Increases approved to utilities rates, landfill fees

The Sallisaw City Commissioners and the Sallisaw Municipal Authority board on Monday both unanimously approved increasing rates for city utilities — water, sewer and garbage — which will hike monthly residential costs for the average customer by almost $10 (and could be higher depending on individual household usages) and will boost commercial billing by almost $25 per month (or more).

The amendments to the city’s Master Fee Schedule go into effect Sept. 1.

Meanwhile, the two administrative entities rejected a proposed increase of tipping fees at the municipal landfill facility from $34 to $50 per ton, but approved a more conservative increase from $34 to $41 per ton, with the understanding that the fees can be further adjusted in the future should a further increase or reduction warrant.

City Manager Keith Skelton said the utility increases will generate an estimated additional revenue of $490,000, which he said is necessary for the city to “maintain a cushion for our services that we provide already.”

The utility increases are the first in “a long time” several years, Skelton and Mayor Ernie Martens told the city commissioners and the SMA board.

While city commissioner Julian Mendiola said he doesn’t have a problem with the rate increases, he did question calculations that indicate an increase of less than $10 per customer, saying he believes the monthly impact could be a little more than what is projected.

According to calculations provided by the city from Fiscal Year 2022, average residential water usage was 4,849 gallons, which equals increase from $26.41 to $29.25 ($2.84 difference). Average residential sewer usage was 5,000 gallons, which equals increase from $19.50 to $23.85 ($4.35 difference).

Average commercial water usage in FY 2022 was 16,248 gallons, which equals increase from $65.50 to $73.25 ($7.75 difference), and average commercial sewer usage was 17,651 gallons, which equals increase from $48.50 to $58.50 ($10 difference).

Landfill increase argued

While amendments to the Master Fee Schedule were approved without much discussion, adjusting the landfill tipping fees drew considerable pushback.

“I’ve continued to reach out to whoever I’ve not already reached out to. Those leads are getting slim, far between,” Skelton said regarding his efforts to acquire additional tonnage for the landfill. “The company out of northwest Arkansas I’ve been talking to is still a possibility. Robin [Haggard, city finance director] and I have a meeting with them set up for next Monday. Their representatives are gonna come down, and I have a feeling they’re gonna discuss the possibility of more tonnage, but also I have a feeling they’re gonna discuss a reduced rate other than what I’ve already presented them for that tonnage as well.

“One of our contract customers, they’re still looking at ways that they could ship some additional tonnage here, but that has not worked out yet as well,” he reported.

Skelton presented the SMA board and city commissioners with an 18-month overview of tonnage for the period January 2022 to June 2023. Total tonnage received in those 18 months was more than 131,000 tons, with the average tonnage per day of about 305 tons. During that period, the average revenue per ton was $23.47. Skelton said Fiscal Year 2023 wrapped up with just under 90,000 tons for the year, and he expects to bring in similar tonnage in Fiscal Year 2024.

“As of right now, everything’s still kind of status quo as far as the revenue generation and tonnage generation. We’re basically stuck with what we have at the moment.”

Skelton also presented estimated revenues for Fiscal Year 2024, and noted that $1.6 million is needed to construct cell 8A at the landfill. At the current tipping fee rate of $34 per ton, Skelton projects a shortfall of almost $1.1 million. Even with the proposed increase to $50 per ton, calculations show a shortfall of more than $300,000.

Regardless, commissioner Josh Bailey spoke out against the proposed $50 per ton rate.

“I don’t see how we can be above $44 a ton. Fort Smith is at $44. Seems like anything even close to that would run people to Fort Smith,” he said.

Debt plan offered

Then Bailey interjected an alternative not previously considered.

“I propose a $1.1 million loan for a fouryear note at 7% is $360,090.44 per year. That’s $360,090.44 divided by 49,237 tons. That’s an increase of a $41 tipping fee, and that keeps us below Fort Smith by $3, and that’ll make the note and you have $176,000 surplus to save for future expansions. That’s what I propose. We still get an increase. We stay below Fort Smith. We don’t lose our existing customers now. And it will service itself at $44 per ton [although he possibly meant $41 per ton]. And that’s without even any additional tonnage at all,” Bailey said.

Skelton said he has not considered acquiring debt, but could look at that scenario.

“My biggest concern is that there’s good debt and bad debt,” Martens offered. “And sometimes good debt is for a good reason, a good purpose. I’m just concerned about how much interest we’d have to pay on that over the long term. I’m just concerned about the amount of interest we’d have to pay on that money and how we would service that debt. That’s my concern.”

But Martens agreed Skelton could investigate acquiring debt and its impact on the city budget.

“I think issuing debt for pushing dirt is not a good issuance of debt, especially when we’ve got equipment purchases looming that we will have to purchase,” Skelton argued. “We’re looking at north of $10 million through 2030, 2031 as far as equipment, landfill cell construction and things of that nature. Plus there’s the unknown thing of mitigation and the Corps of Engineers that’s out there for Phase Two. So there’s a lot of things that you to to take into consideration. But if the board wants to issue debt for moving dirt, I’ll definitely put a package together and we’ll see what we can do, and we’ll see if the numbers will cover the debt service.”

“That’s kinda what I meant by good debt and bad debt,” Martens continued. “When I’m thinking about going into debt it’s for purchases of an item, like equipment or a new building., where we’re going to actually get something tangible in hand is what I’m thinking about as good debt.”

Overall picture

Then Skelton counseled the SMA board and city commissioners regarding his approach to finances.

“I have to look at the city as a whole. When Robin and I talk numbers, we just don’t talk one utility versus another utility. We look at the city as a whole. We’re going through a growth phase right now. We’ve already spent quite a bit of money on materials for this growth. And we’re gonna continue to have that. We have to take into consideration the equipment needs as the landfill. We’re not gonna have cash ready to go by a $400,000 dozer or a $500,000 dozer or a $600,000 compactor, which can be $700,000. So that’s the items that I’m looking at for lease purchasing units. That’s things we have to look at. We have to look at the city as a whole. The way the city operates, the utilities have to operate at a profit in order to finance the non-revenue-generating services that we offer — police, fire, streets, parks, all those services that don’t generate money. Yes, they’re supported by sales tax, but sales tax and utility revenues are what we live on. It has to support all our needs,” Skelton said.

But Bailey was adamant. “I’m trying to save an asset without bankrupting our customers, our citizens, and running our customers off. That’s what I’m trying to do,” he countered.

Skelton explained that existing contract customers — namely LeFlore County Solid Waste, which accounts for almost 30% of the tonnage, and Sue’s Recycling, which generates almost 12% of total tonnage — have negotiated contracts below the current rate that extend through October 2024 and November 2025.

“This looks like a sweet deal,” Martens observed.

“I was close to losing LeFlore County this year unless I made concessions,” Skelton revealed.

“That’s where you’re caught between a rock and a hard place,” Martens said. “How you cover your costs and still get what you need to keep the customer.”

Commissioner Julian Mendiola said he agrees an increase in landfill tipping fees is necessary, but could not support an increase to $50 per ton. Mendiola also said he would like Skelton to put together a debt package for board consideration, and commissioners Kristin Peerson and Ronnie Lowe also agreed.

Jessica Robertson (left) was presented a certificate of completion from the American Public Power Association Key Accounts Program and for becoming a Public Power Key Accounts Manager. Making the presentation at Monday’s Sallisaw City Commissioners meeting was City Manager Keith Skelton. LYNN ADAMS | TIMES