COMMENTARY
With the recent passage of the resolution that will allow the Arkansas
Highway and Transportation Department to rebuild six streets in the City of
Alexander, there has been much controversy and many comments made without the
knowledge or understanding of all of the facts. Perhaps some of you reading the
recent article on the subject missed the significance of some of the information
provided.
As in everything there’s what we know and what we don’t know. Let’s start
with what we know.
In 2003 St. Joseph's Glen (SJG) developers Michele Baker, Darren Baker
and Travis Baker brought an ordinance to the Alexander City Council written by
their attorney. This is three years before Woodland Hills would be annexed into
the city and the council was made up of six aldermen representing three wards.
The ordinance established an improvement district, encompassing phases one
through six.
After the completion of all six phases a second ordinance was presented
to the council in 2008. The new ordinance established a second improvement district
for what would become Phase-7. And, it’s Phase-7 that contains the two streets causing
all the uproar, Magnolia Glen and Autumn Cove.
By now the city had also grown. Woodland Hills had been annexed in 2006,
boosting the council to eight members representing four wards. I guess you can’t
expand an improvement district the same way cities annex new areas.
Ordinance 2008-02, passed June 16, 2008, says the improvement district
is being established, "[F]or the purpose of constructing and installing
facilities for water works, recreation, drainage, gas pipelines, underground
trenches and excavations necessary for the installation of electric and
telephone distribution systems, sanitary sewers, streets, including curbs and
gutters, sidewalks together with facilities related to any of the foregoing
within said district."
After the completion of SJG, "[T]he improvement district shall
continue to exist for the purpose of preserving, maintaining and operating the
improvement(s), replacing equipment, paying salaries to employments (sic) and
performing any other functions or services authorized by law," the
ordinance states.
Up to this point this second ordinance mirrored the first ordinance
that formed the original improvement district. However, when aldermen compared
the first ordinance to the second they discovered language included Alexander
taking over the maintenance of all utilities, including street repairs, if the Bakers
decided to skip out.
Since water and sewer services, for the Saline County area of the city,
are provided by Saline County Water and Sewer (SCWS) the council could not speak
or make decisions for SCWS. Not to mention, if the Bakers would do the
unthinkable and leave SJG high-and-dry, Phase-7 would be the only area covered
by the city. The Bakers would still be responsible for the rest of the
subdivision. With all that in mind the aldermen had the Bakers’ attorney amend
the second ordinance.
It now stipulates, "The City of Alexander shall not have any
obligation to assume the responsibilities for the continued existence,
maintenance or control over the improvement(s)."
But, why does SJG need improvement districts when the newest
subdivision under construction in Alexander, Meadow’s Edge, doesn’t? Perhaps
financing is the answer.
We know the Bakers acquired a bond to fund construction of all
utilities in the subdivision, including the streets and sidewalks. The bond is
being paid for by a self-imposed property tax being paid by SJG residents.
Self-imposed as-in imposed by the Bakers. It appears on the tax bill as “City Street
Tax” but the City of Alexander doesn’t receive any of that revenue. It’s sent
to the Bakers who then make payments on the bond.
In other words, the sale of the property and houses did not pay for the
streets and underground utilities. It’s an on-going payment being made by the
property owners.
An accusation being thrown around is that SJG residents are paying city
taxes and getting no benefits. As far as property taxes go SJG residents pay
the same city property tax paid by all property owners in the city; which is
five-mils. The property tax, and a two-cent sales tax, provides revenue to the
general fund, police fund and fire department fund. So they do get the same
city services owed them.
Revenue to the street fund comes from the state’s fuel tax, which
brings up another issue. The state disburses the share that goes to cities and
counties based on population. You would think Alexander’s street fund revenue
should be based on a population number minus the population of SJG. Whether it
is or not is one of those facts we don’t know and someone will have to ask. I
only mention this because when the city takes ownership of those two streets
the population count used for the street fund revenue should be increased by
the number of people living on those streets.
What we don’t know is a much shorter list than what we know. And, it’s
a question I don’t believe anyone has asked. In order to qualify for the bond
issue did the Bakers have to maintain ownership of the streets, sidewalks and
other utilities?
It sounds as though the Bakers were able to qualify for what’s commonly
known as a revenue bond. That type of bond is usually easier to get, at a lower
interest rate, because payment is guaranteed either by a dedicated tax source
or from fees such as a water and sewer system. To the best of my knowledge revenue
bonds have always been made available to government entities; not private
enterprises. That would explain both the need for an improvement district and
the property tax.
Since government entities always own and maintain the beneficiary of a
revenue bond, does that apply here as well? Must the improvement districts, operated
by the Bakers, maintain ownership of all SJG utilities, both underground and
above ground, until the bond is paid?
Before a subdivision’s utilities are taken over by the local city or
county, after construction is completed, a set of standards and approval
process is always established in the design stage. It appears the same
construction standards used in building the streets in phases one through six
were not used in Phase-7.
If taking over the streets by the city was going to be the end result
from the beginning an engineer should have been monitoring construction to make
sure all the streets were built to code. It does appear the plan for Phase-7
was to build streets as cheaply as possible and pass them off to the city with
the attempted use of a couple of sentences in the second ordinance.
Finally, it’s not as simple as the city council just passing an
ordinance. It would be like someone selling your car without you knowing about
it. Even if all the streets and sidewalks were up to code there would have to
be a legal agreement between the city, the Bakers and possibly the bond
company.