Latest / The Kevin Stone Podcast / Episode #37 "Ozark's Water, The Tax, The Facts, And What it Means For You"

Transcript

Episode #37 "Ozark's Water, The Tax, The Facts, And What it Means For You" · The Kevin Stone Podcast

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  Speaker 1: The content of this podcast is for entertainment purposes only.
• 0:01
  Speaker 1: Mainly the entertainment of the podcast creator. If at any
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  Speaker 1: time you find any of this to be offensive, you
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  Speaker 1: should immediately rewind the program and start it from the beginning.
• 0:06
  Speaker 1: The sarcasm provided in this program is so accurate it
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  Speaker 1: is illegal in 14 states.
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  Speaker 2: You are listening to the Kevin Stone Podcast, broadcasting to
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  Speaker 2: you from an undisclosed location. Customized listening. Let's begin by
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  Speaker 2: cleaning those ears. Who am I?
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  Speaker 1: I'm a nobody. I just happen to have a camera
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  Speaker 1: and a microphone and an internet connection, which makes me
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  Speaker 1: a superstar. I have beef enchiladas in the oven.
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  Speaker 2: What? Yes. And you made them or are they frozen?
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  Speaker 1: Well, they won't be frozen in about 35 minutes. Hey,
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  Speaker 1: I made it at the house, so it's homemade. The
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  Speaker 1: Ozark water tax. Let me try to explain this in English. Alright,
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  Speaker 1: I recorded an episode about this already, and then I
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  Speaker 1: listened to it, and I sounded like I was trying
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  Speaker 1: to explain a Harvard lecture on municipal finance. Now, if
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  Speaker 1: you've listened to this podcast for longer than about 30 seconds,
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  Speaker 1: you already know there's one major problem with that. Kevin
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  Speaker 1: didn't go to Harvard. So let's try this again. Because
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  Speaker 1: I went to the public meeting about the Ozark water
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  Speaker 1: situation and the sales tax proposal that's going to be
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  Speaker 1: on the ballot. I recorded the meeting. I took pictures
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  Speaker 1: of the slides. I listened to the engineers. I listened
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  Speaker 1: to the financial people. I listened to the questions. Then
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  Speaker 1: I came home and went through it all again. And
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  Speaker 1: here's what I decided. This thing is way more complicated
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  Speaker 1: than it needs to sound. So I'm going to try
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  Speaker 1: to explain it like an ordinary citizen of Ozark who
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  Speaker 1: owns a house, pays a water bill, pays sales tax,
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  Speaker 1: and would just like water to come out of the
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  Speaker 1: faucet when I turn it on. That's the extent of
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  Speaker 1: my qualifications. I'm not going to tell you how to vote.
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  Speaker 1: I'm going to tell you what I learned. then you
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  Speaker 1: make up your own mind. Because apparently, that's how this
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  Speaker 1: representative government thing is supposed to work. Let's start with
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  Speaker 1: the easiest part. Ozark's water system needs work. That's really
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  Speaker 1: not the controversial part anymore. We've had water problems. We've
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  Speaker 1: had restrictions. We've had leaks. We have an aging infrastructure.
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  Speaker 1: And something I think people need to understand is that
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  Speaker 1: the Ozark water system doesn't just provide water to people
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  Speaker 1: living inside Ozark. We're supplying water to other areas and systems, too.
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  Speaker 1: At the meeting, they discussed Pleasant View, Altus, Waterloo, and
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  Speaker 1: Rivers South. I'm not very good with these names, and
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  Speaker 1: I'm not going to sit here and act like I am.
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  Speaker 1: Then you've got businesses and industrial customers using the system too.
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  Speaker 1: So when we're talking about the Ozark water system, we're
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  Speaker 1: really talking about a regional water system based here in Ozark.
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  Speaker 1: That's important because whatever happens in this system affects more
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  Speaker 1: people than just those of us living inside the city limits.
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  Speaker 1: Phase one is fix how we move the water. Here's
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  Speaker 1: where I got confused before the meeting. We're having trouble
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  Speaker 1: with water. So naturally, I thought, build something that makes
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  Speaker 1: more water. Seems reasonable. That's not really what phase one is.
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  Speaker 1: Phase one is mostly about improving the system that moves
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  Speaker 1: the treated water where it needs to go. Transmission lines, pressure, reliability,
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  Speaker 1: fire flow, replacing or improving infrastructure that's been failing. They
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  Speaker 1: talked about major line breaks that can lose somewhere around 100,000
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  Speaker 1: gallons of treated water. That's a lot of water. So
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  Speaker 1: here's my highly sophisticated engineering explanation. Imagine you got a
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  Speaker 1: garden hose with holes in it. You can buy the biggest,
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  Speaker 1: fanciest water pump in Arkansas. But if the hose can't
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  Speaker 1: carry the water where you need it without leaking it
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  Speaker 1: all over the yard, you still got problems. That's basically
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  Speaker 1: what I took away from phase one. And engineers everywhere
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  Speaker 1: just cringed at my garden hose explanation. But you understood it,
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  Speaker 1: didn't you? That's what matters. Now, does that mean we
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  Speaker 1: don't need to produce more water?
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  Speaker 2: No.
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  Speaker 1: That's phase two. We'll get to that monster in a minute.
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  Speaker 1: How much does phase one cost? About $ 22 million. Technically,
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  Speaker 1: the estimate presented was about $ 22. 29 million, but we're going
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  Speaker 1: to call it $ 22 million just because Nobody listening to
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  Speaker 1: this while driving needs me yelling decimal points at them. So,
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  Speaker 1: we need roughly $ 22 million for this first big round
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  Speaker 1: of work. And now we get to the tax. What
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  Speaker 1: is this one cent tax? This confused me too. Are
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  Speaker 1: they adding another penny? Is this an old penny? Is
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  Speaker 1: this a new penny? Does the penny go away? Why
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  Speaker 1: are we spending 15 minutes talking about a penny? Here's
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  Speaker 1: the simplest way I know to explain it. Ozark already
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  Speaker 1: has a one-cent sales tax that was used for previous
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  Speaker 1: city projects. The proposal going before voters would essentially replace
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  Speaker 1: that existing one-cent tax and redirect the penny toward financing
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  Speaker 1: the water project. So based on what was presented, they're
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  Speaker 1: not proposing to stack another penny on top of the
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  Speaker 1: existing penny. But they're also not saying nothing is happening here,
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  Speaker 1: don't worry about it. You're voting on whether that one
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  Speaker 1: cent tax continues under a new authorization for this purpose.
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  Speaker 1: That's why it's on the ballot. What does the penny
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  Speaker 1: actually buy? Now we can make this really simple. Remember,
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  Speaker 1: phase one cost about $ 22 million. The sales tax financing
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  Speaker 1: is expected to provide roughly $ 15 million. That leaves roughly $ 7. 5 million.
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  Speaker 1: And that remaining $ 7. 5 million would still have to be
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  Speaker 1: carried by the water sewer system under the plan presented.
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  Speaker 1: So here's the entire proposal in Kevin English. We need
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  Speaker 1: about $ 22 million. Use the penny sales tax to cover
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  Speaker 1: financing for about $ 15 million. Finance the remaining roughly $ 7. 5
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  Speaker 1: million through the water and sewer system.
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  Speaker 2: That's it.
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  Speaker 1: I just saved you several PowerPoint slides. You're welcome. Does
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  Speaker 1: that mean that my water bill won't go up?
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  Speaker 2: No.
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  Speaker 1: And this is important. If somebody tells you, vote for
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  Speaker 1: the tax and your water bill won't increase, that's not
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  Speaker 1: what was presented at the meeting. The financial plan still
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  Speaker 1: anticipates the water and sewer system needing more revenue. They
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  Speaker 1: showed some possible percentage increases. I'm not even going to
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  Speaker 1: bury you in those numbers because they're preliminary and the
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  Speaker 1: final rate structure hasn't been determined. Here's what matters. Even
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  Speaker 1: if the tax passes, water and sewer rates can still increase. Why?
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  Speaker 1: Because the sales tax financing doesn't cover the entire project.
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  Speaker 1: There's still that roughly $ 7. 5 million. Okay, then why have
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  Speaker 1: the tax? Now we're getting to the big question. If
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  Speaker 1: my water bill can still go up, why use the
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  Speaker 1: sales tax at all? Because the alternative presented at the
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  Speaker 1: meeting is potentially much more expensive for the water and
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  Speaker 1: sewer system. The financial people ran the numbers on what
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  Speaker 1: could happen if the water and sewer system had to
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  Speaker 1: finance the entire $ 22 million by itself, and they estimated
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  Speaker 1: that the system would need roughly 68% more revenue. Now
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  Speaker 1: stop right there, because this is where Facebook could have
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  Speaker 1: a field day. That does not mean vote no and
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  Speaker 1: your water bill goes up 68%. That's not what they said.
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  Speaker 1: It means that under the scenario they presented, the water
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  Speaker 1: and sewer system as a whole would need roughly 68%
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  Speaker 1: more revenue to finance the entire project and meet the
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  Speaker 1: financial requirements they were modeling. How the city would raise
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  Speaker 1: that money would still have to be determined. Maybe rates.
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  Speaker 1: Maybe different rates for different users. Maybe some other financing approach.
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  Speaker 1: I don't know. But here's what we do know. Voting
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  Speaker 1: no doesn't make the $ 22 million problem disappear. The pops
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  Speaker 1: don't look at the election results and say, well, folks
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  Speaker 1: voted no, guess we'll fix ourselves. The project still needs money.
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  Speaker 1: The question becomes, where does that money come from instead?
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  Speaker 1: And that's something everybody needs to understand before voting. Who
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  Speaker 1: should pay for this? Here's one of the questions I
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  Speaker 1: still have. Remember what I said earlier. Ozark isn't only
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  Speaker 1: supplying water to Ozark. There are surrounding systems. There are
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  Speaker 1: residential customers. There are businesses. There are industrial users. So
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  Speaker 1: if everybody depends on the system, how is everybody's share determined?
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  Speaker 1: That's something I'd like explained more clearly. If you're using
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  Speaker 1: significantly more water, shouldn't you pay significantly more toward the improvements?
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  Speaker 1: How much do wholesale customers contribute? How much do major
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  Speaker 1: industrial users contribute? How much falls on the ordinary homeowner?
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  Speaker 1: Those aren't accusations, they're questions, and they're questions worth answering.
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  Speaker 1: And here's something that surprised me. According to the comparison
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  Speaker 1: they showed at the meeting, Ozark's water and sewer bill
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  Speaker 1: is actually very low compared with other cities in their chart.
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  Speaker 1: For somebody using about 4,000 gallons per month, they showed
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  Speaker 1: Ozark's combined water and sewer charge at $ 25.
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  Speaker 2: 90.
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  Speaker 1: Russville was about $ 58. Fort Smith is about $ 57. And
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  Speaker 1: Clarksville was about $ 51. Some of the cities shown were
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  Speaker 1: considerably higher. Now don't take that and say, Kevin says
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  Speaker 1: Ozark's a double our water bill. No, Kevin did not
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  Speaker 1: say that. Comparing cities isn't perfect. Different cities have different systems,
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  Speaker 1: different debt, and different expenses. But it does raise an
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  Speaker 1: interesting question. Have we enjoyed really low water rates for
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  Speaker 1: so long that we haven't been putting enough money back
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  Speaker 1: into the system for something this big? I don't know.
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  Speaker 1: But after seeing those numbers, I think it's a fair question.
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  Speaker 1: And this didn't start last month. This is another thing
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  Speaker 1: I've learned. The current water problem may have finally gotten
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  Speaker 1: everybody's attention, but the infrastructure problem didn't suddenly appear this summer.
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  Speaker 1: Ozark has been working on pieces of the water system
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  Speaker 1: for decades. And importantly, the city was already financing work
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  Speaker 1: connected with its Water and Sewer Master Plan in 2022.
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  Speaker 1: So this isn't, we ran short of water, panicked, and
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  Speaker 1: suddenly invented a $ 22 million project. The planning predates the
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  Speaker 1: recent water problems. That doesn't mean every decision has been right.
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  Speaker 1: It doesn't mean nobody should question the plan. It means
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  Speaker 1: the underlying infrastructure problem has been developing for a long time.
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  Speaker 1: Now let's talk about Phase 2. Remember our $ 22 million?
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  Speaker 1: That was fun, because eventually we get to Phase 2.
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  Speaker 1: Phase 2 is where we're talking about major work on
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  Speaker 1: the treatment side of the system. In other words, making
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  Speaker 1: more treated water available. The early estimate discussed at the
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  Speaker 1: meeting was somewhere around $ 75 to $ 85 million. Yes, million
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  Speaker 1: with an M. And that estimate isn't final. So the
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  Speaker 1: $ 22 million project we're talking about today isn't the end
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  Speaker 1: of Ozark's water conversation. It's the first big step. And
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  Speaker 1: that leads me to another question. Their original projections apparently
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  Speaker 1: didn't include potential major new demand from things like a
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  Speaker 1: prison or data center. I'm not saying either one is
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  Speaker 1: definitely coming. But if we're building a system designed around
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  Speaker 1: projected future demand, and then somebody shows up wanting a
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  Speaker 1: gigantic amount of water, I want to know what that
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  Speaker 1: does to the plan. That's common sense. And this is
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  Speaker 1: the part that bothered me personally. There might have been
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  Speaker 1: 60 people at this meeting. That's my estimate. Maybe there
• 10:29
  Speaker 1: were a few more, maybe a few less. The exact
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  Speaker 1: number isn't really my point. My point is, where was everybody?
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  Speaker 1: Because I hear the complaints. I've had people come to
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  Speaker 1: me because I've talked about the water situation on this podcast.
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  Speaker 1: I've heard the city oughta. Why don't they? I heard that.
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  Speaker 1: Somebody told me. Also on Facebook, we've all heard it.
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  Speaker 1: But when the city puts the engineers and financial people
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  Speaker 1: in a room and basically... basically says, come ask us questions,
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  Speaker 1: we've got to show up. You don't have to agree
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  Speaker 1: with them. Matter of fact, if you think they're completely wrong,
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  Speaker 1: that's an even better reason to show up.
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  Speaker 2: Ask them.
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  Speaker 1: Challenge the numbers. Ask where the money goes. Ask why
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  Speaker 1: they're doing phase one before phase two. Ask what happens
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  Speaker 1: if the tax fails. Ask what happens if it passes.
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  Speaker 1: Ask who's paying. But ask the people who actually have
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  Speaker 1: the answers to the questions. Because here's what worries me.
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  Speaker 1: A lot more people are going to vote on this
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  Speaker 1: than attended that meeting. And some of those people are
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  Speaker 1: going to decide based on what somebody told them, or
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  Speaker 1: what they read on a Facebook comment, or what they
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  Speaker 1: heard at the coffee shop, or what somebody's cousin heard
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  Speaker 1: from somebody whose brother knows a guy who once drove
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  Speaker 1: past City Hall. That's not how we should make a
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  Speaker 1: decision involving this much money. And by the way, don't
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  Speaker 1: vote a certain way because I said something either. I'm
• 11:42
  Speaker 1: trying to give you the information I gathered. I'm going
• 11:44
  Speaker 1: to have opinions. That's why this is called the Kevin
• 11:47
  Speaker 1: Stone Podcast and not the completely emotionalist Municipal Finance Hour.
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  Speaker 1: But it's still your vote. If you tuned out during
• 11:55
  Speaker 1: the rest of this episode because I started saying the
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  Speaker 1: word bonds, come back. Here's what I think you need
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  Speaker 1: to know. Ozark's water system needs major work. And Ozark
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  Speaker 1: supplies more than just the people living in Ozark. Phase
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  Speaker 1: 1 is mostly about fixing and improving the infrastructure that
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  Speaker 1: moves the water. It costs roughly 22 million dollars. The
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  Speaker 1: proposed 1 cent sales tax would finance roughly 15 million
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  Speaker 1: dollars of that. The water and sewer system would still
• 12:20
  Speaker 1: have to handle roughly 7.5 million dollars. So, yes, your
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  Speaker 1: water bill could still increase even if the tax passes.
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  Speaker 1: If the tax fails, the $ 22 million infrastructure problem doesn't disappear.
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  Speaker 1: The financial people showed one scenario where financing the entire
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  Speaker 1: thing through the water and sewer system would work. require
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  Speaker 1: roughly 68% more system revenue. Again, that does not mean
• 12:45
  Speaker 1: your individual bill automatically increases 68%. And finally, after phase one,
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  Speaker 1: we're still looking at phase two. And the early estimate
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  Speaker 1: discussed for that is somewhere around $ 75 to $ 85 million.
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  Speaker 1: That's it. That's the issue in normal person English. So
• 13:03
  Speaker 1: how should you vote? I'm not answering that question for you.
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  Speaker 1: That's your decision. But I am asking you to do something.
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  Speaker 1: Know what you're voting on. If you're against the tax
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  Speaker 1: after understanding it, vote against it. If you're for it
• 13:15
  Speaker 1: after understanding it, vote for it. That's how this is
• 13:17
  Speaker 1: supposed to work. But don't let your entire research process
• 13:21
  Speaker 1: be somebody complaining on Facebook. Don't let it be gossip.
• 13:24
  Speaker 1: Don't let it be a rumor. And don't let it
• 13:26
  Speaker 1: be this podcast alone. Ask questions. Look at the information.
• 13:30
  Speaker 1: Listen to both sides and make your own decision. Because
• 13:33
  Speaker 1: we expect our local government to be responsible for what
• 13:36
  Speaker 1: it does. Fair enough. I agree. But citizens have some
• 13:39
  Speaker 1: responsibility too. We have to pay attention. We have to
• 13:42
  Speaker 1: ask questions. And when somebody actually gives us the opportunity
• 13:46
  Speaker 1: to participate, maybe more than 60 of us ought to
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  Speaker 1: show up. This is our city. It's our water system.
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  Speaker 1: And a system that serves people beyond our city. It's
• 13:54
  Speaker 1: our money. It's our tax. It's our water bill. And
• 13:57
  Speaker 1: when November gets here, it's our decision. I'm Kevin Stone.
• 14:01
  Speaker 1: This is the Kevin Stone Podcast. And I just explained
• 14:03
  Speaker 1: municipal bond financing without using the phrase... debt-service-coverage ratio. I
• 14:09
  Speaker 1: don't know about you, but I consider that a win.
• 14:12
  Speaker 1: And Harvard still hasn't called.
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  Speaker 2: This concludes our broadcast day. Good night, and God bless America.