue, attorneys say