City of Alexander must take out loan to satisfy USDA loan requirements

Another unexpected financial issue from the past has appeared; this time threatening the loss of Alexander City Hall. This latest revelation, unknown to past and present city council members, has been ongoing for over 10 years and started when former Mayor Shirley Johnson was in office.

According to a letter from the United States Department of Agriculture (USDA), sent to City Treasurer Kenneth Miller, in 2005 the city took out two loans. The first loan was used to purchase what was the post office building and property for $364,000. The second loan of $56,000 funded improvements including the addition of the courtroom and a new roof.

As part of the loan agreement the city was to establish a “Debt Service Reserve” account, which would hold one year of premium payments for both loans. According to the USDA formula the amount needed in the account is $21,960.

Mayor Paul Mitchell told council members the city had 10 years to comply. He said the USDA is allowing Alexander some time, since the issue was just discovered, but his suggestion to solve the problem quickly is to take out a loan then put that money into a bank account.

“As long as we have something to show the USDA they’ll be satisfied,” Mitchell said. “We might even be able to pay it off at the end of the year.”

Miller has contacted two banks about the loan and establishing an account. He said anything can be used as collateral, including the General Fund.

Council members decided to use the recently purchased 2017 Mahindra Tractor. It was purchased for the street department, without the need of a loan, for $32,200. They also gave Mitchell and Miller the authority to proceed with the loan and establish the debt reserve account.

Mitchell also informed the aldermen the city still owes the USDA on the principal. For the past ten years Alexander has, for the most part, been making payments on the interest.

This is the second financial surprise to hit Alexander officials this year. According to a state audit report released last month in 2014, during Mayor Michelle Hobb’s administration, $46,654 was illegally transferred from the Parks and Recreation Fund to the General Fund. That fund receives sales tax revenue dedicated to Parks and Recreation only and cannot be used by any other fund. Both the current and future city budgets will have to include paying back the Parks and Recreation Fund.

For anyone familiar with City of Alexander history you know this wasn’t former Mayor Shirley Johnson’s first trip down the “Financial Fiasco Trail.” Before she ended her 20 years as mayor she oversaw;

• The combined spending over multiple years of $159,913 from the General Fund of state revenue dedicated for Street Fund use only (Legislative Audit Report 2007). The final payment owed to the Street Fund was made in 2016;
• According to the Legislative Audit Report for 2008, "General Fund total disbursements for 2008 exceeded appropriations by $178,707 (27%)." City council was not asked to approve an amended budget;
• Mitchell defeated Johnson in the November, 2010 election. After taking office in January, 2011 another financial secret Johnson kept hidden from aldermen was discovered. The City of Alexander owed several thousand dollars in back payments and penalties to the Internal Revenue Service (IRS). Rather than working out a payment plan with the IRS she hired a Texas company to make the IRS go away. In a somewhat similar situation the City finds itself in now, Alexander started 2011 not only owing the IRS but a couple more thousand to the Texas company, which of course was not able to make the IRS vanish.

In other business during the April 17 meeting;

Mayor Mitchell provided council members with a copy of the quit claim deed which gives ownership of a four-foot wide strip of the city easement at 13401 East First Street, behind Hess, to F & G Commercial, LLC.. The property was the location of Royal Communications which has moved.

During sale negotiations with Haynes Equipment a survey was done and it was discovered the wrong survey marker was used when determining where to place the building used by Royal Communications. The building is four feet inside the city’s right-of-way. At the February council meeting aldermen gave Mitchell and City Attorney Pat Marshall the authority to do what was necessary to solve the problem.

According to the company’s website Haynes has been providing equipment and service in the municipal water and wastewater industry for over 50 years. The Alexander site is their third joining the home office in Olathe, Kansas and a service center in Sunrise Beach, Missouri.

The city council voted to, “Dissolve the planning commission and re-establish it at a later date.” The five-member commission was established April 6, 2015. Since then two members have resigned and four of the five terms have expired without the mayor appointing anyone to fill those positions.

The only position remaining was held by the commission’s chairman Robert McKeon. His term would have expired April 6, 2018. The two remaining commission members, who had not resigned, are former Alderwoman Andrea Bearden and former Mayor Shirley Johnson. Johnson’s term expired April 6, 2016 and Bearden’s ended this month (April 6, 2017). Under Arkansas law Johnson and Bearden were still legally members of the planning commission until they were either replaced or reappointed to a new term.

According to Mitchell the last planning commission meeting was held around April of 2016. He said planning commissions are required to meet once every quarter.

“They’ve gotten very little done,” Mitchell said. He wants to appoint, “People who are really interested.”

Mitchell pointed to one goal of the planning commission which has yet to be accomplished. Alexander still does not have an up-to-date zoning map.

Mitchell laid out a revenue proposal to council members that, if approved, is expected to increase revenue to the General Fund and bring both commercial and residential growth to the city. His four-part plan would increase the city sales tax from two-cents to three, reduce the property tax millage from five-mils to three, reduce the cost of a city business license to be more in line with Bryant, and have Alexander’s classification changed from Class-2 to Class-1. More details on this in a later article.

The next regular meeting of the Alexander City Council is Monday, May 15. Meetings start at 6 PM and are held in the courtroom at the City of Alexander Municipal Complex. The public is invited to attend.