Springdale residents can vote May 9 for a measure to leave an extra $4 million a year in the city operating fund, said Mayor Doug Sprouse.
A portion of the city's general sales tax that has been paying off bonds through the city budget would no longer be used to pay bond debt, and would become available for the city to return services to residents, said Colby Fulfer, the mayor's chief of staff.
If voters approve, the city would refinance debt paid by the city's general sales tax, Fulfer said. That debt would be combined with the debt from the 2023 bonds, which will be paid from a capital sales tax, he said.
The bond program put before voters will include two questions about consolidating $184 million of debt remaining from previous bonds.
The bond program also would generate $135 million for street improvement, $16.3 million for park improvement, $16.3 million for a new Senior Center and $7.8 million for a new fire station and other improvement.
But without voter approval to pay off $140 million of bonds issued in 2018 and $45 million of bonds sold in 2020, the rest of the proposed $350 million bond program won't pass, Sprouse said.
Residents will vote on each measure separately.
If voters approve, the 2018 and 2020 bonds will move under the umbrella of the proposed 2023 bonds for payback, said Bob Wright, a senior managing director for Crews & Associates, an investment banking firm that has handled several bond issues for the city. It also would pay for various fees and other costs associated with taking out the new bonds.
Crews & Associates and Stephens Inc., as compensation for preparing the bond program, will split .85 of 1% of the total bond sale as a fee, Wright said.
The interest rate for payback of the 2023 bonds was 4.66% on April 13, Wright said. The rate was 4.91% when he first introduced the bond program to the City Council in January.
"We discussed with them the interest rate chart and taking advantage of the downward trend in rates," he said.
The city currently is paying a 4% interest rate on the outstanding $184 million debt from the previous bonds, Wright said.
The 2023 bonds would be repaid by a 30-year extension of a 1-cent sales tax, dedicated to repaying bonds, he said.
"Residents have paid that tax for decades," he said.
Also, total receipts from another 1% sales tax, a portion of which has been paying off bonds through the city budget, would no longer be used to pay bond debt and would become available for the city's general budget, Fulfer said.
The two cents of sales taxes brought the city $46 million in 2022 -- an increase of 20% from 2021, when they brought the city a total of $38.4 million, he said.
The average growth of those sales tax receipts has been 9.5% over the last five years, Wright said.
TIMELINE
Every purchase made in Springdale provides the city 2 cents in sales tax for every dollar spent. One cent goes to the general fund and the other pays off bond debt, Fulfer said.
Voters approved that first cent of general sales tax in March 1992. The money went to the general fund, according to a timeline provided by Wright.
Voters approved the other cent -- this one a capital tax -- in 2003 for a 2004 bond issue, the timeline reads. This paid for 10 major street improvements, three major intersection improvements on Sunset Avenue and repaving 35 miles of city streets.
Both taxes are still in place. The money from the second tax -- the capital tax -- goes directly to the state, which pays the bank holding the debt, Wright said.
It never goes through a city fund, Fulfer said. "We never even see that money," he said.
Voters in July 2006 approved extending the 1-cent capital tax for a new bond issue, Wright's timeline states. This included $40.6 million to refund the 2004 bond issue, $45 million in street improvements and $47.5 million to build Arvest Ballpark.
Voters in 2012 approved a bond issue paid from a portion of the city's 1-cent general sales tax, which built the first phase of Gene George Boulevard and the interchange with Interstate 49 at Don Tyson Parkway, the C.L. (Charlie) and Willie George Park and new fire stations 2 and 3.
Voters in 2013 extended the 1-cent capital tax, saving the city $12.4 million in interest by refinancing existing debt with a lower interest rate.
Voters extended that tax again in 2018, which included refinancing the 2013 capital bonds, building Shaw Family Park, three new fire stations, a new city administration center and a new animal shelter. The bond money also extended Gene George Boulevard and widened 64th Street, extended Dixieland Road south from Lowell to Wagon Wheel Road and allowed for the first phase of an extension of Har-Ber Avenue.
Ryan Carr, assistant director of the city's Engineering Department, said the city did 17 major road improvements for $95 million under the 2018 bond. The city also received some grant money to help improve some streets.
Some of these bond projects are still under construction, Carr added.
The second phase of the Har-Ber project and another extension of Gene George would be completed under the 2023 bond tax.
The city in 2020 refinanced the 2012 general tax, saving the city $951,000 a year in interest in its general fund, according to the timeline.
The proposed 2023 bond sales would pay off the 2018 bonds and pay the $45 million for bonds that is now being paid by the general fund.
The money will go to the general budget, freeing up about $4 million.
"That's the money we use to extend services to the residents," Fulfer said.
AHEAD OF SCHEDULE
Fulfer noted the city is paying off current bond debt more quickly than planned.
The city budgeted for 2023 based on the sales tax collections increasing by 8%, but the collections actually are increasing by 11%, Fulfer said.
That 3% extra each month goes directly into the general fund, but it's not designated for a project, Fulfer said. The council often uses that money for capital projects or unforeseen needs -- recovering from a debilitating storm, for example.
The city's bond debts are like a home mortgage. Most are set for a long-range payoff, Sprouse said.
But the mortgage has a set payment every month. The bond takes anything above its minimum payment to pay down the principal, shortening the life of the bond loan, Fulfer said. Extra money from the capital bond goes directly to pay off the principal.
Money freed up in the city's general fund from the 2002 general tax could go to other, smaller capital projects.
As of March 30, the city had roughly $23 million in its general fund which is not dedicated to other expenditures or capital projects, Fulfer said. The city could use this money to pay for intersection improvements on a pay-as-you go basis.
A recent traffic study found $200 million worth of street upgrades the city could make. The City Council soon will prioritize the projects, Sprouse said.
Wright said the 2023 bond is set to pay off in 2045, if sales tax revenue does not grow. If voters don't approve the bonds, the sales tax would remain in effect until the existing debt pays off in late 2032.
TIME MANAGEMENT
Wright said a city must consider the useful life of a project before spending money to be paid out long term.
But the revenue base must be there to ensure the city will make enough money over time to pay back the bonds, he said.
Structures like roads, parks and police and fire departments still will be useful after 30 years, Wright said. Equipment like trucks and mowers take heavy use and don't last long, he said.
Sprouse explained cities must manage the time they bond and build projects, using Gene George Boulevard as an example.
The city is working to transform the two-lane 56th Street into Gene George, a four-lane street with medians, roundabouts and multi-use side paths designed to create a north-south traffic corridor. It is being built in phases with money from different bond issues.
The first phase was built with 2012 bond money from Arvest Ballpark to Bleaux Avenue. The second phase was done with money from the 2018 bond, north to Elm Springs Road and south to Don Tyson Parkway.
"Without that, we wouldn't have Sam's. We wouldn't have Arkansas Children's. We wouldn't have as many parks," Sprouse said.
The 2023 bond would allow the city to develop the road south to Johnson Mill Boulevard and north to County Line Road.
The city ultimately might need to extend Gene George north to Wagon Wheel Road and U.S. 612, but residential and commercial development have not reached those streets.
The city could have built the entire length of Gene George with the 2012 bond money, Sprouse said. But it would have built a road to nowhere because the city was not yet developed there, Sprouse said. Ten years later, now that nowhere is somewhere.
And the city would not have had money for other the projects in the city built on the 2012 bond, Sprouse said.
Sprouse said revenue follows growth, but the city needs to be prepared for growth, even if doesn't have the revenue yet.
When the revenue from development comes back to the city, the money is used to pay back the loans the bonds represent.
"I think we've been very responsible and forward thinking about how we time out our projects," he said. "We're using the money to make connections and move traffic."
Gene George and Har-Ber Avenue make connections with other streets, so residents easily can travel to other parts of the city and Northwest Arkansas, Sprouse said. He said it's important to strengthen the city's inner connections via major intersections as the density in existing parts of town increases.
"People have funny ideas about debt, and it's easy to misunderstand how cities use debt wisely," he said.
"But these types of bonded indebtedness are necessary in a growing city -- there's no way around it."