Fort Smith board rejects proposed wastewater rate plans for Town of Arcoma; defaults to higher rate if no agreement

The Fort Smith Board of Directors on June 17 declined two proposed five-year rate agreements for wholesale wastewater service to the Town of Arcoma after roughly two hours of questions and public comment.

City staff had offered two alternatives: option 2A, a rate of $3.48 per hundred cubic feet (CCF) based on Fort Smith’s 2024 treatment cost plus a 10% return on investment; and option 2B, a $5.68-per-CCF rate that added a 39% inflow-and-infiltration (I&I) adjustment to reflect shared system losses. Staff recommended option 2A as “defensible” and said it did not include an I&I component because that allocation was difficult to quantify.

The board first voted on a motion to adopt option 2A. That motion failed on a 3-3 roll call vote (Directors George Gitsavas, Good and Kemp voting yes; Directors Christina Gitsavas, Settle and Neil Martin voting no). A subsequent motion to adopt option 2B failed 1-5 (Kemp voting yes; five directors voting no). City staff had told the board that if no agreement is reached the rate for services to Arcoma will default to $8.75 per CCF as of June 22.

Why it matters: Fort Smith treats Arcoma’s sewage at its P Street facility under a wholesale arrangement. Board members emphasized two competing priorities: recovering Fort Smith’s full cost and avoiding a rate that Arcoma residents cannot pay. Administration said bond covenants and debt-service coverage require rates that recover treatment costs; Arcoma officials said their customers already pay higher total monthly bills and that their town is working on infrastructure improvements with grants and loans.

During discussion, staff said Arcoma discharged 122,848 CCF to Fort Smith in 2024. City staff explained how it computed the two proposed rates: option 2A derives from Fort Smith’s 2024 per-CCF treatment cost adjusted by a 3.5% increase and a 10% ROI; option 2B added a 39% I&I factor to the same base. CFO Andy Richards confirmed the I&I figure is the primary difference between the options.

Arcoma Mayor Joshua Johnson and Vice Mayor Bobby Weatherford addressed the board, saying Arcoma’s plan is to continue pursuing grants and financing and that recent Arcoma projects included a roughly $1.2 million manhole-and-line replacement effort and a $400,000 forgivable loan for upgrades.

Board members split on policy and implementation. Director Goode said Fort Smith retail customers are already covering the city’s I&I costs and warned against a wholesale rate that would “force” Fort Smith citizens to subsidize Arcoma. Director Good and Director Kemp supported option 2A as a fair, legally defensible price for the city’s costs. Director Neil Martin and Directors Settle and Christina Gitsavas opposed option 2A because they viewed the term length and the lack of stronger incentives for Arcoma to fix its system as insufficient.

Administration warned that the board’s choice could prompt litigation; several directors acknowledged Arcoma officials had said they might sue regardless of the outcome. City staff also said an agreement would require Arcoma to pay its outstanding balance in full by August (staff stated the current past-due balance is $149,720.95). A developer who had previously discussed paying that balance has not finalized such a payment and, staff said, may await an agreement.

The board left the matter without adopting either proposal. Because both motions failed, the board did not set a new contract or price table; staff reiterated the $8.75-per-CCF default rate that would apply starting June 22 if no negotiated agreement is in place. Officials said the city could also pursue collection of past due amounts and other alternatives.

Quotes: “The proposed $3.48 per CCF rate is defensible as a true cost of providing services to Arcoma,” Staff member Jeff Dingman said in the presentation. Arcoma Mayor Joshua Johnson told the board, “Our plan is to continue to aggressively pursue grants, pursue financing, and continue to evaluate, through engineering, the best use of those funds to improve the system.”

What’s next: With no adopted agreement, the board directed no formal follow-up motion; staff said they would continue discussions with Arcoma and noted the unpaid balance remains due. The board may revisit wholesale service terms if staff or Arcoma return with new proposals or if the outstanding balance is not resolved.

Votes at a glance: Motion to adopt option 2A (rate $3.48/CCF) — failed, 3-3. Motion to adopt option 2B (rate $5.68/CCF including 39% I&I) — failed, 1-5.

Background: City staff said the proposed rates are based on metered outflow and a five-year term. Fort Smith said its bond covenants require rates that recover the cost to provide treatment; Arcoma said its customers already face high monthly bills and that the town has been investing in infrastructure.