Huntington mayor talks about possible bankruptcy filing for town
HUNTINGTON – A town of a few hundred people in southern Sebastian County may consider filing for bankruptcy, according to its mayor.
Gary Lawrence, Mayor of Huntington, said on Monday the situation arose as the city struggled to repay loans to the U.S. Department of Agriculture and Rural Development, as well as a decrease in money monthly return across the state due to a downturn in the city’s population according to the 2020 census.
“It’s a possibility,” Lawrence said. “I’m not saying we’re going to go bankrupt, but it’s an option.”
Mark Hayes, executive director of the Arkansas Municipal League, said he doesn’t believe any municipality in the state has ever declared bankruptcy, although some of them have gone through financial crises.
“In fact, a few years ago, maybe a decade or more, we had a problem with a town in southern Arkansas, Gould,” Hayes said. “I asked a bankruptcy lawyer to review it for them and the conclusion was that it would be unlikely that the law would allow a city to file for bankruptcy.”
However, Hayes noted that this is not an “absolute” as no municipality has attempted to file for bankruptcy, at least to its knowledge.
An article published in the Arkansas Democrat-Gazette in July 2010 indicates that Gould filed for Chapter 9 bankruptcy in 2008. The bankruptcy was dismissed by the federal bankruptcy court in May 2010.
Huntington’s financial problems stem from a project to upgrade its wastewater treatment plant at 400 W. Oak St., according to Lawrence. The city has owned the factory since 1978.
Barry McCormick of Van Buren-based Hawkins-Weir Engineers wrote in a September 22 letter to the state’s Environmental Quality Division obtained through a Freedom of Information Act request that the division informed Huntington in March 2015 of the need to address effluent violations at the Huntington Wastewater Treatment Plant.
Huntington and the division accepted an administrative consent order in December 2016 that included a corrective action plan to resolve these violations and bring the facility back into compliance with the city’s National Pollutant Release System license, McCormick wrote.
McCormick said construction on the improvements to the plant and the city’s sewage collection system was completed by September 2020. Some post-construction issues have been resolved by August 2021.
The order was closed on October 22, according to a letter from the Environmental Quality Division in Lawrence with the same date.
Lawrence said Huntington initially budgeted over $ 1.3 million for the project. This stemmed from a cost estimate detailed in a preliminary engineering report from Hawkins-Weir initially completed in May 2016 and last revised in July 2017.
A spokesperson for the Department of Agriculture said the department gave Huntington a loan of $ 798,000 and a grant of $ 649,000 for the project on July 31, 2017. The city also increased its sanitation tariffs to help cover the initial cost in 2017 or 2018, according to Lawrence.
However, when the project was able to go to tender in early 2019, all of the bids the city received exceeded the budgeted amount, according to Lawrence. This led the city to obtain additional funds through the Ministry of Agriculture.
The department granted the city a loan of $ 562,000 and a grant of $ 460,000 on May 6, 2019, according to the spokesperson for the department.
Lawrence said the overall cost of the project ultimately came to over $ 2 million. City loans from the Department of Agriculture are to be repaid in monthly installments over a 40-year period with interest. It started after the city received the second silver round.
Huntington’s need to meet loan repayments for the project is compounded by a reported decline in the town’s population, according to Lawrence. The 2010 census shows that Huntington had 635 residents as of April 1 of the same year. The 2020 census, which was released last year, shows that number fell to 490 as of April 1, 2020.
Lawrence said that because the amount of return money a municipality receives through the state is based on the population of the municipality, the decline in the population of Huntington has also resulted in a decline in its income – income which she needs to keep the city running.
“When they dropped our census, when that happened, it cut some of the funds that we allocate to the water, streets and general funds,” Lawrence said. “So it’s just another success that we have to somehow catch up with, and with a city the size of us, we don’t have a tax base. We have very little. businesses here in town, so we don’t have any revenue other than our water bills and what return we get from county and state sales tax. “
Lawrence said the ongoing covid-19 pandemic that began in 2020 interfered with data collection for the last census, with some people also refusing to complete the census during that time.
Lawrence said that in light of these circumstances, Huntington has been in contact with the Agriculture Department about a possible restructuring of the city’s loan payments so that the city can make them. However, the ministry has so far refused to change the payment schedule.
“We’ve been struggling with the payments for a while, and we’ve made our payments and will continue to try to make the payments, but with the combination of the turnaround and the climate we find ourselves in, something is going to have to give way. , “says Laurent. “I mean, we only have three employees. We don’t have a police officer right now. So it’s not like we can fire people to make up for that. I mean, we’re on the bare bones. . “
Lawrence said that unless something changes, the city may have to file for bankruptcy, which is not something he wants to do. If everything stays as it is, he estimated that it could happen “probably in the next six months”.
A spokesperson for the Department of Agriculture said the department would continue to work with Huntington on the sewage treatment plant project.
“USDA always works with rural communities and other borrowers to help them carry out projects the department funds to improve rural communities and help rural residents and businesses,” the spokesperson said.
Hayes suggested that Huntington work with Sebastian County to set up a meeting with local governments around him, such as Greenwood and Mansfield, to find out what services are being duplicated and where money could be saved for all of them. involved persons.
“Usually it does some things if everyone is willing to look at it objectively and take a hard look at what they’re doing and what their fellow local government officials are doing,” Hayes said.
Hayes also said Huntington can contact the Arkansas Municipal League for assistance.