GENTRY — Gentry Mayor Wes Hogue said the city is still in good financial condition but he warned against using short-term financing and taking on any additional loans for city projects during his annual state of the city address on Monday night.

“The city of Gentry is in good financial shape,” Hogue said. Because of conservative budgeting, we have had success even in challenging times. We have completed some very good projects and we have managed tomaintain staffing levels and services to the public without reductions,” Hogue said.

Hogue said the half-cent dedicated sales tax paid off the library bond two and a half years early, and the city now has one of the lowest sales tax rates in northwest Arkansas. He also commended the city clerk and council and thanked the members for their hard work in paring back the 2010 budget.

The fire station addition, which was financed with a fiveyear note, has made it difficultfor the city to meet normal obligations, Hogue said. He indicated that the $180,000 annual debt service on the note was part of the reason the city was not able to give pay raises or buy a new police car. The city still has three more years of payments on the loan.

Hogue said the city would need to “exercise a great deal of restraint in growth” in its general fund budget until the loan on the fire station is paid off. He said he would not support theuse of shortterm loans which obligate the city’s general operating funds for future projects.

The secondphase of the rural water project - the Springtown Water Project - is operating at a deficit, Hogue said. With debt service on the project, the loss in 2009 was $20,000. He anticipated more lost revenue in 2011, when user contracts are paid off and water customers who never hooked up to the system have no further obligation to the city. In 2017, when deferred loans payments begin, the debt service will double, Hogue said.

“It appears that this project will operate in the red for the 30-year life of the loan,” Hogue said.

Though Hogue said it was necessary for the city, “from time to time ... to make exceptions to accomplish the goals we deem are necessary” - adding, “I believe this is what we have done”- he said he did not accept the practice “as an acceptable model for business as usual.”

Instead, Hogue called on council members to join him “in setting a course of long-term financial security for the city of Gentry by implementing minimum annual savings and moving closer to a budgeting process that does not include savings and reserves as a part of annual revenues.”

Prior to his state of the city address, Hogue told council members that county sales tax revenue received by the city was down 6.5 percent in 2009 from what it was in 2008 - from $499,284 in 2008 to $466,195 in 2009.City sales taxes were down 19 percent - from $677,360 in 2008 to $547,379 in 2009. He said incoming revenues had increased slightly in the last months, indicating some hope of a turnaround in the economy.

News, Pages 1 on 02/03/2010