The City of Hot Springs (CHS), in response to a possible referendum of the needed water rate increase to support the water bond and due to the current shortage in the City’s water system, will place a temporary suspension of all new water connection applications for those served by the City’s Waterworks System if and when verified signatures are submitted for the referendum.

The possible suspension was announced at a press conference in the City Hall Board Chambers on Dec. 1. A video recording of the press conference is available at www.cityhs.net/board-videos or on the City’s YouTube channel in the Special Topics playlist.

A water shortage exists when the CHS water system exceeds the state-mandated maximum output, as occurred most recently in 2022, as well as in 2010, 2011 and 2012.­­ City Manager Bill Burrough shared at the press conference that the CHS water system had 2,620 water connections added between April 2013 and April 2021, and 602 between April 2021 and October 2022. In addition, there were 982 obligated approved connections in April 2013. In all, the more than 4,200 new connections were added without “a single drop of water added to the system,” said Burrough.

“When we think about that, we are at risk. We have overextended ourselves, but we took that risk because we knew we had a new plant coming,” Burrough explained. “We now have a referendum in front of us. Signatures are being gathered to stop that $2 rate increase, which will be $4 over the next year. We cannot afford to let that happen in our community. We need this water. We need it for our existing customer base, and we need it for the obligations that I just mentioned…We cannot afford for a small group of individuals to impact the lives of 100,000 other people – our neighbors, the ones we are obligated to serve.”

Mayor Pat McCabe followed Burrough at the press conference and shared additional details of the efforts that led to the water supply project, as well as the impact a referendum would have on the project.

“It is important to understand the ramifications at this late date of a referendum. All of the work that has been done regarding this bond issue and the ability to build out the balance of the water treatment plant and the supply lines, distribution lines, will be for naught, and we’ll have to start all over,” said McCabe.

The recent bond issuance and corresponding water rate increase was passed by the CHS Board on Nov. 15, 2022. For the $4 increase in Utilities’ water base rate for residential 5/8^th-inch meters, $2 will take effect in January 2023 and $2 in November 2023. These increases are required for the issuance of bonds to cover the cost increases of the Lake Ouachita Water Supply Project. CHS Utilities water rates are currently among the lowest 17% in Arkansas, according to the Arkansas Natural Resources Commission. After the $4 increase, CHS will remain among the lowest 25% in the state.

At the Nov. 15 CHS Board meeting, two residents spoke in support of the bond measure and associated rate increase and two spoke in opposition. One of the opponents suggested that a referendum initiative might occur if the measure were to pass, which it did. Such a referendum would threaten the City’s ability to continue with the needed bond issuance, delaying the water supply project.

The bond issuance passed on Nov. 15 was predicated on the audited financial statements of 2021. A referendum would delay the issuance, requiring the use of 2022 financial statements that will push the bond issuance until after June or July of 2023.

“We don’t know where interest rates are going to be…in September of next year. We can only imagine that construction costs will continue to go up, so that is going to add to the total project cost which is going to add to the total cost of the end user,” said McCabe.

If the referendum signatures are gathered and submitted, the suspension of new water connections will continue until funding is solidified to complete the water supply project.

“It’s a terrible position to have to be in to have to make that kind of decision, but there is no other decision. We have been pushed into a corner and we’ve got to do what we have to do,” said Burrough. “Hopefully, this will be something we can have resolved over the next couple of weeks and we can continue as we are and work towards building this plant and putting new water in the pipe so our city, our county, our community can continue to thrive. Because we are thriving. We are one of the city’s in Arkansas that are absolutely busting at the seams, and we have to keep that momentum. Please don’t let something like a referendum on water stop that.”

The Lake Ouachita Water Supply Project dates back more than 13 years. Fortunately, water storage was able to be obtained by CHS from the Corps of Engineers and the Mid-Arkansas Water Alliance in an agreement that was signed in May 2017. It provides 23 MGD from Lake Ouachita. In 2018, a portion of the waterworks bond was issued to initiate the Lake Ouachita Water Supply Project. In June 2020, the CHS Board of Directors passed a bond for just over $100 million to pay for the intake, the new water plant and both the potable and raw water lines. All estimates received from the engineers planning this project indicated that the bonded amount would be more than enough. By the time the plans were finalized and sent out for bid, it was already a post-COVID world with corresponding supply chain and inflation issues. Projects throughout the country and the state now required additional funding to be completed.