Park fund subsidized by taxes
By ELISA CROUCH
ARKANSAS DEMOCRAT-GAZETTE
Little Rock will cut a hefty check Saturday to make its second
payment on the Clinton presidential library bonds.
But contrary to what city officials have said in court, the
city will dip into its general revenue to subsidize the fund that
the bond payment will come from, city Finance Director Don Yucuis
said.
City officials have long maintained that they didn't ask
voters to approve the Clinton library bonds because parks users
-- and not taxpayers -- would solely finance them.
But Yucuis said he plans in July to transfer an unspecified
amount from the general fund to the parks enterprise fund, which
he said was created in part to pay the Clinton library bond debt
as well as finance the operation and maintenance of the parks
system. Money in the general fund comes from a variety of
sources, including property taxes, sales taxes, franchise fees
and fines.
Yucuis said the bond payment would sap too much money from
the parks enterprise fund. For entities like the zoo and War
Memorial Fitness Center to continue operating, it's necessary to
put more money into the fund, he said.
"We pledged parks and recreation as a revenue source to get
the bonds sold," Yucuis explained. When the bond payment is made
with those user fees, "that leaves a gap in the parks and
recreation enterprise area. We have to use general funds to
supplement the parks and recreation budget.
"We only need to transfer money when we make the payments,"
he continued. "By July we'll need money to transfer."
Yucuis' statement clashes with what City Attorney Tom
Carpenter has said since the bonds were issued in 1998, when Nora
Harris, a tax opponent, filed a lawsuit against the city calling
the Clinton library financing plan a sham.
Harris argues the city needed voter approval before issuing
the bonds because she predicted taxpayers would indirectly
finance them. The city "cannot operate or maintain the park and
recreational activities without subsidizing those activities from
the general revenues of the city, which as a matter of law
include taxes," her lawsuit states.
But in defense of the city, Carpenter has maintained that
park user fees would be the sole backers of the bonds.
"The enterprise fund does not contain general City revenues,"
Carpenter wrote in papers filed with the Arkansas Supreme Court.
The parks enterprise fund, he said in an interview, is
"always segregated. There's not a single tax dollar in there."
That's been true so far because Little Rock didn't spend
about $1.3 million of the bond proceeds. Instead, it reserved
that money to cover the 1999 bond payment and part of this year's
payments. That money, called capitalized interest, is about to
run out.
Knowing this, the Little Rock Board of Directors approved
transferring $300,476 from the general fund to the parks
enterprise fund for "1998 Presidential Park Debt Service for
Bonds" when they voted for the 2000 budget.
Although property taxes make up less than 10 percent of the
general revenue budgeted for this year, nothing separates it in
the general fund from the millions of dollars the city raises
through selling business licenses and issuing parking tickets.
Two laws in Arkansas clearly state that revenue bonds, such
as those funding Little Rock's role in the Clinton library, must
not be funded with tax money.
The Local Government Capital Improvement Revenue Bond Act of
1985, which Carpenter cites as the authority for the bond issue,
states that revenue bonds are "all bonds, notes, certificates or
other instruments or evidence of indebtedness the repayment of
which is secured by user fees, charges or other revenues (other
than assessments for local improvements and taxes.)"
Amendment 65, Section 3 of the Arkansas Constitution defines
revenue bonds as those whose repayment are secured by rents, user
fees, or "any special fund or source other than assessments for
local improvements and taxes."
David Henry, Harris' attorney, cites the two laws when he
charges that subsidizing the park enterprise fund is illegal.
"They've known all along they would have to do this," Henry
said of the transfer payment. "It assures me that someone told
the truth because in recent times they've shuttled around those
points."
Nevertheless, Carpenter defended the city so successfully
last summer that Pulaski County Chancellor Alice Gray dismissed
Harris' case. Harris appealed it to the Arkansas Supreme Court,
where it awaits oral arguments.
In 1998, the Little Rock Board of Directors issued the $16.5
million in parks revenue bonds to buy and clear land for the
proposed Clinton library and to fund other park and zoo
improvements.
Yucuis said the city's doing nothing wrong in replenishing
the parks enterprise fund with the general fund.
"The arrangement we're talking about here is not new," said
City Manager Cy Carney. "When we issued the debt, the plan is and
was to pay for the bonds from the revenue from the park and
recreation operations."
In the past, parks revenue went straight to the general fund.
Carney said that's still the case. Yucuis, who began as finance
director in March, said it's not.
Yucuis said that since 1997 parks revenue has remained
separate from the general fund.
Revenue from the zoo, golf courses, War Memorial Fitness
Center, concessions and the River Market go into a separate
enterprise fund. According to the city's 2000 budget, $6.3
million in parks revenue should go into the enterprise fund and
another $539,478 goes into the general fund.
When President Clinton decided to build his library in Little
Rock, the city agreed to buy and clear 27.7 acres east of the
River Market District. That was budgeted at $11.5 million but
will total closer to $12.5 million.
Next year, the payment on the bonds used to fund those
expenses will be $1.29 million.
"It's significant," Yucuis said. "Hopefully we won't have to
transfer a significant amount."
This article was published on Thursday, June 29, 2000
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