Hot Springs board approves wastewater rate increases to fund $68M–$70M capital plan

The City of Hot Springs Board of Directors on Jan. 7 adopted an ordinance to raise wastewater rates to help fund a major wastewater capital-improvement program and the debt needed to pay for it. The measure passed by roll call vote 5–1, with Director Dudley Webb voting no.

City finance and utility consultants told the board the increases are intended to produce revenue sufficient to issue roughly $69.8 million of revenue bonds to pay for about $68 million in wastewater system improvements, including interceptor replacement, pump-station work and upgrades at the Davidson wastewater treatment plant.

Dan Jackson, vice president of Willdan Financial Services, said the plan combines modest multi-year base-charge increases with ongoing volumetric (per-1,000-gallon) adjustments. “This rate plan … will enable the city of Hot Springs to invest $68,000,000 in the future of its community,” Jackson said. He described a three-year sequence of $2.50 monthly increases to the base charge for the typical 5/8-inch residential meter, plus 3% annual volumetric increases thereafter.

Why it matters: the city is under multiple consent administrative orders from the Arkansas Department of Environmental Quality requiring the repair of collection-system overflows and upgrades to its treatment plant. Local residents and public-health advocates told the board the work is urgent after documented raw-sewage overflows into Gulf of Creek and Spencer Bay.

During the public-comment period, Ellen Carpenter said the fee increases are necessary to complete work tied to the consent orders and to prevent untreated sewage discharges into recreational waterways. “I’m here to ask you to adopt ordinance number 02438 because proposed fee increases are needed to fund projects that will protect public health and safety and ensure the city’s wastewater system complies with state and federal water pollution laws,” Carpenter said.

Board discussion and vote: Finance Director Karen Scott and consultant Jackson reviewed the analysis and the debt assumptions. Scott noted state law requires rates to be “sufficient in each year for the payment of the proper and reasonable expenses of the operation, repair, replacements, and maintenance of the system, and for the payment of the sums required to be paid into the sinking fund for the payment of bonds and interest thereon.” The board first amended the ordinance’s effective date so the new rates take effect March 1, 2025 (the ordinance originally specified Feb. 1). Director Steve Trusty moved to adopt the ordinance; Director Karen Garcia seconded. The roll call was: Erin Holiday, aye; Marsha Dobbs Smith, aye; Dudley Webb, no; Karen Garcia, aye; Steve Trusty, aye; Mayor Pat McCabe, aye. The ordinance was adopted.

Numbers and impacts explained: consultants and staff gave several concrete examples of customer impact and system scale. Willdan reported about 27,000 wastewater service connections (roughly 17,000 inside city limits and about 10,000 outside). The average wastewater customer contributes about 5,000 gallons a month; that customer now pays about $51.14 for sewer service under present rates. Under the adopted plan, Willdan estimated that bill would rise by about $3.30 in 2025 (to about $54.44) and continue rising to roughly $64.84 by 2029, driven mainly by base-charge increases in the first three years and volumetric changes thereafter.

Consultants and staff emphasized financing and timing trade-offs. City financial-advisory staff described a financing split that would use tax-exempt and taxable debt components (staff showed a structure of roughly $44 million tax-exempt and $24 million taxable as one example) and said construction timing, contract lead times and market interest-rate uncertainty all affect the final par amount. Director Webb said he preferred delaying borrowing and reconsidering in 3–6 months to see whether market conditions improved; he voted no.

Public comments: several residents urged quick action. Bart Stafford said delaying the work would be “gambling on” public health and asked the board to approve the financing. Dayton Myers, who said he toured affected sites with staff, testified that overdue maintenance had been deferred for years by previous leaders and urged the board to act. David Sowers described ongoing contamination and documented discharges to local waters.

Next steps and conditions: the ordinance authorizes the adopted rate schedule and staff to proceed with planning for bond issuance and construction. Staff and consultants said they will return with specific financing documents, construction schedules and final bond-structure numbers when market conditions allow; staff noted the par amount and debt structure could change as underwriter structuring and costs of issuance are finalized. The city also faces regulatory deadlines in consent orders and potential enforcement costs if the work is not completed.

Votes at a glance (other actions at the Jan. 7 meeting) - Ordinance O‑25‑01 (zoning amendment, ~18 acres at 1108 Higdon Ferry Road; project listed as “Home Depot Hot Springs”): adopted (roll call recorded after public hearing). Planner recommended approval; Planning Commission recommended approval 9–0. - Ordinance O‑25‑02 (waive competitive bidding and approve agreement with Island View Inc./Xylem for phase 6 of the Water Loss Management program / virtual district meters): adopted. Phase 6 will add meters to achieve 100% district coverage and add allied meters for pressure sensing; budgeted at $350,000. - Ordinance O‑25‑03 (amend parking-zone map; substitute “Map B” to keep a block of Spring Street unregulated to accommodate St. Luke’s Church and nearby users): adopted after amendment substituting Map B. - Ordinance O‑25‑04 (downtown residential parking program): the board voted to table the ordinance to the first meeting in February so staff can finalize administrative details and a short grace period for residents to register; no enforcement against residents will be undertaken while staff implements the program.

What the board did not decide: staff and consultants emphasized that the final bond par amount, taxable/tax-exempt split and interest rates will be set later, after market execution and underwriting. Staff also signaled they will return with the formal financing documents and may pursue refinancing opportunities if market rates move lower in the future.

Local context: consultants said the work is intended to bring the system into compliance with consent administrative orders issued by the Arkansas Department of Environmental Quality and to address chronic overflows that have deposited millions of gallons of untreated sewage into Gulf of Creek and Spencer Bay in recent years, numbers commenters and staff cited from 2023–24. The projects include interceptor replacement, pump-station upgrades and treatment-plant improvements at the Davidson plant.

Supporters and opponents: most public commenters pressed for immediate action to stop overflows and address public-health risks; at least one director preferred delaying borrowing to try to lower ratepayer costs if market conditions improved. The adopted ordinance includes staff direction to proceed with financing work but recognizes final debt structure and timing will be updated for the board before closing.