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:

1. Evaluate city services.
2. Measure and compare needs.
3. 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.

Other Income (Miscellaneous Revenues)

• Outside fire protection fees
• Sale of equipment
• Animal licenses
• Hotel and motel/Hamburger taxes
• Vehicle licenses
• Interest earned from special accounts

Purchasing and Bidding

In all first-class cities with the mayor/council form of government, the mayor or duly authorized representative has the exclusive power and responsibility to make purchases of all city supplies, equipment and materials necessary to conduct the business of the city.

The mayor has the authority to enter into contracts for work or labor on behalf of the city, after approval of the city council.

• The governing body shall set out the procedure for all purchases that do not exceed $10,000. The details for these purchase procedures should be described in each city's purchasing ordinance.
• When a purchase exceeds $10,000 the mayor or duly authorized representative should advertise in the local newspaper for competitive bids.
• Bids must be opened on the date and at the exact time and place described in the bid notice published in the newspaper.
• The mayor or duly authorized representative has the exclusive power to award the bid to the lowest responsible bidder.
• In emergency situations where the bidding procedure may not be feasible or practical the governing body by ordinance may waive the requirements of competitive bidding (Hdbk. 14-58-303).

Award bids can be controversial. The bidding process is usually highly competitive. Pressure can be exerted on all municipal officials. One of the best ways to avoid controversy is to carefully prepare bid specifications.

Careful bid specification will also increase chances of your getting what you want and within your budget. If you want specific options, accessories or particulars you feel will assist you in conducting the city's business, then state them in the bid specification. Under no circumstances should the bids be opened, reviewed or discussed until after the official bid opening. If provided in the specifications, the city can reject any and all bids.

Cities of the second class and incorporated towns have no requirement for bidding for these kinds of purchases, although a city could pass an ordinance to require such.

Here is an exception to the rule: Cities of the first class, second class and incorporated towns must take bids for any public improvements, which include the major repair or alteration or the erection of buildings or other structures or other permanent improvements, exceeding $20,000 in costs.

The law is found at Hdbk. 22-9-203, which also contains the procedure for taking bids for contracts for public improvements that exceed $20,000.

Professional Services

Competitive bids are not allowed when cities seek professional services. Professional services include con-tracts for legal, architectural, engineering services, construction management and land surveying (Hdbk. 19-11-802).

Cities that need professional services should advertise for RFP (Request for Proposal) or RFQ (Request for Qualifications). The RFQ should be evaluated considering the qualifications and reputation of each professional firm.

Many cities will ask a professional service representative to make an oral presentation to the entire city council prior to its making a selection.

Next, the city shall select three qualified firms and then select the most qualified (Hdbk. 19-11-804). Once a qualified professional firm has been selected, then the city may negotiate a contract for the desired professional service (Hdbk. 19-11-805).