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Fort Smith, Arkoma continue negotiations over wholesale wastewater rate; board asks administration for options within 21 days
Summary
City staff presented cost analyses for a proposed wholesale wastewater rate for Arkoma; the town—s leaders said they could not pay fully allocated costs and the board directed administration to continue negotiations and return with proposal(s) within 21 days.
City staff and Arkoma officials continued a multiweek discussion about a wholesale wastewater agreement and potential rate changes after staff presented systemwide cost calculations and several rate scenarios.
Andy Richards, Fort Smith chief financial officer, presented a cost-based analysis intended to identify the incremental cost to the city of treating wastewater Arkoma sends to Fort Smith—s P Street plant. Richards calculated systemwide sewer operating costs, depreciation and allocations and produced per-unit cost estimates under different infiltration-and-inflow (I&I) assumptions. Using the administration—s system cost figures for the 2024 fiscal year, one staff calculation placed a fully allocated treatment cost at about $3.36 per CCF at the plant; another staff calculation using a different I&I assumption produced a lower operational-treatment cost estimate of about $1.90 per CCF.
Richards explained the difference arises from (a) whether the calculation uses the citywide I&I factor (63% in staff materials) or a basin-specific factor (39% in the worksheet staff used to build the wholesale scenarios), and (b) whether fully allocated charges (debt service, administration, development and other fixed costs) are included in the wholesale rate. Richards also noted that state law permits the city to add a return on wholesale rates and that he had included the 10% return the law allows in one scenario.
Arkoma—s mayor, Joshua Johnson, said his town provides about 1.27% of Fort Smith—s total system flow and that covering Fort Smith—s fully allocated cost would be unaffordable for Arkoma residents. Johnson said Arkoma would be prepared to accept a step increase aligned with Fort Smith—s scheduled 3.5% annual retail increase, but not an immediate jump to a fully allocated wholesale rate that staff modeled.
Board members raised several issues: the difference between a retail and wholesale approach, whether Arkoma should be charged for systemwide I&I that the city attributes to older infrastructure and whether adjusting the wholesale rate would prompt other unincorporated customers or industries to seek the lower wholesale rate. A director noted the city historically subsidized Arkoma under the original agreement and questioned whether that subsidy should continue.
Direction to staff: after discussion the board instructed administration to continue negotiations with Arkoma, work through I&I and peaking-factor differences, and return with one or more draft agreement options for the board to consider at the next meeting (the board set a 21-day expectation). No vote was recorded adopting a new rate; the board asked staff to present administratively negotiated proposal(s) for a decision at the board—s next meeting.
Ending: Both sides described the meetings as productive; Arkoma leaders said they wanted an agreement that keeps service affordable for their residents while Fort Smith staff said they would prepare options that reconcile system-cost accounting with equitable treatment of retail and wholesale customers.
