City Budgets & Finances

The residents of your city are entitled to an accounting from their municipal officials.

The professional management of city finances demands high standards of personal responsibility. As a newly elect-ed city official it is extremely important that you understand the basics of city financial matters.

One noted political analyst suggests two criteria that constituents traditionally use to evaluate the effectiveness of their local government.

What does it provide for them and what does it cost? The document that should answer these questions is your annual budget.

City Budgets

Your city’s annual operating budget should be the principal policy management tool for governing. It should be the mechanism to:

Evaluate city services.
Measure and compare needs.
Set priorities and balance community public service demands against the tax revenues required to furnish them. Therefore, it is important that governing officials participate in the policies and decisions that go into building your municipal budget.

Arkansas Law and Budgeting

Every city and town must have an annual operating budget approved by its governing body (Hdbk. 14-58-201 through 203).
The fiscal year of each city and town shall begin January 1 and end at midnight, December 31 of each year (Hdbk. 14-71-102).
Deficit spending is prohibited. Cities are not allowed to spend more money than they accrue during a year (Ark. Const. Art. 12 Sec. 4). Exceptions to this rule are made for capital improvement and rev-enue bonds (Ark. Const. Amend. 62 and 65) and for short term (up to five years) financing (Ark. Const. Amend. 78 sec. 2).
All cities and towns must have the financial affairs of the city or town audited annually by a certified public accountant or by the division of the Legislative Audit of the State of Arkansas (Hdbk. 14-58-101).

Major Revenue Sources Available

Revenue sources may differ from city to city. However, listed below are the major revenue sources available to Arkansas cities:

City and County Local Sales Taxes: Cities and towns share on a population basis most countywide sales taxes for operating purposes. City voters may authorize city sales taxes and county voters may authorize county sales taxes.
Ad Valorem General Fund Property Tax:set by the governing body, may not exceed five (5) mills. Cities share three (3) mills of county road tax (Hdbk. 26-25-102).
General/Street Fund Turnbacks: this is appropriated from the State Municipal Aid Fund and dis-tributed to cities based on population according to the most recent decennial census.
Franchise Taxes: Investor: owned public utility retailers pay a franchise tax to cities for use of public rights of way and streets for the delivery of their services (Hdbk. 14-200-101).
Solid Waste/Sanitation Fees: Cities may charge a fee for the pick up and disposal of residential, com-mercial and industrial solid waste.
Fines and Forfeitures: Municipal ordinances may be enforced by the imposition of fines, forfeitures and penalties on violators of city ordinances.
Permit and Inspection Fees: Cities have the authority to require building permits, safety inspections and to charge accordingly.
Parks Department Revenue: The city may charge fees for participants of city recreation programs and for concession revenues at the city pool, parks and community center.
Occupational Taxes/Privilege License: The city may charge and collect revenue for the privilege of doing business or carrying on any trade profession or vocation within the city limits.