Joint Performance Review (JPR)
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- October 6, 2026
Unknown speaker
0:00
Thank you.
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people in their seats, we'll get started here.
Speaker 7
3:30
well that didn't work I'd like to call this
meeting to order good morning again I'd like to thank everyone for being here I am representative Bruce Kozart and my colleague Senator Rice would you like to have his name say this morning all right
we're going to get right into the meat of things like i said a while ago if you needed to sign in the sign-in sheet was outside it's getting ready to get pulled or has been pulled so um we hope you got your name on her if you wanted to talk all right consideration to approve the september the 9th meetings minute meeting of the minutes do i have a motion and motion second i have a second all in favor say aye any opposed
meetings are approved all right we're here today the first item we're going to talk about is discussion on broadband equity access and deployment the bead program then we have another one after that that we will see how far we get into that to see if we have to postpone for a break for y'all or if we could just continue on through but we'll see how far we get hopefully we can get all this
done before we go take a break all right uh this time i'm gonna call up howard gorder are you here howard
Speaker 14
5:18
right, that's fine. You want, is it Russell, Ms.
together or separate, but that's fine. Once you get seated, if you would key in your mic there, get a green light,
and introduce yourself and who you're with, please. Doesn't matter
who, just whenever you get a green mic, go. It's got to be green. All
Howard Gorder
Unverified
6:03
right. There we go. There we go. All right. Thank you to the co-chairs and the committee for the invitation and opportunity to be here this morning. My name is Howard Gorder with Palmetto Engineering and Consulting in North Little Rock.
We also have offices in South Carolina and Texas, and we have approximately 165 employees focused primarily on doing broadband engineering. We engineer over 2,500 miles of fiber broadband construction each year, and we've been heavily involved in grants and broadband activity in the last six years that includes over 500 million in grants that were awarded in the last six years been involved with
over 200 state and federal grant applications including more than 25 specifically in the bead program that we're we're here to talk about this morning and that's that's over 10 states as well so more than just the state of Arkansas. I'm a licensed professional engineer in Arkansas and a number of other states. I've been licensed since 2009, been in the industry since 2002, and so I've been heavily involved in these grant applications. And at the appropriate time, if it's acceptable to the co-chairs, I'd like to make an opening statement as well.
Senator Jane English
Unverified
7:15
I will. Let's get everybody introduced. Good morning. Thank you very much for inviting us to be here today. I'm Denise
Speaker 28
7:26
Russell. I am the Director of Regulatory Affairs at Northern Arkansas Telephone Company. Thank you. I have 40 years of experience in the telecommunications industry. I started out as a consultant, a telecommunications consultant at Ernst & Young, and went to work for Northern Arkansas as their Director of Regulatory Affairs. My primary responsibilities are to do all of our federal communication filings, Arkansas
public service commission filings budgeting cost forecasting rate setting making sure we're in compliance with all the rules and following all the developments the changes of rules fcc likes to change the rules a lot and so in determining how those impact us since 2010 we've been heavily involved in filing for grants for our service area because it's a very high cost service area We got a BIP grant, which is a broadband infrastructure program, back in 2010,
and I've been the lead on all of our grants. So the broadband infrastructure program, RUS-USDA reconnect program, five rounds of that, community connect program through the rural utility service-USDA, the Arkansas connect grants, and now BEAD, and we've been following BEAD for three years now, and I've been the lead on all of those. and so have a lot of experience in all the different kinds of grants at different levels of government and entities.
Speaker 33
8:59
Next. Thank you for the invitation today. My name is Stephen Sanders. I'm the general manager of Northern Arkansas Telephone Company, and I have been since 2009. I've been with the company for 35 years this year, and next year is actually the company's 75th anniversary. Um, I've had general oversight over all of the grants that we have worked with, um, as Denise mentioned, um, in addition to, uh, several, um, rural utility service part of USDA loans that we have, um, had in order to build fiber facilities, uh, in a service area, in our service area.
so thanks all right mr gorder you're welcome to make your statement or presentation whatever
Howard Gorder
Unverified
9:49
you have uh yes thank you the co-chairs i uh i guess just briefly the the bead program is the broadband equity equity and access deployment program it was it was passed as part of the infrastructure act uh approximately november of 2021 uh so we're about four years into the program and and so far No dollars have been spent on broadband deployment.
There's a lot of reasons for that. We'll probably talk more about the BEAD program generally in this meeting. It was pushed down to the states to run the process and determine who the awardees were going to be within the state. So the state of Arkansas has a broadband office that went through that process. The culmination of that process, a couple of months ago, they had an open comment period for a week. So I submitted a couple of comments multiple comments in that program. But I wanted to go through specifically one of my
Comments that I submitted related to hometown internet, which was the the number one awardee based on dollars in the state of Arkansas and So specifically this was in opposition to the hometown award, which is 88 million dollars worth of grant So hometown internet's been in operation for approximately five years Um, has used several names, uh, but has never submitted a broadband data collection report. Broadband data collection is the, uh, is the system, the process that the FCC uses to track
broadband availability as well as subscriptions. And so it forms the, the basis for the national broadband map. So if you've ever looked at the FCC broadband map, um, that is based on the BDC reporting. It's a requirement for internet service providers to do that, to do that report. And so during this time, Hometown Internet has never filed a report with the FCC. So unless Hometown doesn't have a network, they are out of compliance with the FCC and would be subject to FCC enforcement actions. ISPs that are not in good standing with those FCC requirements are not eligible for BEAT
awards, so allowing a provider that's in violation with those reports would set a dangerous precedent and undermine the integrity of the broadband programs. Arkansas Rural Connect awards providers were required to have at least 500 subscribers. Hometown Internet either doesn't have those subscribers or is out of compliance with the reporting. A few years ago Hometown Internet was awarded 7.4 million dollars by the state in the in the state Arkansas Rural Connect
grant program in the third round. Those projects were applied for in October of 22 and work began in 2023 after two years of work they've only been at 15 completion that's been reported to arc which is the lowest of of all the awards in round three by a significant amount in the last couple of months they have increased that to 31 reporting but most other projects in the state are at least 60 or 70 percent many are at 100 completion at this time
in the field we really see very little progress of hometown internet's work they have a sign in a building they've got a little a little bit of progress out in the field but there's been a lot of issues with some of the work there a lot of complaints from the county judge and from others as well they were able to the broadband office allowed them to remove locations in round three which was something that they said they were not willing to do and at this point there's a lot of question of how that project could be completed by the end of next year December of 20 December 31 of 26 according to public documents hometown
Internet's been rated at high risk throughout this process by the state broadband office evaluators and yet they've been announced to receive the largest award at 88 million dollars their award is proposing 2168 miles of fiber across at least six counties and completion of the project in two years by December 15 of 2027 these areas are some of the most difficult terrain in the state of Arkansas including almost all of Newton County where nothing
happens very quickly Newton County is probably the most rugged county in the state of Arkansas also one of the most beautiful but it's very difficult to construct in in addition there's a lot of federal lands involved with the Buffalo River Bull Shoals Lake and a lot of other things that are very difficult to cross so that's greater than a thousand miles of construction per year facing some of the most difficult challenges that a project can face and attaching to poles that hometown internet also does not own this is going
to supposed to cover 16,000 locations which is also a lot so the hometown internet award has a density of approximately 7.4 locations per mile in broadband networks we often look at how many locations or passings per mile there is because that indicates how how profitable the project can be or whether it can fund itself or can sustain itself and there's is that 7.4 which seems overly generous for the area by comparison pety gene electric and
Petigean fiber which are slightly east of the project area have only 4.8 meters per mile and those include populated areas of Clinton and Fairfield Bay so it's really unlikely that Newton County and these other areas have a higher density than Van Buren County and Searcy County what I'm really saying is that I don't think there's enough miles in the project to complete the project other comparisons the the northern portion of Boone County outside Harrison where NACCO serves has a density of approximately 5.8 locations per mile. So it's nearly impossible that
this 2,168 miles is enough mileage to serve that many locations across six counties. Now the awardee would ultimately be responsible for building what's necessary for the project. However, if there's cost overruns of 10 or 20 million or even 26 million, it can easily double the amount of match that hometown internet's required to to make as part of this award now by comparison uh pettigene fiber for example built 3 000 a little over 3 000 miles in three years also for a cost of
approximately 114 million which is the total of hometown's award uh well their grant award plus their match is about 114 million but pettigene fiber owns the poles they own the they have their right-of-way in easements they've got a staff with experience and knowledge to serve them Hometown Internet does not have any of those, and those are significant things when building a project of this size. So granting Hometown Internet $88 million in bead money is not only highly risky for the state of Arkansas, but it's very likely to be a serious compliance and public relations problem.
So far, Hometown Internet has not demonstrated the ability to construct a network, operate a network, or submit the required FCC filings. They haven't even met basic milestones on the project. already been awarded by the state so this award has potential to put arkansas on the news for all the wrong reasons and keep the residents of these areas unconnected so until hometown comes into compliance with these obligations and demonstrates the ability to to complete a project here and provide that kind of evidence i strongly urge the decision makers to reject this preliminary award
and that's all i have for statement thank you mr. Russell would you like to make a statement good okay where you all right thank you do we have any questions all
right let me get started here I'm going to get the right pen.
Senator John Payton
Unverified
17:57
Peyton, hit yours again. I think you're on. Thank you, Mr. Chair. Just curiosity, if you mentioned it, I missed it, but where is Hometown Internet located? Where is their offices? We're actually
Howard Gorder
Unverified
18:18
I don't even know that we're sure exactly where their home offices are but they're based out of Berryville And so the the project covers the six counties that are part of the project are Newton County
Speaker 52
18:28
Boone, Marion, Searcy, Carroll County, and Benton County
Senator Jane English
Unverified
18:31
Okay, thank you I will add that What we can tell Hometown is a wireless internet provider in the Berryville area We haven't been
Speaker 28
18:46
able to estimate how many customers they have, but we think between 100 to 300 customers currently of wireless customers. They don't have any fiber customers right now.
Speaker 58
19:06
Representative Brown. Thank you, Mr. Chair. And Senator actually kind of had my question of, Have any of y'all ever seen a physical office for this place? Because when you punch their name in the Secretary of State, it comes back to a registered agent or registered office. I'm sorry, it's just some brick house out in the middle of the woods. You know, I mean, their website's GoDaddy.com. I mean, the whole thing smells like a scam to me just looking at it, not knowing anything about this. Do they have
Speaker 28
19:36
an actual brick-and-mortar office? We've investigated it as well and looked it up and looked at their website to see if we could order service from it.
that kind of thing um their number on their website is a cell phone number and um we believe the main office in barryville is a house like where he lives the owner follow up mr chair and uh and i think
Speaker 58
19:56
y'all said this in your testimony to make sure i'm clear to y'all's knowledge these people or this company it does not own a single pole or easement or anything anywhere is that correct because i mean as we all know you can't to my knowledge you cannot eminent domain rights-of-way for fiber so I mean I don't understand where
they're gonna run these fiber if they got this money
Howard Gorder
Unverified
20:19
if they don't have you right away that's correct yeah they as far as we know they do not own a pole do not they may have attached to a few in the last little bit working on their grant project but that's correct they do not own a pole and I can go into the attachment process more but it is it's a it's a very lengthy and expensive process to attach to to polls uh for electric you know an electric company um and so that's something that they would have to go through for this whole project which would cause it to take longer and cost more it's much different than uh the owner of the polls constructing the network
Senator Jane English
Unverified
20:50
themselves thank you Mr. Senator English you recognize this year thank you is is there anybody here from the broadband office at all kind of would like to hear how we got to this situation I know there's been a lot of work done for the last five or six years on this whole broadband issue and with Bede which we
don't have an answer yet from the feds but how we can proceed but I think this is an interesting situation and we really need somebody from the broadband office to be able to talk to us about
how we got this far absent somebody being here I will say that give you an
Speaker 28
21:46
update on where we are in the process. We've been working for the past, since 2022, the state has been working and working hard. I mean, they've had a lot, a huge job in front of them. And we've been through three rounds
Senator Jane English
Unverified
21:59
of bids to determine who was going to have the awards in the state. And then in June of this year, NTIA, which runs the program, National, I'd look up the Telecommunications and Infrastructure administration they came out with a ruling that changed the rules not 180 degrees but close
Speaker 28
22:23
to it and gave all the state offices 90 days to do a bargain round bid so what they were saying is
lowest bid wins we don't care what technology it is because prior to that for the last three years We've been operating under the assumption that fiber is the preferred technology, and I would argue that that is the best future-proof network for anybody in Arkansas, the life of the assets and the service that it can provide for future needs for any of our citizens. But then the new NTIA department said we have 90 days to the states to do a bargain round,
And wireless, satellite, hybrid technology, cable technology, fiber technology all had the same playing field. And so obviously a fiber build is going to be more expensive than a satellite build, for example. But it also had to meet certain parameters of, you know, was there any latency on the usage? Could it be expandable in the future? Was it scalable? Which I think some of the satellites has trouble with that.
they get it gets full and you can't add so many users so um september 4th was the date for all the states to submit their final proposals that's what they're calling it to ntia and in here they said these are the companies that were recommending for the awards whether it was satellite or wireless or fiber companies these are the amounts um and out of the states and territories that were eligible to bid on these or get the money there was 36 states that provided the information on
September 4th and 20 states that got an extension because they weren't quite done the 90 days I mean hats off to the state that was not a easy task and there was a lot of information and a lot of stuff that you had to redo it was not a good position to be in and I know the state did not want to have to redo because we literally had just finished the last round of bidding and they gave the last awards and we had to start over. I mean, us being the industry and the state.
So right now we are in the review stage at NTIA. They have various reviews at NTIA where it was reviewed and now it's in committee. I guess it was in committee the last update we got. And they have committed to have their review done by December 4th. They've given themselves 90 days for all the states to be reviewed. At that point, it has to go through a cybersecurity kind of review, and then it comes back to you guys, the full legislature, to approve in Arkansas.
So I think if there was any changes that you saw that needed to be made, Now would be the time to do it as opposed to in December when NTAA has finished all their reviews and hands it back to the state for final stamp of approval. So that's where we're at with the process. And so by December, everything should be done. They anticipate approval by the legislature and then awardees will be signing the subgrantee agreements
with hopefully environmental issues taken care of in the first quarter and construction started by, you know, when the weather gets a little bit nicer in, like,
Senator Jane English
Unverified
26:03
March. So the first proposals, was this hometown in that first proposal? Were they also in the second proposal? And I know that one of the main things that the administration wanted was a reduction in cost. So we went down a whole lot on what it was going to cost to put the Internet in across the state.
So were these same people been in that second round or second proposal, and had they reduced their cost measurably like other people have
done? There was a preregistration process where companies could submit information, and then you were approved to bid
Speaker 28
26:46
or not bid. And there was 49 companies that signed up to bid in Arkansas. In the first three rounds, as you've mentioned, there was 33 companies that, let me double check my notes.
44 of the 49 had submitted bids in the first three rounds, and only 33 providers had filed bids in the bargain round that we did this summer. I can't answer your question because the state never told us. We were in this cone of silence, confidentiality rules that we didn't know who got the awards. We knew that somebody won a certain area. Originally, the bidding areas were census block groups, and you could bid one census block group.
In Arkansas, there was 1,521 census blocks that had unserved customers in them, meaning they didn't have good broadband speeds. We never knew who won. We know somebody won, but we were never told who won. We knew which ones we might have won, but we weren't allowed to talk about it with other companies, so I don't know who won those other awards. We did ask the state several times if we would know who the bidders were or who won to help us in forming our bids, you know, because it's competitive, so that would kind of give you an idea.
We also asked if they would tell us who won before we entered the bargain round, even though those results are now void, but we didn't find out who that was, so we don't know. We're assuming that the same companies were probably winners in the other tranches, but I know we had won some awards in the prior tranches where we did not win in the final round, but then we won some that we had also won in the first round. So
Senator Jane English
Unverified
28:45
I guess I'm just confused about how these people got in and stayed in.
And how do we know that they've gotten that contract again, Or they would get that, be part of
that bargaining thing? Oh, because they did announce the bargain round on August 13th. They announced
Speaker 28
29:05
the winners for the bargain round, and so we did know that, but we didn't know. We can assume who won maybe in the prior rounds, and it's hard when you're only going on the price that it's going to cost, and the companies could choose to match more
because we're required to match 25% of the cost. So like in Hometown's case, their total project cost is $114 million. They're getting $88 million from the state, so they're going to have to come up with $26 million of their own money in order to build this project, assuming it's not underbid, like Howard has indicated they didn't underbid the project. If it comes in at $150 million and they bid $114, they're going to have to cover the difference because it's still going to have to be built. they have the responsibility to build it so we have the list of who all was got
the awards in the state on August 13th and then that was submitted to NTIA for approval on September 4th I
Senator Jane English
Unverified
30:08
think I still think we need somebody from the broadband
Senator Terry Rice
Unverified
30:27
miss Russell what you just said I'm trying to gather
from my past experience which is limited are
you saying that fiber is not required now you
Senator Jane English
Unverified
30:43
can win in the bargain round without building fiber yes in the prior
Speaker 28
30:48
rounds it was the preferred technology but now and you got points extra points if you had a fiber build versus a wireless build but now let's say on a scale of ten fiber got ten wireless got ten satellite got ten it
was all treated evenly so whoever bid the
Senator Terry Rice
Unverified
31:11
lowest price won okay in the and
I don't remember the definitions but in the initial broadband money that first pot we called it was much looser
than what this was supposed to be and now it's
Senator Jane English
Unverified
31:27
got loose again yeah I mean Arkansas was awarded a little over a
Speaker 28
31:33
billion dollars and after the first three rounds of the with the old rules they were set to pay
out about 450 million so they still had another 550 million left on the table so to speak under the old rules that was supposed to go the state could then use it for non-deployment projects like getting computers in people's hands teaching them how to use the Internet, digital equity kind of stuff. I would have argued had those same rules stayed that we would do a better service to the citizens if we use that money for all fiber builds than, you know, using it for other builds.
But that's here nor there because that's moot now. It doesn't matter. But so the bargain round resulted in the state using $3.5 million, $100 million of their money. And so it's up in the air still what's going to happen to the extra $700 million. If Treasury is going to take it back, if the states are going to get it for digital equity, there's been lawsuits filed on people saying we shouldn't have lost our digital equity money. I definitely don't think we're going to see the $1 billion, that's for sure, in our state.
Senator Terry Rice
Unverified
32:51
Well, again, some of this comes in light. And I
go back to my former co-chair when I co-chaired the Legislative Council. The entire Arkansas Legislative Council, when contracts weren't complete, at times they allowed the co-chairs to do the final sign-off on them rather than the body. So the body said, we're fine with it, y'all can sign it off. I questioned some with, at that time, AEDC in broadband office because this doesn't smell right.
Somebody made the comment a while ago, this didn't sound like it smells right either. I had a company that didn't get more than 100 participants, but spent millions of dollars, supposedly. And I kept punching the button, warning them, and after the fight, there was investigation, not by the broadband office, they don't do that. But the people that were supposed to be checking on that, that we had hired to check those deals,
evidently didn't have enough parameters that they needed to be checking on, because I Googled a name that I was given and found out-of-state charges on is the one that got the grant. Now, I'm not saying this hometown is that. I'm saying something similar to somebody that didn't look like they should have gotten it. And what we got, I thought at that time, was going to be fiber. Didn't get fiber. Bought supplies, lots of things got bought.
And it's still out there, and I hope being investigated. I don't want that to happen anymore. I've made that clear to the broadband office and to Glenn. And I understand he has to work within the rules he does. But what y'all brought here today to me is major. How do we get this in front of lawmakers if you're saying this is going to
Speaker 28
35:00
come back to legislative council? Yes, for final approval. When? After NTA approves it.
And I'm not sure if it's legislative council, the whole body, or like your group. Well, if
Senator Terry Rice
Unverified
35:10
the legislature's in session, we could hear it. But, I mean, we're not scheduled to be
in anything session until April. Does this still have to be completed by the end of 2026?
Speaker 28
35:24
They will want the approval this December is when they will want it. Because they'd be in the broadband
Senator Terry Rice
Unverified
35:30
office. When does the construction have to be
Speaker 28
35:33
finished? Two years from when it starts, so the soonest that,
Senator Jane English
Unverified
35:37
well, people could say how long it's
going to take, and you've got extra points if it was less than two years, and so I haven't seen any applications that were less than two years. So Hometown said they could finish this $114 million project in two years, so if it starts January, if it starts March, depends on
Senator Terry Rice
Unverified
35:56
when the agreements get out. I understand. Well, I, too, think we need the broadband office here, and
I would be fine with hometown or home, what is it, hometown or hometown? Hometown internet, yeah. Hometown to be able to answer any question.
And this is what frustrates me. I see in government, we all work within our parameters that we're given, and I'm not saying the broadband office hadn't done that. But you've got to look at the whole thing if it doesn't make sense. If they don't have polls and they don't have right-of-ways and they've underbid to make that budget round, it's not going to work. And I've seen them come back and ask the legislature for more money. Well, we're already committed. We've got to come up with more money to try and do that to prison right now.
Get us started on the prison, then you all can't back out. No, tell me what it's going to cost on the front end. That's what we need to hear here. So I appreciate you all being here. I hope some other people have got some concerns like I have on this.
Representative David Ray
Unverified
37:03
Thank you. Thank you. Representative Ray. I see lights. Thank you, Mr. Chairman. So I think it's evident from Senator English and Senator Rice's questions that it doesn't sound like anyone from the State Broadband Office is here to answer questions.
So my question is, were they invited to be here today?
as far as I know we did not ask them to come we were just really trying to hear from information but we did not get it we did get a response from the bead program they could not be here today the ones that take care of the bead program and I don't have that name in front of me right now but they were out of state
Speaker 107
37:40
at a meeting so okay so the the committee specifically invited somebody
from the bead program yes we did okay well we don't know who that was I can get that for you okay
Representative David Ray
Unverified
37:55
I don't have that I don't have that in front of me on my papers okay I mean a lot of the
stuff that we're hearing is very concerning and merits a response from from the from the department that just it seems like a lot of this discussion is futile if we don't have anybody that we can sort of ask questions of on their end.
Senator Steve Crowell
Unverified
38:21
Senator Grell. Thank you. I guess I'm kind of on with Mr. Ray. I wish they would be here to answer the questions because apparently the due diligence was lacking. could you speak to that just a little bit let's see um that's that's
Speaker 33
38:46
actually been one of the frustrating things um for us has been i mean it kind of goes to the question of how did we get here
we you know have have done a lot of the federal and state programs in the past and we're used to being heavily vetted for what the project is going to look like they you know we have engineering plans um our us goes in and they they really look at the plans to make sure it's feasible make sure it's reasonable um we have to do financial projections we have to submit several years of audited financials and then projections on how we're going to maintain it because one of
one of the features of doing broadband in arkansas is not just the upfront capital investment but it's expensive to maintain the networks you have to have technicians that go through a lot of rural areas but but we're used to being vetted on our plans from an engineering perspective we're used to having a lot of difficult questions about how we're going to be able to make it work financially and how we're going to spend the money and in cases like this where you have awards where you
have a co-pay in this case it's a minimum of 25 percent they want to know how you're going to be able to afford to pay the 25 percent and not get into a situation where you're you're granted some funds and then you're not able to execute the plan and then those funds essentially you know wasted and in a lot of cases you can't pick pick up the pieces and start over because like in our case we have an existing network all of our engineering plans for the bids that we put in
in the areas we we bid to serve are all based on where our existing facilities are so if if you have a company like that and they're not able to perform the design the way that it started is all you know engineered one way somebody can't just come in and pick it up and go from there so we we had been expected to originally i believe they called it a pre-qualification to be able to bid it turned into what they called a pre-application phase where we had to provide
some information and you have to click and certify you know make some certifications that you can do something but we were waiting for the big okay how are you going to do it show us we're going to ask you questions on how you do it is your design as howard said you know looking at the design is it reasonable how much cable you have in here can you afford to and and those those questions never came and so all of a sudden you know there were awards and we kind of did the same thing you know how did we get here we thought we thought there was going to be a process to really understand who should
be bidding and who shouldn't be bidding
Senator Steve Crowell
Unverified
41:47
follow please so this is that was a new occurrence in the process it used to be better than this and this is a new occurrence is that what i'm understanding um
Speaker 116
41:57
no not no not really when we when we first went into the program and we knew
Speaker 33
42:02
we were going to have to they were going to try to come up with a list of bidders who were going to participate they called it like a pre-qualification and then at some point it became
pre-application qualification implying that they were going to try to vet potential bidders on the front end to see if they're able to you know should be able to do it and you know I guess it's I guess it would be sort of like when you get a loan when you want to get a loan on a home and you go to a bank and you get a pre-approval and they say okay based on your financials based on you know who you are and what you've done in the past you're going to be qualified to get a loan up to you know a hundred thousand dollars we thought that that's how the process wasn't going
to go was going to go when they were calling it a pre-qualification they changed it to pre-application and there was not really any questions or any vetting
Senator Jane English
Unverified
42:57
done after that i think what you're referring to
Speaker 28
43:00
though when you said the program used to be like that stephen is comparing and contrasting our experience with other federal grant programs and the kind of information, the absolutely onerous and huge amounts of information that we had to provide for USDA grants,
the ReConnect grants. I don't know if you've heard of those. There have been a lot in the state that have gotten those. That was the other. So we were used to that side of the coin. And so we were like, we got to do the forecast. We got to get our 10-year forecast going. And we never got asked for that. and it was surprising because a lot of the pre-qualification was, do you certify that you have the money? Do you certify that you can technically do this? Do you certify that you can make the copay? And there was never any proof.
We didn't have to prove it. The only financial information the state ever got was one audit, and ours is a comparative audit just because that's how our auditors do it, But they only really required one year, the most recent financial year, which happened to be 23. So we hadn't submitted any other financial information since 23
Senator Jane English
Unverified
44:09
to see how a company is going. And if Hometown Internet had gotten a $10 million award, you know, it probably wouldn't be an issue. But the fact that they got $88 million, well, the project cost is $114.
I think that's what raises the – comes back to
Speaker 28
44:27
look at the prequalification. And the state did issue, when they submitted their final proposal on September 4th, the same day we got a letter from them saying, now we're going to do a comprehensive review. I'm like thinking, shouldn't you have done that before you submitted the final proposal? But there was a deadline. They could have got an extension. But now we're going to do a comprehensive proposal, and we want you to submit the couple things that we had to submit were,
how many other awards do you have? and all the companies had to list if they had any other awards, other grants. So Hometown Internet would have had to list the award that they're working on right now, the $7.4 million, now the $88 million. To complicate matters, they also got a $47 million award in Missouri. That was after our final proposal had been released. It was announced in the middle of September.
So they are now on the hook for $182 million between Arkansas and Missouri. So they will have to disclose that. Then they also required a pro forma of how you're going to show that you're going to be sustainable in the future for three years after the build is completed. That, to me, should have been completed before they submitted the final proposal. And then they could have maybe drawn back a little bit on hometowns award to what they could have afforded,
not just go ahead and go forward and then after the fact ask for a pro forma because that's in the NTA Notice of Funding Opportunity rules that they needed to ask that. And we brought that up in our comments that we filed in the public comments that were never public. So I would think at this point if
Senator Jane English
Unverified
46:18
the state got this information, we just had to submit it on Friday, they could look at that and see is hometown internet really capable of doing 182 million
Speaker 28
46:29
dollars worth of construction do they have the finances that support that the co-pay alone for them uh 25 of that you know is just horrendously huge and you know howard made the point um earlier that if it was a company like at&t or winstream um who got very few dollars in the program um and if If they were underbid, they could cover it. That's their problem. You know, they're going to have to come up with the money somewhere.
We don't know how hometown Internet will come up with the money someplace else. And it's our subscribers that we've served for 75 years that are going to be suffering because they're not going to get the fiber broadband service that was promised to them.
Speaker 49
47:14
And I would add, I think where the state broadband office did do a good job was having
Howard Gorder
Unverified
47:20
this prequalification process in advance of the bidding. I think where it really fell down was in financially vetting companies for the amount of projects or the size of projects that they would be bidding on.
And this pro forma was always part of the process from the federal legislation on down. It was always part of the process. It's just that now it's being provided after the fact. So there may be, you know, through that evaluation, they may come to the conclusion that we've come to, but we don't really know at this point. But, you know, the key is these are infrastructure projects that involve a lot of dollars, and it requires a lot of cash flow to complete them even before you get the grant money. And there is tranches that that comes through.
But this company, you know, you're looking at a company that's not well capitalized, has no real existing assets, you know, telecom assets to leverage. You know, they could easily go broke just from a cash flow standpoint in the middle of this project. senator hammer you recognize a quick question or two number one
Senator Kim Hammer
Unverified
48:28
did y'all file an official protest when the award was made or where are we in that or i was trying to catch up on what you're
Howard Gorder
Unverified
48:35
saying so they well they had the public comment period which was approximately a week uh right around labor day before the the deadline of september 4th and so i i had filed uh two separate comments
Speaker 128
48:49
the one was was on hometown internet uh natco had filed a comment and there was
Senator Kim Hammer
Unverified
48:55
a couple others as well okay and then the second thing and and i remember discussions years you know from years ago when we all got the covid money and we everything senator rice was talking about and you made a comment a while ago is is um under this contract is line of sight or the
uh towers or the satellite is that going to be permissible under the award of this money engineer
Howard Gorder
Unverified
49:20
yes yeah um so the hometown internet proposal is is 100 fiber so okay so there's not a line of sight concern specifically with that award there are other awards that are fixed wireless and there's also satellite awards for both spacex and amazon that where line of sight is a factor yes all right because that was one
Senator Kim Hammer
Unverified
49:40
of the big discussions back when that was going on
about the quality of you know the fiber versus the line of sight and that's what I was trying to clarify is does this particular contract that y'all are
Speaker 123
49:54
here talking about today it is strictly fiber only correct correct yeah there's not a line-of-sight issue
Speaker 33
50:01
with this this specific one okay thank you our comments that we filed were extremely descriptive and when they made it to the final proposal that went to NTIA the federal agency they were toned down
considerably so I don't think the the meaning and
Speaker 31
50:19
descriptiveness that we had included was passed passed along we
do have someone coming from the broadband office they'll be here shortly so we still have plenty of
people to testify here are to ask questions. Representative Vaught. Thank you,
Representative DeAnn Vaught
Unverified
50:39
Mr. Chair. So I've got a couple of questions for you. One, I think the same company that Senator Rice was speaking about a minute ago
also scammed a little over $2 million out of one of my counties. So my question is, are we prosecuting those people who have scammed Arkansas out of broadband monies? And if not, what are we doing to recoup some of that money in which they stole
from the state or from the federal government, for that matter? I'm not sure that we can answer
Speaker 49
51:18
that. I don't think the broadband office hopefully can answer that.
Hopefully we get that question from someone else. I'm not sure
Representative Jim Wooten
Unverified
51:28
they can answer that. Okay, thank you. Good question, though. Representative Wooten. Thank you, Mr. Chairman. Let me understand for sure that I've got this right. An RFP was sent out, and 49 people responded to it, or did 49 people meet the qualification to bid?
Speaker 128
51:53
44? Met the qualification to bid, yeah. that's yeah 49
Senator Jane English
Unverified
52:00
companies were pre-qualified said they could bid but there was no limit on the number of award
Representative Jim Wooten
Unverified
52:07
they could get 44 44 responded that that they would bid and then 33 bidded is that correct 44 bid in
Senator Jane English
Unverified
52:16
the first three rounds where we had
Speaker 28
52:18
the old rules if you think about june being the introduction of the new rules and so the same 49 companies were qualified to bid
in the new round this summer and only 33 providers bid in the the final round that we just went through okay and of
Representative Jim Wooten
Unverified
52:38
that i'm trying to get to the bargaining part of the hundred of the of the 33 that bid one was selected and the award was 114 million with them putting in 26 million before they got any of the money is that correct there was there was
Speaker 28
53:00
other companies they the 114 million award was 29% of the total award the total award was 305 million for the state and the second highest award was for Aristotle, and they had a total award of $89 million. So those are the top two. And the actual support that they would get is $88 million, and they would have to come up with $26 million. You're
exactly right on that amount. And
Senator Jane English
Unverified
53:33
it's up to the companies to bid what they thought they could afford. Now, you could still have a $100 million project, but maybe you were going to contribute more
Speaker 28
53:43
than 25 percent so maybe you said we have the financial capability we're going to put in 50 million dollars and ask the state for 50 million so that we have a better chance of winning the bid because whatever the lowest price was as long as you could meet the technical standards um then you
Representative Jim Wooten
Unverified
54:04
won in the last round so how did we end up in a bargaining if it was for a request for proposals them for a bid you mean and this is the first I've heard of the second there was a second offer the second bid
Senator Jane English
Unverified
54:22
that was considered under the NTIA rules when the the first when the law was passed as Howard said
Speaker 28
54:28
in 21 NTIA set out a set of rules that all the states had to follow when they did
their bid process. When the new administration came in, they had a new head of NTIA, and the new head said, we're going to change the rules. Since no dollars have been awarded yet to any of the states, I mean, you know, everybody was finishing up their rounds. So when I say the prior rounds, it was like old rules and now new rules. And so the new rules were dictated to all the states from ntia and so it
Speaker 29
55:01
was like we had kind of a change of course in the whole process
and so that was something they really couldn't control i don't know if i'm answering your
Howard Gorder
Unverified
55:17
question well it just got more confusing the benefit of the bargain that that process was driven by the ntia from from the federal level so that that was
Representative Jim Wooten
Unverified
55:27
outside of the state broadband office so here we are again with the federal program that's come back and said they want to re-evaluate it or do it a different way.
That's correct, yep. And they have to come up with at least 25%, which you're saying that they may bid more, it may be 30% in hopes that they get the bid because it reduces the investment. Well, we're still, what is the bargaining stage about? How many people are we bargaining? And when you say bargaining, who are you talking about?
Is it the state office that's bargaining? Mr. Chairman, I may have to ask them, but who heads up the bargaining portion? I think the idea of
Howard Gorder
Unverified
56:19
the bargain was to save the taxpayers' money, the federal taxpayers' money, to reduce the expenditure from the $42 billion down to a lower amount. I think that's what the benefit of the bargain intent was. Well, how many
Representative Jim Wooten
Unverified
56:32
people are considered in the bargaining? Are all 33? I mean, everyone was able
Howard Gorder
Unverified
56:37
to submit a bid in the benefit of the bargain round,
but the costs were driven down. There was additional parameters that were placed on it. It was also the playing field was leveled between fiber and wireless and satellite. Fiber is the most expensive, so that's, you know, it's more challenging for a fiber project to compete with fixed wireless or a satellite. But you only do fiber. And fixed wireless as
Speaker 143
57:03
well. And that's what NACO has proposed too, yeah. Okay. All right. Thank you, Mr. Chairman. Thank you for
your indulgence. Thank you. We have someone here from Broadband.
I believe Glenn Howey's here. I'm going to go ahead and bring him
up, and we still have three in the queue to speak. If you have a question for Mr. Howey, you can ask him. If not, you have a question for the other ones, you
can ask them. So would you please introduce yourself and who you're with, please? Glenn Howey, State Broadband Director. All right. So if you had a question about the
broadband for Mr. Howey, would you go ahead and cue back in? And I'm going to go ahead and continue on with our other questions, and then we'll get back to you.
So just everybody sit tight. Senator Dismay. my question
Senator Jonathan Dismang
Unverified
57:51
is on the pre-qualification process and where we came into play as far as legislative members some members
were asked repeatedly to sign on to letters to companies we've never heard of to do work in our districts and was kind of explained to us if you don't sign on to a letter then it hampers the ability to get broadband put into your area it's a very strange process because I know nothing about broadband or fiber or satellites or you name it but yet we're being
asked to sign on for companies. Did that play a role at all in this pre-qualification process? Where is that
Speaker 28
58:29
component in the process? That was part of the rules of the original rounds under the old NTIA rules. You got additional points for scoring your application if you had support from school board members, representatives, people in your area that would support you
as providing the broadband service in your area. It was just strictly a metric for additional points, and it was part of the NTIA rules that allowed companies to get those extra points. But now, since the benefit of the bargain round changed all the rules in June those no longer were considered basically did this have any impact for instance on what's the
Senator Jonathan Dismang
Unverified
59:16
name of the company hometown hometown internet I don't know maybe
Senator Jane English
Unverified
59:24
Glenn could say I don't know if they got a lot of recommendation letters you were limited to five per application and they each counted for a half of a point so I
Speaker 28
59:37
mean total points out of a hundred two and a half so it wasn't a huge um waiting but you know and that was part
Speaker 54
59:45
of the NTA rules in the state then implemented that okay all right thank you
Senator Jonathan Dismang
Unverified
59:50
very much and we might circle back then at some point with the broadband office I mean I'd be curious to know who all received letters from
who um again i don't know how tight the scoring is but i mean we had how many applicants did we say oh 44 44
Speaker 173
1:00:07
in the old round yeah in the old round yeah uh
Senator Jonathan Dismang
Unverified
1:00:10
and two and a half points across 44 may have been a difference and i'd just be curious to know if that were the case uh that never made sense to me i'm glad it's no longer part of the process but we appreciate your letters i mean again i mean even if we were asking to write one for y'all i think it was inappropriate
none of us know anything about any of you more than you sitting in front of us it's not a dig right that was just that was silliness to think the legislators or a school board member or someone else could vet a broadband company but again i i think what i'd like to do is get a list of all letters that were sent for all companies um so we can kind of see and make sure see what was happening there i'd be curious senator
Senator Terry Rice
Unverified
1:01:00
russ thank you mr chair uh mr harry appreciate you making
yourself available i'm coming on quick notice uh and just to piggyback because i'm gonna catch you up a little bit with my statements and with some of the testimony we've had uh you just stated that and i agree with can't expect legislators to really know what's going on with this i've tried what little knowledge i
have but i've learned if what i've been testimony in this meeting that i didn't know is come back with a bargain round after we had public meetings saying there's
going to be fiber everywhere i went to mount ida i went to mina i went to waldron i think i miss yale
county but i told you let them know i was vastly interested they already had their internet is that one i want to see if that testimony is right it's not all going to be fiber since the federal government's backed up one of the most important things that i've written down here It says that Hometown, I don't know Hometown, don't know anything about them.
I'm not going to make any accusations or whatever else. It has been stated they lacked filing broadband data collection report with the FCC. Are you aware of that? Thank you, Senator. First, I'm
Speaker 180
1:02:32
glad to be here in front of you to help explain anything that you need explaining, any questions you may have. I apologize for not having a tie-on. I did not know this meeting was taking place. this morning um so on the the question directly to filing that is something that we're looking at
currently and I think it's good for that answer to be put into context okay so throughout this process the preliminary the pre-qualification process that took place the preliminary selections throughout the process that we ran before June 6 and then after June 6 we come out with this final proposal as as it is called it is essentially preliminary selections okay so the selections that we have made to date and have sent up to
NTIA have met the minimum qualifications for at this point in the process okay I I think the idea that the preliminary selections as they stand today are concrete and that everyone who has been preliminary selected will automatically sign a grant agreement with our office at the end is not the case. There are qualifications that are met through each step of the process, okay? So to pre-qualify, you had to meet certain qualifications as established by the federal
government, okay? To be selected before June 6th, certain qualifications. To be selected in the post-June 6th, benefit of the bargain round, had to meet certain qualifications. And we're still doing this. Friday was a deadline, just this past Friday, for more information to come into our office that we're still evaluating. So this is a rolling process throughout. And if we come to you hopefully after December 4th when TIA does their piece, And we come to you with a list of folks at, at some point before peer and before
ALC on the Friday. Okay. That means that those folks will have met the requirements up to that point. Okay. Then there's a whole nother set of requirements that we have to work through before we would even sign a grant agreement with someone. Okay. So that's what I want to put out there. This is a rolling process with coffee qualifications that happened throughout different parts of the process. Okay. And it's not over. I will say that in this, this filing question, that's at the heart of your question right now
Senator Terry Rice
Unverified
1:04:56
senator rice we're looking at that right now actually okay the other statement that's been made is
up until recently this company on the round one it only completed 15 percent but
it's now up to 31 percent of completion
with when the rest of arkansas is up and around the 60 percent completion would you
Speaker 180
1:05:15
agree with that yeah so you're the round three capital projects fund cpf grant that this particular preliminary selectee has ongoing i think the latest update is about 32 percent completion per our dashboard system um that is not the lowest there are other companies actually with a lower percentage than that at the current time those have to be completed by the end
of next year okay uh and to date they are making progress as they should on
Senator Terry Rice
Unverified
1:05:44
that particular project Okay, and then the other fact that I thought was important enough to write down, and again, I'm not pushing for one person or another, but I do
know this. The current, they're talking about Petty Gene Electric, owns poles and has right-of-ways. In my area, it's the WAVE, Arkansas Valley, that has done a bunch of work.
And as you know, I've talked to you numerous times about there's a section from an energy company that doesn't plan on doing anything. And I've got a number of my constituents that's worried about they're going to get left out because nobody claims them. And I've had that one more thing to catch you up. Representative Vaught and I both brought up this past deal from this initial pot of money is what I call it. When we had a company that came in that was very questionable, that didn't have financial backing,
but they got a bunch of money and spent it on stuff that's still being questioned and hopefully investigated, and I realize your office is not the one that investigates, but you helped push that to it. The problem is they weren't substantive enough to do it, And we had the entity, as I was co-chair of council at that time, and the council gave us a sign-off authority, and I contacted, as I told you, the AEDC office at that time.
And they were signed off on when I did an Internet search on a name and found federal charges on the person that got the grant. And they still got the grant. So it wasn't hard to look them up. Again, not besmirging this other company we're talking about today, but that's the stuff in our mind we need to know about. What I want to hear from you, I guess, I'm not telling you what to say,
I don't want the federal government to push you into this bargain round of stuff and just get whoever
you can get, and then we get down the road and it
Speaker 177
1:08:05
doesn't get finished. can you understand my concerns no look with the history um of the program i
Speaker 180
1:08:11
completely understand your concerns um you know before my arrival okay into the office a particular grant recipient and project that you're referring to right a couple of differences one that particular project was
funded all up front right all the money was sent out the door before the project started okay that's one thing to you know our subcontracting help at that time prior to my arrival has been replaced okay with a new entity that's that's two three the particular project you're referencing our team and the Department of Commerce has referred that particular I'm not sure what I can say referred that particular sub grantee and project to the Arkansas Office of Inspector General and the FBI.
Senator Terry Rice
Unverified
1:09:02
I appreciate that. I just don't want to get into that process
Speaker 180
1:09:06
again. Yeah, and I think, well, I can, I didn't want to follow up to that because I understand how the process used to work, right? This BEAD program, especially Arkansas's BEAD program, has been built and designed to, one, save taxpayer dollars, okay, not to the detriment of service to the folks, But how we ran our process was completely competitive and market-driven, and two, to protect taxpayer dollars. So in the past, when projects were fully funded up front, the BEAD program is different, okay?
The BEAD program is going to be a fixed amount sub-award contract, and payments will be dispersed upon completion of milestones, okay? So people will only get paid when they actually perform the work. So let's hypothetically speaking. You have a million-dollar grant, okay? I'm using too much time, last thing.
Senator Terry Rice
Unverified
1:09:53
What I don't want to get into is we're warding them. And, again, Senator Hickey,
I think, is the one that brought that up first about how we were paying on maybe the federal.
Maybe he just mentioned it and the federal government came up with it. I appreciate it. It's the way contractors get paid. But you can still put a bunch of money in a project and a company declare bankruptcy, and who's going to come up finishing this? That's what we're
Speaker 180
1:10:26
trying to avoid. Sure. And with the fixed amount, simple word process, right? They're not getting paid unless they're completing the work. Okay. So it's different from before. There's a letter of credit or performance bond requirement for the first 10% of the project.
And then beyond that, once they actually build to homes and get people hooked up, that's when folks get paid. So when it comes time for the grant, the disbursement schedule, and, you know, they've spent $500,000 so far. but they haven't hooked people up
Speaker 195
1:10:55
yet we're not getting paid okay so we are protecting taxpayer dollars by doing
Speaker 28
1:11:02
it the right way i would add though in with the milestone approach if you have a company that's undercapitalized and they've built half of the project and they
may get paid for half of the project maybe they potentially don't have the cash to finish the rest of the project so you have the risk of maybe you still have got 10% done or 15 percent done but getting to a hundred percent if they're an undercapitalized company and they can't manage
Speaker 29
1:11:30
the cash flow it would be a serious risk to the state, in our opinion.
Speaker 13
1:11:43
Representative Long, you still there? You good? All right, let's go
Representative Stan Berry
Unverified
1:11:53
to Representative Berry. Thank you, Mr. Chairman. And first of all, thank you for sitting here answering questions that you, some of them you didn't even know anything about and mr howie thanks for being here interstate 40 and interstate 30 is full of contractors on both sides of the interstate obviously they have negotiated right
away with our own highway department can you tell me and there's been a lot of questions about contractors obviously they have a contract because and obviously they're putting in fiber because of all the interduct that you see up and down the interstate can you tell me how they received and were awarded a contract to do what they're doing up and down the interstate
right now putting in putting in the fiber optic yeah representative it
Speaker 178
1:12:57
would depend on the particular project so um well those is pretty simple to see what
Representative Stan Berry
Unverified
1:13:02
those projects are i mean they're just putting in interduct right now yeah and i mean give me an example of what
Speaker 202
1:13:10
they're doing and how they received their contract sure so it could be for that
Speaker 177
1:13:15
particular company right it could be the result of one of our state grants that has funded that it
Speaker 180
1:13:22
could be a separate federal grant remember to date of the 400 well with the bead program of the 420,000 locations across the state that are getting built to right only about 200,000 of those are through our office so there are other federal grants that have funded over 200,000 locations and different projects throughout the state that we're not responsible for so it's either if you're seeing someone building whether it's on the side of an interstate and and do putting interduct there or in a town or where have you it's either funded through one of
our grants funded through a different federal grant that's actually larger programs than we have or it's their own private capital investment so without knowing the particulars would be hard to to walk through that but it could be any
Representative Stan Berry
Unverified
1:14:05
one of those combinations well what you're saying if i may mr mr chairman what you're saying is that we don't have the state doesn't have a control over all of the fiber projects that are going on in the state right now?
Speaker 180
1:14:22
That's correct. So our office has oversight over the grants that we have issued, okay?
We do not have oversight into projects that the federal government has funded separately, okay? And we also do not have oversight over projects that are privately funded through that particular company itself. So we have our scope, which is the projects that
Representative Stan Berry
Unverified
1:14:42
the state office has funded. The state knows nothing about the contractors that are going up and down the interstate. You know nothing about the construction that's going on if it's a federal project? If it's not
Speaker 180
1:14:56
one of our projects, that is not within the bounds of my office.
If that's something that the legislature would like to put within the bounds of our office moving forward, we can do that. But that's not currently the scope of
Howard Gorder
Unverified
1:15:11
what our office does. I think what you're seeing along Interstate 40 now is privately funded transport projects. I believe, I don't know the details of it, but it's very likely a hyperscale project that's actually to connect data centers, and so that's why they're building all that duct. So it's being done with private funds. The contractor should have a contractor's license with the state of Arkansas. They would have also gotten a permit through Arkansas DOT to Department of Transportation to be on stricken access.
Representative Stan Berry
Unverified
1:15:37
Mr. Howie, do you know every project that's going on that both federal and Arkansas pertaining to the construction? Well, again, that's not our authority, right?
Speaker 207
1:15:48
So I don't have authority over those projects. Who does? If
Speaker 180
1:15:55
it's a federal grant, so the federal agency responsible for that grant, right? So if the Federal Communications Commission at the federal level or FCC has funded a particular project, they have oversight and administrative authority.
If it's one of the state grants, then our office would. So it just depends on the particular grant. Again, so if it's a federally funded project directly through the other federal agency or a private build, our office does not have authority over that project. Thank you, Mr. Chairman. Senator Sullivan. Just like some clarification from
Senator Dan Sullivan
Unverified
1:16:35
the department, You earlier made a statement in reference to hometown. I think it was they're making progress as they should.
Speaker 207
1:16:41
So how do you determine as they should? Yeah. So we have a subcontractor, Michael Baker international, who is responsible for onsite visits. Okay. So let
Senator Dan Sullivan
Unverified
1:16:52
me, let me shorten the question. I don't want to spend a lot of time. So is it based on
Speaker 178
1:16:58
merit as they should based on merit? Yes. We have onsite visits that take place and then engineering firm goes on side
Senator Dan Sullivan
Unverified
1:17:04
and checks benchmarks. And the other statement you made was that
they weren't the worst, that there are people worse than them. So how are they compared to the best?
Speaker 180
1:17:13
Yeah, I don't know if I said worst. Go back and play at the table on that one. They're currently at 32% complete on their particular project. And I was making the point that we have several, depending on the size and scope of the project. How do they compare to the best? We have several projects that are 100% built out at the moment. We have some
Senator Dan Sullivan
Unverified
1:17:34
that are, some of the 100%. Okay, so how do they compare with the best? They're at 30% of it. You know, you have, are they lower quartile, the higher mid-quartile? Where are they in achieving the best result?
Speaker 180
1:17:46
Sure, and look, I don't necessarily want to get into hypotheticals of comparing someone against another because every project is different. Different project start times, different terrain, different types of build-out, different locations, et cetera, different numbers of locations. what i can do is measure the progress for that particular project and as of today they're about 32 percent complete okay is that a good thing or a mediocre
Senator Dan Sullivan
Unverified
1:18:08
thing how are they doing i would say
Speaker 180
1:18:11
as today they're projected to finish their project on time okay thank you thank you mr chair
Senator Jonathan Dismang
Unverified
1:18:23
senator dismay thank you and i just kind of want to make sure that i'm
following along i walked in just a little bit late so i may have missed a couple of things i mean the main thing we're talking about is the process and we're concerned that some entities are not capitalized enough to be able to fully you know build out and complete their project is that the main concern is to head nods good with me all right and so one entity that we've talked about so far is hometown internet and i and again i so i want to go back to the broadband office in your memory but
that's one entity are there other entities that y'all are
concerned about that we need to talk about specifically or just hometown internet i
Speaker 49
1:19:03
had submitted some comments related to aristotle as well um i think the if i would summarize the issues there
Speaker 128
1:19:09
i i don't feel like there's enough funds there to construct the project however i i do know that aristotle has rural digital opportunity funds as well that may cover a portion of that i don't know um but i had some concerns about their total award as well so we're
Senator Jonathan Dismang
Unverified
1:19:24
So we're talking about two companies, Aristotle and Hometown Internet,
and we're concerned that even though they've been
awarded a project, that they do not have the funds or the capital, I guess, to borrow, to complete, to do whatever it may be. And we're also concerned, I think, just to make sure I'm following through, that they have intentionally underbid and they're responsible for anything that's in excess of their bid and they're not to have the ability to do that. Is that correct? The capital issue is really
Speaker 128
1:19:52
the biggest concern for me, and potentially when I look at total cost of construction based on what I know around the state of Arkansas and other projects, just the ability to construct it for what their bid is placed.
Senator Jonathan Dismang
Unverified
1:20:05
Okay. And then, so then just to go back to the broadband office, um, again, I mean, much like us submitting letters, which again is silly, uh, and unhelpful to the process. Um, I mean, there are bits and pieces of this that the federal government required as we score, as we do, as we, the process, all of those things. And so my, my question is, So Aristotle now and Hometown Internet, do we have concerns with them completing the project?
Do we have concerns about their capital
structure? I mean, with where everything is right now, what do you see
Speaker 180
1:20:49
happening? Yeah, thank you, Senator. Look, I, you know, we cannot ever guarantee 100% completion for any project, whether it's Natco, whether it's hometown, whether it's Aristotle, AT&T or whoever, right? You know, I cannot in good faith sit here and say I'm 100% certain that every project
is going to go 100% completion, right? Obviously, that's what we want and that's what we strive for. What I can do is defend the process, okay? and the process that we have run has been fair it has been transparent it's been market driven um and i think just a misnomer for the folks is you know i don't want to have it framed as as they've the folks have received an award to date right we call it sort of selections
throughout the process so to date has been preliminarily selected okay um and as i said before there's different phases of how we're working through and i know sometimes the public it can get a little confusing when we say final proposal people think you know final hard and done which is not necessarily the case they meet qualifications as they go and like i said last week we asked for more information and we're evaluating that likely with more to come the ntia has put out a lengthy document around everything that has to be qualified to be able
to sign a grant agreement right and we're not that far yet right so i'm here to defend the process The process has been, in my opinion, second to none, and we continue
Senator Jonathan Dismang
Unverified
1:22:24
to work through it. Okay, and so you feel as though whatever vetting needs to happen
as we complete the full process and we actually achieve awarding, you think that those procedures, checks and balances are in place?
Speaker 180
1:22:39
Yeah, honestly, I do. I think, again, built to save taxpayer dollars, I think the conversation today is honestly a little bit premature
because we're not there yet okay um and there there are barriers as we continue to move forward on this process okay and
Senator Jonathan Dismang
Unverified
1:22:55
it do you all have the ability then
to so it's 10 has to be bonded or whatever is that can that be increased or is that a federally driven component i mean are there other some other safeguards we can maybe put
Speaker 180
1:23:12
in place sure there There's, you know, the 10% requirement is a, first of all, it was a way for us to get more interest from investors, from providers.
We had, of the 49 that originally pre-registered in our process, you know, 29 were from in-state, 19 were from out-of-state. One of the highest kind of per capita numbers in the country, and that was on purpose. We designed it that way purposefully. The providers will have the option to seek a 10 percent, either letter of credit or performance bond security for their project. And that opens up the ability to do the milestone reimbursement process, which we've talked about, helps to protect taxpayer dollars. To be honest, I would have to check with
Speaker 234
1:23:52
the feds to see if we could look at increasing that.
Senator Jonathan Dismang
Unverified
1:23:55
And here's my last, and then I'm going to be done, I think, on this subject. Can you get us a detailed list of how this process has carried out and some of those safeguards so that everybody fully understands where we are in the process? Because maybe that would be helpful to us. Because the one thing I don't want to do is create legislative bias in a process. I think we need to be careful about that. And so I just, to your point, I just want to make sure it's fair.
I want to make sure everybody's on the Spain page is what we're talking about and where we are, you know, in the process. So if you could get that to staff and maybe the members, then maybe that will help us all understand, you know, are we at, you know, from A to Z, are we at M or are we at Y? I don't know. And maybe that would help give a little bit of or alleviate some of the concern. Yeah, very fair, and I think that makes a lot of
Speaker 195
1:24:47
sense. All right, thanks. Representative Evans. Thank you, Mr. Chair.
Speaker 238
1:24:57
Mr. Howey, thank you for running over at the call. You had stated that you had no knowledge of this meeting was going
Representative Brian S. Evans
Unverified
1:25:04
to take place today, so I appreciate you coming on over and answering questions. You made a comment earlier about the level of authority that your office has, and it seems to me from the testimony, if you didn't know this meeting was happening, then I'm sure you weren't sitting over in your office watching the testimony, but I would encourage you to find some time and go back and listen to the testimony
that's been provided by Mr. Gorder and Ms. Russell and their team. It seems to me the big question right now that we're faced with is currently the next phase, and that is this $88 million, a total of $114 million contract or award or grant that's out there. does your office have the authority uh to determine who who received that or to not allow
Speaker 207
1:26:02
someone to move forward in that process yeah so our our office
Speaker 180
1:26:11
has the authority to if a particular current preliminary selectee right does not meet the requirements for the particular where we are in the process right if we get to whether it's before we come back to peer and ALC maybe January or so or we get to the point where it's grant grant exit grant agreement execution time you know if federally mandated requirements are not met for the next piece our office has the authority
to not move forward with that particular provider that's
Representative Brian S. Evans
Unverified
1:26:40
correct so you have provided a list based upon those qualifications you have provided a list of potential awardees to NTIA is that correct that's correct and as of today that list that has been submitted has not been given final approval by NTI is that correct that's correct so between today and the time that they give final approval does your office have the authority to contact NTIA and say we need we need to send you
Speaker 180
1:27:12
something that impacts the federal requirements of the program okay then yes okay
Representative Brian S. Evans
Unverified
1:27:21
you mentioned Michael Baker and associates that they do they are doing risk assessments for you they were doing project completion follow-up for you did they do a risk assessment upon the list that you provided to NTIA yeah
Speaker 180
1:27:42
the the there's been a pre-qualification process that
we went through and I'm sure our friends at the table have talked about um this is constantly evaluated right we have folks helping our team go through this stuff um it's it's a lot there's a lot of as you can imagine there's a lot of things involved in the process but yes we have
Speaker 178
1:28:04
uh professional subcontracting teams that help us through this vetting process
Speaker 238
1:28:08
so a lot of different factors could determine the risk assessment of of one of the folks trying to to get this contract is that correct sure sure
Speaker 242
1:28:18
do you know how uh this hometown internet whoever
they are do you know what the risk
Speaker 177
1:28:24
assessment was on them yeah we'll have to go back and look particularly um
Speaker 180
1:28:30
there's not a uh you know as of today this particular applicant right or provider is let's say high risk or medium risk or low risk really risk ratings would come in a little bit later in the process as of today it's has any applicant met the qualifications okay right i think that's a distinct difference
Representative Brian S. Evans
Unverified
1:28:49
that there's not a report out there right now that shows a risk
Speaker 180
1:28:54
assessment on hometown internet what we have to date is records of meeting qualifications to date or not right and the folks that in the application process and the 20
Speaker 178
1:29:08
that we have sent up so far have met the qualifications to date
Representative Brian S. Evans
Unverified
1:29:13
I had seen a report I'm not sure exactly what all went into that assessment what qualifications were asked for that assessment but in that report they were given a high risk uh for uh for this program um if i can
Speaker 180
1:29:29
can i interject yes certainly yeah
probably what you're referring to is the risk assessment report that we have actively ongoing for our current projects okay that are underway right and so there and i know the report you're exactly talking about um it lists out the risk of like not completing the project on time right as as and there's many factors in that and again some of those so
Representative Brian S. Evans
Unverified
1:29:57
being a high risk in that report that is on the ongoing projects and you stating that your office has the authority
to not submit an applicant to ntia why did we submit them on for a project that is over 10 times the size of what they're already messing
Speaker 180
1:30:25
qualify it as quantified as messing up I would say that as of today there are 32 percent complete on the current project as the last site visit that our team went another site visit is
I think scheduled pretty soon because they have self-reported being above that percentage now we have to go in the field and certify and check that um you know and to say that again 32 complete on track to be completed um i would leave it there could you reach out to
Representative Brian S. Evans
Unverified
1:31:00
nti today and send a revised list i i don't
Speaker 178
1:31:05
know that that that case i would say because i know
Speaker 180
1:31:08
there's there's a there's a large concern i feel amongst statewide stakeholders including members of this body right around wanting to get fiber to as many people as possible i think that's an important has been told to me is an important aspect of what the general assembly is looking for all right i would note 75 percent of hometowns preliminary selections right the only other applicant for 75% of those locations is a satellite provider. Right. And so again,
thinking about where that goes, I think the conversations today, knowing the process is not complete, right. We need to continue to move forward, continue to vet on additional requirements that at each stage of the process happen and let the process play out. Yeah. Well, thank you
Speaker 238
1:32:04
for answering those questions, you know, Mr. Howey, I can't imagine the weight that's on your shoulders right now. You've got one of
Representative Brian S. Evans
Unverified
1:32:12
the most important jobs in the history of the state of Arkansas
right now laying on your desk. It affects every citizen across our state. We've passed legislation over the last several sessions for the betterment of every Arkansan. It affects maternal health, mental health, rural health, education, public safety, criminal justice, municipal funding, and I could go on the list. And every one of those has a common denominator, and that's high-speed broadband connectivity. It's a game-changer for our state.
It's everything about the future of economic development of our state. The people in our rural areas are the ones who are going to be the most negatively impacted by this on so much of the policy that we've passed if we fumble. And based upon what I've heard in testimony today, we are looking right in the face of a major failure of an $88 million contract from someone who seems to have no qualifications whatsoever.
And whether you have the authority or not to fix that, I hope that through this meeting today there's brought a lot of awareness to problems in this system and in the process. I am not saying that your office has not done the very best of your ability, that you've not followed, that you said the process has been spot on. You can only follow the guidelines that are given you. But we need to take a real hard look at where we are in this process. This is too big of a deal for the state of Arkansas for us to mess up,
and I feel like we are right on the edge of messing up. with this applicant and this big of a project that's going to
Representative Zack Gramlich
Unverified
1:34:01
affect six counties in the state of Arkansas who need this the most. Thank you for being here. Thank you, Mr. Chair. Thank you. Senator Payton. Thank you,
Senator John Payton
Unverified
1:34:12
Mr. Chair. And I definitely want to thank Speaker Evans for his comments. I don't think he overstated that at all. It is very important. And if we took
everything we heard here today at face value we should be chasing down that paperwork and getting it back in our hands and and everything but i'm concerned as to why we don't have the other side of the story here today uh you're saying you didn't even know this meeting was going on staff or or mr chair did anybody contact hometown to afford them an opportunity to be here to to speak to this do they even know if it's
going on so like i said taking everything at face value do what i believe we were just trying to find out
the facts okay well facts are a funny thing if when you hear both sides of the issue taking everything at face value i think it merits us being extremely alerted red flag chased down paperwork but i wouldn't want to do any of that without hearing the other side of the of the argument here and so i don't know when we can be afforded an opportunity to question the stakeholders in hometown internet let them defend themselves or or get more thorough vetting
of their capitalization and status. But like Speaker Evans said, I mean, this is too important to fumble. And we may need to be chasing down the paperwork and stopping the grant. But I think we ought to put forth a serious effort here to let the other side defend themselves. Thank you. That's why we're here today
to kind of get the facts out and get the questions and knowledge to everyone that does not know anything about this.
And I believe that if there's no grants that have been awarded yet, then there's nothing to bring Hometown in because they're not awarded yet. I think we just need to know the facts on what they can do and if they can do
the project, if that's the one
Representative Jim Wooten
Unverified
1:36:29
that is awarded. So go to Representative Wooten again. Thank you, Mr. Chairman. I totally agree with Representative Evans and Senator Rice and Senator Payton.
This is too big, and I've had this fear and concern about the process that we're using. Can you tell us, this is for the department, can you tell us who's in control of that office? Is it you or the federal government? - Thank
Speaker 177
1:37:03
you, Representative. So, yes, as the State Broadband Director, I'm in charge of the office, okay?
Speaker 180
1:37:10
But we are subject to the authority of the funding federal agency, okay? So when we run this program, everything that we do, okay, from an administrative oversight, okay, is through NTIA. It's a sub-agency of the U.S. Department of Commerce, okay? So as an example, before June 6th, when we had the application process, before June 6th, the federal government said 75% of your scoring criteria,
what you're going to judge people on, we are defining for you. You have no say in, okay? And we're going to allow you to decide what the other 25% of the scoring looks like. And that's where five points from, or two and a half points from letters of support came from. That was our office trying to find a way to allow government officials to have a say in the process, okay? An example, post-June 6th, for example, in how we're judging these applications,
NTIA has said, with some caveats around what's priority and what's not, lowest price wins. okay and that's from NTIA okay now there's certain things in there that we can try to do you can you can say for instance does a certain type of project meet a priority definition to be given sort of first look okay and we worked through that we had 256 or 255 different geographic areas
that people could apply for we had over 700 applications come in and we looked at the every application for every project area and went through and said does this particular application meet a priority or not do we look at it first or look at it second basically and outside of that lowest cost per location wins okay and that's from NTIA that's an example of me not having the authority to do anything different than that okay now and in this process we end up you go through that
process we had 90 days to run it federal government said remember as many of you know i've been talking to you guys about the b program for years now right and working through the process and planning for years my first day on the job august 1st of 22 we were planning for the b program okay years of planning we get to june 6th the feds say nope you got to redo it and you got to do it in 90 days okay with the restrictions of how i've just described on how you look at projects and that's what we did and so that being said with a 90-day timeline we can't look at everything in 90 days as
far as all the qualifications that have to do through the whole thing that's why through the different phases of the process there are different qualifications that you evaluate as we move forward right one of which
Representative Jim Wooten
Unverified
1:40:12
is capitalization okay my question was who makes the final decision is it you or the federal government and what's the seven is the 75 percent in a card with what the federal government wants and you have a 25 percent is that what you're saying yeah the old way before
Speaker 180
1:40:33
they changed everything. The old way was that the federal government defined 75% of the scoring criteria and the state was able to define 25% of the scoring criteria. When they made the change in the program June 6th, all that went away, gone. And they were very prescriptive and said, this is how you're going to do it from a judging applications perspective and evaluating applications perspective you say the change came place
Representative Jim Wooten
Unverified
1:40:59
by the new administration on june 6th
they released a new policy notice that changed the program
mr chairman it this this is just as confusing as it can be to who has the authority over that money and and bottom line being is it the federal government that has the final say and if and And my question is this. If the lowest bidder is the one that's successful and has been vetted, then why the bargaining aspect to get a lower price if we're taking the lower bid?
If the federal agency requires you to take the lowest bid, then what is the bargaining process and who does that? Is this your office, the federal government, or is it
both? I think I can try to answer the question, okay? This is not
Speaker 178
1:42:02
me sitting in a chair deciding who wins and who loses and who gets a grant and who doesn't.
Representative Jim Wooten
Unverified
1:42:14
Wait a minute. I don't need a long dissertation again. I ask a simple question. Who sets the parameters for the bargaining, and why is it necessary to bargain if you're taking, in your opinion, the lowest bid based on whatever the evaluation is by your people, and you're taking the lowest bid, what is the bargaining process about?
When you say bargaining, what do you mean? I'm referring to what Ms. Russell kept telling us,
Speaker 259
1:42:54
that we were in the bargaining stage right now. I think that's a misnomer. It's called the bargain round to get a bargain for the taxpayers. Why do we have a bargaining round? Because the new NTAA released new rules on June 6th that said, We're going to go one last bid round and let companies have the lowest price possible to get a bargain for the taxpayers.
The state doesn't have any need to bargain with these companies or allowances to bargain with these companies. It's just kind of like the term that NTA called
Speaker 29
1:43:35
this round of bids, the bargain round, so we can get a bargain for
Representative Jim Wooten
Unverified
1:43:40
the taxpayers. I understand what you're saying. So in reality, it's the federal government and not the state. Is that correct? Because
they call it the bargaining round.
Speaker 180
1:43:54
So the federal government set the parameters of the program, and then my office executes the program at the state level and runs through the selection process.
Speaker 29
1:44:09
it the benefit of the bargain round, like we were going shopping and getting the best bargain possible shopping I'm familiar with that well I'm
Representative Jim Wooten
Unverified
1:44:18
I'm all in favor of saving the taxpayers money let me be very clear I'm in favor of that
but what I don't want to see is someone knocked out of the bidding process because someone at the federal level says we don't want that done that way we think this group is the one that
Speaker 13
1:44:41
should have it. Thank you. Thank you, Mr. Chairman. Representative Rye, you're
Representative Johnny Rye
Unverified
1:44:48
on. Thank you, Mr. Chairman. Let me ask you this. From the get-go, we've passed laws. And then on those laws that were passed, I'm sure you had some kind of federal overreach or something in this. But
what I would like to ask you is this. There has got to be a certain amount of work, a certain amount of equipment that fall within a certain stage, okay? Each stage should be a block of money to a company based on the progression that they have made. And I just wonder if you guys are operating it that way, or you're just paying out as the federal government, you know,
Since funding down here to you, are we actually getting this work done for each one of those companies that are drawing funds? Sure, and the program has
Speaker 180
1:45:50
changed over time, right? Originally, and speaking again to the project that Senator Rice referenced earlier, in the first couple of rounds of this program, the funds were all sent out up front,
Speaker 178
1:46:02
right? Here's your lump sum check. Now go build it, okay?
Speaker 180
1:46:06
Then the state pivoted and changed and said, we're going to do a reimbursement program.
So as providers or grantees, awardees spend money on their project and are building out, they have to show invoices and they have to show proof of payment to the state. That's the process we're running now in round three, the round before this one we're talking about now. The projects that are ongoing and getting built out now are on a reimbursement basis. So they are reimbursed as their expenses are incurred and proven to the state, okay? Moving forward into the BEAT program, we're going to pivot again,
and we're going to pay out based on performance, irregardless of how much is spent. So as you perform, you get paid. Follow-up,
Representative Johnny Rye
Unverified
1:46:57
please. Is this the way that you're operating
Speaker 180
1:47:01
now? In the BEED program, we'll operate that way. In the current round, the current projects are reimbursement basis as expenses are incurred and submitted to the state. So they submit their invoice that they paid.
They submit their proof of payment, like a check or an ACH payment, so forth. And we go through and verify those and then reimburse the provider for their expenses. That's
Representative Johnny Rye
Unverified
1:47:27
how it operates right now. Yes, sir. And that sounds okay. But what I would like to know is we're looking for this state to get tied together on the broadband. Now, do we deliver money to these folks after we know that that work has been completed in each stage,
or do we just do it as the federal government sends money to
Speaker 178
1:47:50
us? No, it's as we verify either expense in the current version of the program, verifying their expenses. That's when we
Speaker 180
1:47:56
reimburse. in the next one that we're talking about today the bead program we will disperse funding as construction is
Representative Johnny Rye
Unverified
1:48:05
built out yes sir but that's still not what i'm looking for you you say that you're doing this on their expenses but what about the actual job itself that's what i'm for every one
Speaker 178
1:48:16
of these folks sure so a part of that is again as
Speaker 180
1:48:20
we mentioned earlier that we have a team that goes out and does site visits and goes to the project and checks it and visualizes the the progress and takes pictures and documents it and then certifies that to our office that's a part of the process yes thank you mr. chairman senator hammer
Senator Kim Hammer
Unverified
1:48:41
thank you uh i'm gonna direct this to you glenn the the company you're questioning the hometown internet they're currently doing work
Speaker 270
1:48:51
in the state is that right yeah they're currently building out a a project
Speaker 186
1:48:56
yes what's the value of that project i want to say it's around eight million dollars i think seven point four
Speaker 270
1:49:02
yeah seven point four eight okay and the and the contract on the question now is 88 million is that right yes bundled together yes okay because there's several projects in that but all together yes okay and as far as what you did to
Senator Kim Hammer
Unverified
1:49:18
vet whether they are financially fiscally responsible to be able to take on that did they meet the criteria that you laid out or was that
Speaker 180
1:49:26
criteria laid out by the feds or both yeah so to date they have as all of them all 20 preliminary selectees have
Senator Kim Hammer
Unverified
1:49:35
met the federal requirements as of today okay because it seems like the question listening to all the debate is the two that are at the table are questioning whether or not they are fiscally able to meet the expectations of getting the work done where we won't get stuck with a bad provider. So do you have any response to that if I've not mischaracterized what we're
Speaker 180
1:49:56
hearing today? No, look, I would say, you know, generally the capitalization and being able to complete a project, right, is one of the things that we have to account for. Okay. Now folks are not building out the whole thing at once. Okay. Some providers go out and get extra equity investors that are added to their their their portfolio of owners right and help capitalize things some folks go out and some combination of that plus additional loans plus additional credit
that happens all the time and again capitalization is something that we're evaluating and down the road another barrier to this to executing grant agreements right with any of their preliminary selectees, no matter who they are, is being able to demonstrate, right, their financial capabilities. But on this particular
Senator Kim Hammer
Unverified
1:50:47
one, have they demonstrated to you, is it a matter of, hey, here's how we're going to capitalize, or is it a matter of, hey, we promise that we will capitalize?
Speaker 177
1:50:59
Yeah, to date, they have met the federal requirement to be at this stage of the process. I would like to add,
Speaker 28
1:51:07
though, as I said earlier, the federal requirements are to certify that you have the financial capabilities. In fact, that was just part of the certifications of the additional information that Glenn was talking about that we did on Friday. We had to check a box that said we certify that we have the funds. We check a box that said we certify that we have the financial capabilities.
Again, the only financial information we've submitted to the state was an audit from 23. We did submit on Friday a three-year pro forma showing the sustainability of the operations after that. But the federal rules do say the companies certify, but in our experience with other grants, you need to prove that you have the money. I mean, we literally have to show bank statements with cash in our accounts for the copay amounts for the USDA grants.
And I don't know how you can approve somebody for an $88 million grant or a $114 million build and have them scurrying around and getting the financing as they're proceeding through the project. We need to know up front. And, you know, we brought these points up to the state in our public comments that we filed on August 29th, and yet they still went forward and filed the final proposal, Even though they're looking into the broadband data mapping absence, they do not follow other FCC rules by having broadband labels on their website.
Think about a nutrition label on the back of a food package. You're supposed to have the same thing for broadband on your website. They don't have that. Why did we not look at that before we submitted the final proposal instead of now we're ongoing and no, we can't send an extra list to NTIA with a revised list of people? I don't know how it gets fixed if you chose to revise your list. It's very unclear in the NTIA procedures. We seemed focused on, and I will absolutely say it was a very hard job, and the June 6th pivot was just crushing for everybody, the office and all the companies in the state.
But there was 20 companies that asked for an extension to further review and do their due diligence before they submitted their final award. We went ahead and submitted it. Then we said on the exact same date we're doing a comprehensive review. why did we not do that before we submitted the final awards? Because I don't know how you back it up now. All right, and let me close just by asking this because I want to hear
Senator Kim Hammer
Unverified
1:53:44
your answer to it, and I'll direct it to you, ma'am, because you've been doing a lot of the talking.
Are you here because you're a company that has sour grapes because you didn't get the contract, or are you here because you have genuine concerns about the process by which it's going to be awarded that even if you don't get the bid, you'd be okay with that, but you just have real concerns about the process by which the
Senator Jane English
Unverified
1:54:10
award has come down. Real concerns about
Speaker 28
1:54:12
the process, the way the bid has come down, and our experience with other grants. And I will let Stephen speak because he's the president of our company. These are our citizens that we have worked with for 75 years,
and we are very concerned that they get lost in the dust, so to speak, of the
Speaker 46
1:54:34
broadband improvements. Okay, thank you. All right, I'm going to take my last one,
Senator John Payton
Unverified
1:54:39
which is Senator Payton. Thank you, Mr. Chair. I'll make it real easy. It's just that one of the facts that has come out, I've misunderstood it at one point. It's changed. The $7.4 million project that Hometown is currently working at 31%, 32% of,
Do they receive that $7.4 million on the front end, or is it paid out in the reimbursement scheme that you explained? It's paid out via the reimbursement process.
Speaker 178
1:55:06
Okay, thank you. Thank you, Mr. Chair. All
right, looks like that's going to end this part of our discussion today.
I thank you for being here. Sorry we were late getting you in. It wasn't an early request to have you here, but it kind of got closer to today. didn't realize we left you off so but thank you and thank all of you for
showing up and put some valuable discussion into what we were doing I believe you brought a lot of light to the discussion today and
I wish we'll go to stage two at some point and see what we want if we want to go any further or
Speaker 49
1:55:45
just let the process take over mr. chairman I've if I have a couple questions
Howard Gorder
Unverified
1:55:50
if I may that's you may thinking of the these capitalization questions here are Are the companies evaluated,
Speaker 132
1:55:56
or maybe a better question is how will they be evaluated for capital capability to construct these projects?
Speaker 275
1:56:04
Are we allowed to ask? I don't think you're allowed to ask that to him. No, you're not. Okay. Sorry. Can't cross-examine back there. I
Speaker 279
1:56:10
do think that's an important question. Well, we'll see what
we can come up with on that. I thank each one of you. If you all have anything, I'm going to have to hurry because we've got another group that's coming in. I've been waiting all morning. So if you have anything, you're welcome to respond to Senator Rice or myself with anything you have after that. Also, I think VLR
Speaker 234
1:56:28
is tracking what I'm supposed to go back and get, right? Okay, thank you. All right.
Thank you all. Thank you all for being here. Thank you
for your time. All right. So, colleagues, at this time, we're going to move to round two. We're going to go through round two without having lunch. You can have lunch later. You've got all afternoon free for all ICMA's harnesses. We can get this other one finished up. We're going to bring in some more discussion about something going on that we've had a lot of interest in across our state. And that's about our federal surplus property program. It's been a pretty good concern for a lot of people.
So at this time, I'm going to ask Colonel Hager to come up and talk to us for just a little bit. Thank
you. I'm going to let Colonel Hager have his presentation and
after that we will call up Mr. Barnes to do a presentation. If you would, please recognize yourself and who you are and who you're with.
Mike Hager
Unverified
1:57:41
Good morning, Mr. Chairman, members. My name is Mike Hager. I'm Secretary of Department of Public Safety and Director of
Speaker 285
1:57:49
State Police. I'm Karen Perry, Chief Fiscal Officer with Department of Public Safety. All
right. I think what we're looking for is just an explanation of what's been happening over the years, what has happened recently with this program, and what the future is for
Mike Hager
Unverified
1:58:04
it. Yes, sir. I'll try to keep this as generic, kind of 30,000-foot overview as possible. If you do want to get in the weeds, that's why Karen's here.
Speaker 290
1:58:11
She's going to have to do that. basically about uh three years ago the federal government changed the way they started liquidating their property um i've been even on that one i can't get into you know great deal of specifics but you know generically they started taking a lot of their plot or property and putting it on deals i think it's govdeals.com maybe and they're able to sell that property turn around put it back into their agency so you know just for instance if the department of interior had a bulldozer
instead of liquidating it and in the old way making that available to the or the state federal surplus programs instead they sold it themselves and or they sell it themselves now and they put it back into that program honestly it's more efficient as a federal taxpayer i'm glad they're being better stewards of our tax dollars but unfortunately when they made that change that had a direct impact on the federal surplus program that is uh run under adam so about
three years ago we were making or up to about three years ago we were making enough money at the program to pay the bills pay the overhead and basically have had the ability to put about $720,000 in the bank or, uh, in the program. So once that, uh, that change was made, that institutional change on the federal government side, um, we started losing money and depleting those, uh, that balance. So in, you know, again, approximates, Karen can talk about specifics if
Mike Hager
Unverified
1:59:52
you'd like it, but approximately in 23, we lost $300,000 and 24, we lost $300,000 and in 25 we lost our own pace to
Speaker 290
2:00:01
lose about another three hundred thousand dollars so in uh and i'm guessing but about late june early july somewhere in there um we notified the governor's office that you know we have about through the middle of october ironically that um we've got the funds in place that we can continue to make payroll and uh pay the bills pay our leases pay our
utilities things like that and after that um the money's gone uh so i should have already said for those that don't know um the federal surplus program does not receive any general revenue or special revenue so um it's one of the few entities within state government that has to sustain itself so um it's you know it honestly it wasn't a decision to be made at least you know not on our part you either have the money to pay the bills or you don't and unfortunately uh we didn't And so we consulted with the governor's office.
We talked with OPM and TSS, and the decision was made to begin the liquidation process and shut it down. There's two processes that are currently in place that are going concurrent with one another, and that's the federal government's process through GSA and what they require in closing the program out, and then also, of course, our RIF process and RIF policy under the state. And so we are kind of in the middle of doing those two things at the same time.
So it was talked about that we had, I think, at least twice in the last couple, three decades, I believe once in the BB administration and maybe once in the Huckabee administration, there was one-time money that was used to kind of build a program out and get it back on solid footing unfortunately if you look back my understanding of those those they were dips where there had been a lull and the ability to get some of the items that is capable
of sustaining the program but it was not a sustained loss the way it is now so the if again Knowing that it is just the program has just changed. It is what it is. It's unfortunate. But right now, the type of inventory that we can get, the simplest way I know to put it is we're spending thousands to make hundreds. So and it's just simply not sustainable. So beyond that, it becomes an ideological issue on, you know, do we use state money to sustain the program and keep it open or not?
And that, I guess, thankfully, is above my pay grade. But the fact of the matter is, as it stands today, it simply cannot support itself. So, you know, there was no decision to be made there. I mean, we had to close it down, and I hope that's enough to at least. Okay, so I guess I'm going
to have a question first. I know we already have some people lining up on to ask questions. Sure. So the products, what you're saying, some of those products are not available.
They're going to gov.com. Right. Okay. So the big-ticket
Speaker 290
2:03:20
items, I hate to use this analogy, it's silly, but my understanding of the way, if you've ever seen
Mike Hager
Unverified
2:03:26
the TV show Storage Wars, where we would have units or lots or whatever the case may be that would become available for the program to bid on compete for whatever and it's kind of like you're
Speaker 290
2:03:37
buying that storage locker and they open the door you look in there and you see nothing but junk but you're hoping there's
that one or two big ticket item in there that's going to pay for the overhead and your expense buying all that junk having to get rid of that junk and that one or two you know thing is going to be able to pay for it unfortunately we're kind of in the same boat on this and even though it's not junk and it is absolutely beneficial to our local partners and our you know fire departments sheriff's departments you know all that it's absolutely beneficial to them but it's not there's no big ticket items in there that are sustaining the program you know so the days of
of us getting the road graders, bulldozers, fire trucks, and all that, they're gone. Also might want to point out that, you know, it's been talked about that we are the only program that's actually shutting down. I'd argue that we're the first program that shut down because we're self-funded. The other states that we're aware of are, they're funded by some form of general revenue. So they're taking losses as well, but they're funded.
Mike Hager
Unverified
2:04:47
They're not, you know, they're not set up the way we are.
We were contacted by Ohio, I think, last week that said, hey, we're going to have to close down, too. We need to
Speaker 290
2:04:58
know what this process looks like. I mean, they're all in the same boat. It's just the way we're funded,
Speaker 294
2:05:08
quicker. Okay. You ready for questions? Yes, sir, I think. Senator Payton,
Senator John Payton
Unverified
2:05:13
you're up first. Thank you, Mr. Chair. I mean, obviously, I've been in business all my life, and you can't operate in a negative cash flow situation.
But, you know, sometimes within an entity, you have certain modules that operate at a negative because they benefit the other modules that are operating at a positive. Right. So when we look at city and county and state government, I see different modules. And when you say that this program has absolutely benefited the fire departments, the sheriff's departments, the city police, and those programs that qualified for it, they were able to purchase equipment through your entity at greatly reduced prices.
Which if they could not have purchased, would they have had to buy it at retail? In other words, were those purchases necessities or luxuries? Because if they were necessities, then at some level, state taxpayer dollars are now going to be paying retail for those necessities instead of being able to have a program that lets it flow through at a greatly reduced price.
So how much did you say, $600,000? What was your...
Mike Hager
Unverified
2:06:43
We depleted about $720,000 over
Senator John Payton
Unverified
2:06:45
three years. Okay, so let's just say three years, $720,000. That's $200,000 a year, $250,000 a year. How much has it benefited us that all of those government agencies at the city or county level were able to save budget money?
Or do you just think it was a luxury that they didn't actually have to have those products that they were purchasing through you? I'd
Mike Hager
Unverified
2:07:21
like for you to comment on that overall. Yeah, no, I absolutely don't think it was a luxury. And I absolutely think that the items that they can get now are still beneficial. The difference is what has to be pointed out is the items that they got in the past. So the ability for a rural sheriff's department to purchase a dump truck, or I'm sorry, a police car, truck, or whatever equipment it was, or a county judge's office to buy a dump truck or whatever, that was incredibly beneficial.
But that all changed three years ago for the most part. I mean, there may be once in a blue moon that you're still going to be able to find something like that. But for the most part, that all changed three years ago on the part of the federal government. So if all that was still available the way it was three years ago, then I think that
Speaker 290
2:08:08
we should fight tooth and nail to save it. The problem is now is I can't make that same argument. Is it beneficial? Of course it is. I mean, if they can buy folding chairs and, you know, and miscellaneous type items, if they can get there now, it's beneficial.
But, you know, again, truthfully, it becomes more of an ideological issue of, as
Mike Hager
Unverified
2:08:32
it were, several hundred thousand dollars to taxpayer dollars to maintain this ability for them to be able to buy folding chairs and tables and things
Speaker 290
2:08:42
like that. Now, if it was the ability for them to buy dump trucks and police cars and all that, absolutely. I
Mike Hager
Unverified
2:08:51
don't think anybody would argue that. But now it's just the type of inventory that we can get and put
Speaker 289
2:08:58
out on just a black and white, you know, business aspect.
Senator John Payton
Unverified
2:09:03
If I could follow up, Mr. Chair, that's what I'm asking for. I'm asking for your, going forward, not in the past, do you see items that they can obtain through this program that are necessities that would save them more than $250,000 a year as a state? Because, I mean, we could cut our nose off to spite our face here. We're going to save $250,000, and then we're going to be issuing grants to every fire department and every sheriff's department to go pay retail for those tables and chairs and office furniture and such, and that's going to cost us way more than $250,000 a year.
So I need your professional opinion going forward, not in the past. Are the products there that would be necessities? And would we be able to save a significant amount of money by coming through this program instead
of having to purchase some retail? From what I've seen the last three
Speaker 290
2:10:05
years and look at the numbers, my opinion is no. It's not. Thank you. And, again, I
Mike Hager
Unverified
2:10:11
have no way of knowing, but, you know, what I see inventory that's available now
and what we're getting and, like, the last one that we did not take, it was basically
Speaker 290
2:10:21
jumped from TSA at the Denver airport. That's what we were going to be allowed to get. They don't bring that to us. We've got to send a crew and tractor trailers to go and get it, bring it back. And, again, so now we're spending thousands to make hundreds. And if you look at the inventory that you're actually getting now, once, you know, I'm not at all going to suggest that once every six months or a year that you may get something that would really be beneficial to an agency.
Mike Hager
Unverified
2:10:49
But if you look at the records and you look at what they're spending over the last three years compared to two years before that, it tells me that they're
Senator John Payton
Unverified
2:10:59
not really getting anything of any value. And I appreciate your opinion. That's what I asked for. And it means a lot to me. But you did bring up one other question. In the absence of this program, will there be a source that can be accessed by those local sheriffs and fire departments through the govx.com
Mike Hager
Unverified
2:11:16
or whatever? Yes, sir. They can still compete for that. And I think, I don't know for sure, but I know one
Speaker 290
2:11:22
problem the federal surplus program had is that we can't sell to the public.
If we could sell that inventory, even in what we have right now, we could probably sustain
Mike Hager
Unverified
2:11:31
the program, but we can't. You have to have a government ID or be a veteran-owned business or something like that. The govdeals.com, I'm not 100% sure if the public can bid on those items or if it's only federal government, or I'm sorry, only state government the way it is for us. But I'm not going to pretend like you'd be able to get the same deals that you could if you were able to get it through a federal surplus program. Probably still, well, no doubt, much less than retail, probably less than wholesale,
but it probably won't be as good of a deal. But all that inventory is still available. It's just not available to the federal surplus programs anymore. It's going to
Speaker 292
2:12:11
be on deals.gov now. Okay, thank you. Thank you, Mr. Chair. Thank
Representative Jeff Wardlaw
Unverified
2:12:16
you for the question. Representative Wardlaw, you recognize. Thank you. I'm going to follow Senator Payton's guidelines a little
bit, but first I want to establish a timeline. So when did you all make the decision to start the RIF process and close the federal surplus?
Speaker 311
2:12:31
Do you remember? You can give me a month. You don't have to give me an exact date. I was going to say that would be my guess was
Representative Jeff Wardlaw
Unverified
2:12:39
July, I think. So prior to July, and I get this messed up, and you've got to remember I'm just a poor old dirt farmer, as you can tell by looking at me, so I'm a little
slow. But are they called gleaners or screeners? What are those people called that actually sit in front of that computer screen and find these deals? I know who you're talking about. I
Speaker 289
2:13:00
don't know if they've got an official title. Okay, so we'll call them screeners for our purpose.
Representative Jeff Wardlaw
Unverified
2:13:03
Okay. Were those people placed in any kind of
handcuffs prior to July from your agency or from financial, wherever they get their approval from before July 1st? As far as what they could
Speaker 290
2:13:18
and could not buy? I don't believe so. Okay. Because the decision at that point had not been made yet. Okay. So my
Representative Jeff Wardlaw
Unverified
2:13:28
understanding was, and I may have the dates wrong.
Again, a farmer works seven days a week. I don't really care if Monday through Sunday. Was it September or August, they found a pretty good, I think it was Hummers involved and some other items involved that they were able to screen or glean. Again, we've agreed to call it screening. And then they were told they couldn't go get it because the decision had been made to stop. Am I right about that? Yes, sir. So those
items, would we call those items a big ticket item or would we say that because under testimony i heard you say to senator peyton a while ago those
items were not available anymore so we've proven that they are still available i guess the question is are those items available in enough revenue savings to the entities that would have purchased them that would equal or greater than the three hundred thousand dollars that's needed to fill the gap because it's my understanding all the meetings i've set in it's about three hundred thousand dollars a year they've lost for the last couple years right so are the are those the big ticket items that
would fill that gap yeah well like i told senator payton i'm not going to suggest
that they won't ever come available the question was were those items available after we made the decision that we couldn't screen anymore
Gail Choate
Unverified
2:14:51
from july if that was in august then yes it was after the decision we were closing down so they would not have been able
Representative Jeff Wardlaw
Unverified
2:14:58
to go pick them up so we haven't picked anything up since that decision was
Gail Choate
Unverified
2:15:02
made in june july we finished picking up in texas where
Representative Jeff Wardlaw
Unverified
2:15:05
we had already started but we but we haven't picked up anything new no since july not to my knowledge thank you i'll yield to uh later in the board mr chair represent mcgrew thank you chairman
Representative Richard McGrew
Unverified
2:15:21
thank you colonel hager for the job you're doing for
the state uh also thank you i know me and you visited on this for quite a while uh will express some of my concerns if we and i come from a business point of view i also understand we can't keep going if there's no money to go but we had a a huge access a few years ago and we're we're losing money every year and nobody ever said anything and we just ran till the money run out and i think
it's been stated that things could have been run more efficiently than the way that they were doing so that's a huge concern of mine that why it almost seemed like it was determined we were going to spend all the money and then close it why wasn't their notice given to us a year ago or two years ago there's my understanding is over 900 agencies that have access to these funds and so i'm concerned that there was no notice and no seems like attempts to save this i also
understand it's been passed between several agencies and that there was a commission over it and i think got changed under hudginson so i am concerned of all of that but the biggest concern the one that's already been kind of put forth the money that these agencies save I understand that it would cost us as you're stating two to three hundred thousand dollars a year budget to keep this open but how much are we saving those other government agencies that are benefiting from this
and I understand there's a big question is to what we can get and what we can't get and I'm not sure that's fully been determined and is it even with the reduced amount is it still how much has it been benefiting so do we have two questions one why was there no notice given ahead of time and two has there been a study done to see how much this is benefiting the other agencies in the state of Arkansas and see if it's more than that 300,000
Speaker 290
2:17:34
right so the reason for the notice
is honestly because we didn't have it either and there's kind of a long backstory on that but when when the transformation occurred uh shared services were all consolidated among agencies so at department of public safety we had five or have five agencies that are part of dps adam is one of those agencies the federal surplus program falls under adam so they were the one agency that did not consolidate shared services and the simplest explanation for that is that
Speaker 292
2:18:11
they received a portion of federal funding that requires them to do that job function and that in that function only so as a result everything that came over to dps and shared service like fiscal it hr all that that did not come over with adam we had a fiscal section at adam that once i started and karen came in as the cfo we had a continuing problem with communication issues honestly and we had to continue probably meeting some deadlines for committee and things like that
karen recognized that her and director gary talked about it made the decision to bring that group to dps headquarters that all happened about the end of 24 the beginning of 25 karen's team started doing a forensic audit and they started going through and they started looking at all the programs within dps where we were good where we were lacking you know things like that where we could save money whatever the case may be now keep in mind that was during the legislative session so to say that we're all kind of preoccupied with that and carrying as well so that all these things
kind of got put on the back burner and the first thing that they were looking at were general revenue lines the agencies the special revenues things like that things that could be impacted within the legislative session at some point about june i guess or somewhere in there she came to me and said that we have made it down to basically the federal surplus program and we've got a problem she said they're in the red there have been in the red for the last three years and this is by how much our surplus is depleted it's gone now but our our balance is depleted and we can make
payroll and pay the bills pay the leases uh looks like through about october so we notified the governor's office this is the situation that we're in and started trying to figure out why you know trying to understand why that were well that was the case so um we found out then by talking to director gary and chris that runs the fsp program that there was a change on the federal side on the way that they were liquidating their property and that the items that had always sustained the program are very rarely available anymore and so the items that we're getting now are again more
the you know i hate to say trivial and i'm not saying that it's not beneficial to the agencies there's absolutely no doubt that they are but it's not enough to sustain them so if you go back and you look at the financial records over the last three years the purchases now instead of being for six-figure amounts obviously for large equipment
Speaker 290
2:20:40
things like that i think the average was like seven hundred dollars so is that life changing to an agency it could be depending on how you're funded but you know truly it gets back down to the point now where you know is that the
Speaker 292
2:20:54
best use of taxpayer dollars I mean we've only got so many again I'm thankful that that's really not my job to determine that I've got a budget I have to run an agency and that's that's the end
Speaker 290
2:21:07
of the day for me so at some point that I mean it's a conversation to everybody's point or everybody's um talking point i i don't disagree with is is it beneficial for the state to uh you know to a certain extent to keep a program running even though it's a bad business model and it's not going to be sustainable you know we we do that on in other areas you know that are service agencies
you know state police did not turn to profit but i promise you know this body spends a lot of money on state police so you know it it gets down to um it's just a question of there's so
Mike Hager
Unverified
2:21:41
many dollars to go around what's the best way to spend them and you know once again that's kind of
Speaker 290
2:21:46
above my pay my pay grade but as a whole all I can do is answer the question when asking me is is it sustainable and even if we clean it up and make some efficiencies Karen found some places that she felt
like that we could save money we did that we implemented those changes truthfully it was too little too late at that point um but i think once again you're talking about saving hundreds maybe thousands when you need hundreds of thousands it's there's there's not enough meat on the bone that can be trimmed there to to make the program sustainable so again now it's a bigger question of is it worth it is it worth it to the smaller agencies for the type of equipment they can get now not what they used to get but what they're able to get now
Representative Richard McGrew
Unverified
2:22:35
hundred thousand dollar question i guess i should say well thank you and that's i appreciate that i guess this has been such a good program that served sure served the state and many agencies and and volunteer fire department for years i just hate to see the haste and you know if if they're not sending the stuff now with the federal government that could change you know And so I hate to see it shut down so quickly. Do you believe that it would be worth a second effort since we don't know what it's really saved?
We've never done a study to know what has saved all these other agencies. It may have saved them, you know, a million dollars in this last year, but we don't know that. you think it would be worth taking a shot at this for a year and funding it to see exactly what it could do if
Speaker 290
2:23:34
it was run efficiently and again honestly just my personal opinion is no from the inventory that i've seen that had had become available in
Speaker 292
2:23:41
the last three years and from our
financial records that show what these institutions were were buying um it i don't it would be i would be hard pressed to make the argument that it would be just completely detrimental to their operations to not have access to FSP anymore based on what they were buying at FSP over the last three years. So again, that's not to say that what they were getting is not beneficial, but I don't, I doubt many would have to close the doors based on not being able to do that. And again, that's,
that's a business answer. That's not a, you know, an ideological answer. Thank you. Yes, thank you thank you riffs and ladyman you're recognized thank you mr
Representative Jack Ladyman
Unverified
2:24:28
chairman i'm way over in the corner i don't know whether this is a question or more of a comment but there's been a lot of discussion uh senator payton talked about this a while ago uh many years ago i was a mayor every time we came to a municipal league meeting we would go by and look at what equipment they
had at this site we would buy things there so one year we we needed a backup generate these generator for one of our sewage pumps and we were gonna have to buy one we went by there they had a military unit that we bought 50% of what it would cost us which was thousands of dollars which was a great deal for the city now what I saw when we would leave the Municipal League meetings and go out there it was mostly small towns the big towns had enough money to buy the cattle the new Cadillacs
we didn't we had to buy a used Ford right so so those small towns and I don't know about the counties they might have had the same situation situation but it was a good deal for small cities and you know I think they had dump trucks they had you know backhoes and things like that that were really good for small cities now whether the cities could have afforded that another way I don't know but it was a really positive impact on our budget and I'm sure it was on a lot of other city budgets and we would also buy some trivial stuff i don't want the term
you used but they used to get these big palatators of radios and telephones and things where they got them only god knows but i would buy a pallet of those and we would give them away at our fourth on the river celebration and i got them they're cheap but i didn't need those i mean that was not that didn't really benefit the city it was good but these are the smaller items that you were talking about so that was our situation so it was it was i believe it was a good thing for the cities
uh we could have probably come up with the money some other way without asking the state to do that but it would have cost us now my question is is that still the case today as it was back then is it still small cities small counties and i i see the municipal league in the audience out there i don't see anybody from the county but if you guys don't mind uh could they come to the table
that sit in the municipal league and see if the current situation is
similar what i just talked about i would be
Senator Terry Rice
Unverified
2:27:07
okay and chairman uh cozart comes back and if he's okay we'll be next so can they come up to the table now well we've got other people signed up okay after yeah that'd be fine we'll let them come up with you with the others all right thank you mr chairman
Representative Johnny Rye
Unverified
2:27:28
representative rye you're recognized about a month and a half ago i got a call from doyle hillis which is the director of drainage district number seven which includes harrisburg mark tree lepanto toronson and so forth. And he was really worried about this program and this, you know, this company, not
company, but where you work with this entity. He said that there's a lot of items, a lot of items. Their budget there in Mark Tree is about $300,000 a year. They don't have any money for big ticket items uh colonel and he told me a couple years ago that they actually bought a piece of equipment that would have been close to a hundred thousand dollars for about three thousand dollars and that's just how important that it is to him and i told him i
said doyle i did not know that this was being dissolved i hadn't heard anything at all but i do know that you guys are very very important and i hope that you can do something to get this back on the road again because this is taking care of a lot of towns, especially in towns like Mark Tree and Toronto, which, man, back in the Depression when they had the big flood, hadn't been for the levees. This thing would have been in real trouble, Colonel Hager. So, boy,
I think we're here to help you, okay? Yes, sir, and we appreciate that.
Speaker 290
2:29:10
You know, again, the only thing that I would say to that is that I'm concerned that the program that so many people are or have so emotionally expressed to me and I literally I have talked to more legislators more county judges sheriffs chiefs volunteer fire department chiefs over this issue than anything else that I've dealt with in three years and and I hear them and I get it and I don't blame them and but there's almost like this an emotional want or need to save a program that truthfully changed three years ago it's
come to fruition now but it changed three years ago when the federal government changed the way that they liquidate their property so if the program if the legislature and the governor's office decided to to say give general revenue to keep the program afloat you know I would just hope that people would realize that even if that happened they're still not going to see the type of items that they used to have available the type of items
Speaker 292
2:30:09
that for me like in my personal life would be life-changing i'm assuming for them it's not going
Speaker 290
2:30:15
to be life-changing is it going to
be convenient and you know to to get a few things here and there possibly but um that's the only thing that i would offer on that is that um you know i just i hope people realize that the program they're fighting is so hard to save honestly that that died three years ago i mean it's just
Speaker 292
2:30:34
they're just that stuff is not there anymore not as a general rule not saying it's not ever or not ever will be but when you do have that big ticket item that hits then you're going to have you know
several states that are also trying to pounce if that makes sense
Representative Johnny Rye
Unverified
2:30:52
well colonel and the thing of it is we didn't know i mean i had not heard of this at all right and that occurred about a month and a half ago, and it meant a lot to them, Colonel Hager. Sure. And, I mean, we're here to help. You know, I think that that's our job is to make sure that people are safe and that we don't flood and things like that. So if you can do whatever
you can do, I, for one, I'll guarantee you I'll back you up on
anything that you might want to try to do to keep it going, okay? Okay.
Senator Terry Rice
Unverified
2:31:27
Thank you, sir. Colonel Hager up here at the desk. Yes, sir. I'm going to cut to the chase
on this. You're Secretary of Public Safety. You're appointed by the governor, correct? Yes, sir. The governor approved of shutting this down, correct? Yes, sir. You didn't get any input from any of the entities that receive benefit from this, correct?
Speaker 290
2:31:52
I wouldn't say that necessarily. We talked, I know Director Gary, almost immediately. and again believe me we wish we would have had more or more heads up on this as well the reason why we didn't is what i explained earlier about the fiscal
Mike Hager
Unverified
2:32:08
issues but once we found out about it uh he director gary was actually at an office of emergency management conference and he
Speaker 290
2:32:16
notified those parties the next week he had a meeting with the county judges notified them and then i met with the sheriff's chief sent them an email told them of the issue
So, granted, it wasn't good notice, but as we got the notice, we started making that information available. But at the same time, I'm sorry. The decision had already been made from
Speaker 346
2:32:38
the executive branch to shut it down, correct? I don't know
Mike Hager
Unverified
2:32:45
if that is. There was about, we provided the financial information to the governor's
Speaker 290
2:32:50
office, and there was a period of a few weeks there that they were analyzing that information.
And Karen and I had met with the FSP director and – or the program manager, whatever his title is, and had talked to him about basically trying to
Mike Hager
Unverified
2:33:09
get plans together. Like, if you have 11 employees, can you do it with five? If you – you know, can we, you know, cancel this contract? Can we do this different? So we had a short period of time there that we were exploring other options and, of course, keeping the governor's office informed of that.
But unfortunately, by the time that we knew about this and we knew how dire the situation was, we had about two
Speaker 290
2:33:36
to three months before the money is gone, there is no more to keep it going, and we had to make the decision to either start the GSA process for closing out and the RIF process, both of which take a little bit of time, GSA much more than the RIF, but because we had to make those notifications so there was a decision made quickly but there was
there was at least i would say a few week window that we're kind of grasping at straws trying to find other options okay at what point did you contact legislature i did not now i began getting contacted in fact i believe you called me i did probably one of the quickest uh out of the gate because as soon as we contacted the county judges and all the entities and we advised them, that obviously they were concerned, talked to legislators, and started fielding phone calls immediately.
Senator Terry Rice
Unverified
2:34:29
But that decision had been made then. I think
Senator Terry Rice
Unverified
2:34:35
I think it had. Bottom line, did your agency, the Department of Public Safety, have enough money and a fund that they could fund this for another year? no sir as far as i know i have no idea do you know i'm supposing that the governor's not told you with money she has discretion right it can be used because this you could even tie in with emergency stuff and she informed you at all that she would consider funding this for another year
Speaker 346
2:35:04
we've not had that conversation no sir okay you don't expect her to no sir i don't
Senator Terry Rice
Unverified
2:35:11
expect okay what i'm trying to get to for our committee the only other
way i know of is for the legislature to appropriate money and we can't do that until april physical session do you know of another way we could do that
Speaker 290
2:35:27
within the means of dps no sir that's i mean again i'm glad our cfo is here she she knows the dollars and cents you know to the minute better than i do but no sir i'm not
Senator Terry Rice
Unverified
2:35:38
aware of any this we're gonna have more testimony after you and i don't know if they've got information on we're missing
out getting some stuff you and i had the conversation i understand that i have to make
decisions in my business and i have uh i've cut out some lines drastically uh changed our our growth but i didn't change the net much i just got rid of some headaches and less people uh sometimes you have to do that i don't know that that's right in this case i'm listening to both sides but if we have testimony that some states are getting more stuff than we're
saying is available out there that's going to be concerning if we're not doing something right to get it and i would be open open to appropriating funding for it i don't know if the governor is going to fight us on that or not uh with some of the stuff going on but this is a i think it's been shown this is a benefit to many entities across state of arkansas and it did work for a long time and if there's a way to make it work i'd sure be open to doing it but you're saying your agency
Representative Jimmy Gazaway
Unverified
2:36:56
it in turn okay thank you thank you sir representative gas what you're recognized thank you mr chairman and thank you colonel hager for being here to address this issue i was contacted by a constituent of mine about this who is the band director at the brooklyn school district he sent me an email and said that the brooklyn school district had saved well over ten thousand dollars just in the past few years from using this program and of course that's one
small band program in the state and i can speak from personal experience when i was prosecutor in points at county i remember one day the points at county administration told us that we were going to get new office furniture they loaded up some dump trucks and went to the surplus and came back and i got a really nice desk and the whole office was furnished and it was like what probably less than five hundred dollars for the whole office right and so when i think about that and those types of savings i mean it's along the lines of all the other concerns that have been raised here
already. The point is this program has resulted in substantial savings to school districts, counties, municipalities, all the other state agencies, band programs, you name it, that take advantage of the savings that this program offers. And it just kind of seems to me it's six, one half dozen of the other we're you we can either fund this program or we can set aside
some additional money to pay for all of these needs that are all they're going to arise i mean you think about uh what representative ladyman mentioned about a backup generator humvees that i think representative wardlaw mentioned um the piece of equipment the hundred thousand dollar piece of equipment representative ryan mentioned that they got for three thousand dollars understanding that the program may have changed to some extent but the point is it all is going to have to be paid for one way or the other
so whether or not we fund this program and we allow those savings to flow through to the those other governmental entities or whether we set aside a chunk of money so that they can pay for those it's going to have to happen one way or the other so i just like to know your thoughts on that And I guess how that, you know, given that being the case, how that factors into
Speaker 290
2:39:25
the decision to shut down this program. Well, again, at some point, there truly was not a decision to be made on our part.
I mean, it's either it funds itself, it sustains itself, or it does not. So we're, you know, again, to Senator Ross's point, I don't have a kind
Speaker 292
2:39:42
of a, you know, a balance somewhere sitting in another pot of money that I can, I've got the discretion to say, well, I'm going to go ahead and build the FSP out for another year. I don't have that. All I can do is, you know, report
Speaker 290
2:40:00
the information and go from there. I mean, that's – so, again, I don't – I'm sorry.
Representative Jimmy Gazaway
Unverified
2:40:10
Just to follow up, at the appropriate time, you can finish. Yes, sir. No, go ahead. Well, I think my point is that you say the decision didn't have to be – there wasn't a decision to be made. I mean, well, clearly there was a decision made by someone because I started getting emails from my constituents saying that they were upset they weren't going to be able to take advantage of this program. I certainly didn't make that decision. I don't think anybody else sitting in this room made that decision. So there was a decision made. The question is, and maybe this decision has been put on us now,
are we going to fund the program so that it continues so that these savings can flow through and people can take advantage of it, or are we going to set aside a pot of money of $300,000 and say if you're a county, municipality, state agency, school district, and you need new furniture or you need a new dump truck or you need a new backup generator or whatever, we've got a pot of $300,000 sitting here for you to pay for it because it's going to have to be one of those two things, at least the way I see it. Any response to that?
Speaker 290
2:41:12
No. Again, the only thing that I just would want to make sure that the body knew, that before the money was committed, that the program is fundamentally different now and has been for three years. It's just so, you know, again, I can't speak to, you know, if some of those items that were so important and impactful to those agencies, if they would be available again, if it would be hit and miss over years,
if they'd be available again. But it has significantly changed when you go through the financial records and you look at what agencies and entities were buying five years ago versus what they were buying in the last three years. It is significantly different. Senator Payton. Thank you, Mr. Chair.
Senator John Payton
Unverified
2:42:09
I guess I'd like to talk about the cash flow for just a minute.
So these products, do you purchase them in order to bring them, or do you just nab them whenever they're up for grabs? No, they're free to us. Okay. So the product is free to you. How do you establish a value that the other entities pay for
Speaker 364
2:42:36
it? GSA sets a rate. And from there, that's the rate that we use. When you say
Senator John Payton
Unverified
2:42:41
a rate, you're talking about percentage of value? That's probably
Gail Choate
Unverified
2:42:46
going to be a little bit over my head.
Senator John Payton
Unverified
2:42:49
So does GSA actually put a dollar value on each item? They do put a dollar value on each item. Okay. So they're giving you the item and telling you what you can sell it for. Yes. Okay. You said that you provided financials to the governor's office. Yes. Can we get those? Yes. So if you don't mind, Mr. Chair, I'm requesting that the committee be sent the financials that were provided to the governor's office. So heard. How many different entities, which I didn't realize schools were part of this, but fire departments, sheriff's departments, counties, cities, schools?
Senator John Payton
Unverified
2:43:35
of entities 292 entities purchased last fiscal year so you know you've heard of sam's club yes and they charge a fee to be a member in order to buy the product have you ever considered charging those entities as far
Speaker 367
2:43:50
as i know no but gsa has to agree for us to allow that charge okay thank
Senator John Payton
Unverified
2:43:55
you well i'm just exploring things that help the cash flow so
do you have no i was just
Speaker 368
2:44:01
going to say that's another frustration with the program is that
Speaker 290
2:44:05
we're responsible for it but we're not in full operational control of it either we're under gsa and the federal government they lay out and have so many guidelines that have to be met that, again, for instance, the fact that we can't sell
Mike Hager
Unverified
2:44:21
to the public is huge. M&R and state version of FSP, them selling to the public is huge. We would go in there and they could pick that warehouse clean today,
but we're not allowed to do that
Speaker 289
2:44:34
because of the federal government. We would do that. We have all kinds
Senator John Payton
Unverified
2:44:39
of things we'd like to do. Let's not worry about what we can't do. Let's talk about what we can do. So
Gail Choate
Unverified
2:44:52
how many dollars worth of product did we sell last
Senator John Payton
Unverified
2:44:55
year? last fiscal year we sold 906,000 so what would be your estimate that let's say you've got $10,000
item that would be worth 10,000 on the open market fair market values 10,000 what would I expect to pay for that as a sheriff's department or something coming in there to buy that item from from your entity i don't know um would it be a thousand three thousand i mean i'm just trying to establish a percentage here if we had nine hundred and six thousand dollars worth of sales and that's ten percent then that's nine million dollars worth of product that flowed to these agencies in arkansas
for for the three hundred thousand dollar loss and and from what i'm hearing from the entities that contacted me and from my colleagues is that it's like a 90% savings, what they pay for a product versus what it's worth, you know, market value. So if a market value is $10,000 and a sheriff's department's getting it for $1,000 and we did that 900 times, I mean, that's $9 million worth of savings to Arkansas.
Speaker 286
2:46:12
Is my math wrong? No, I don't think your math's not wrong, but I think what the issue is is those items are not available
Senator John Payton
Unverified
2:46:21
any longer. So you said the last fiscal year? Yes. And Colonel Hager's been saying for the
last three years the program changed. So has it changed in the last six months, 12 months, again, or was the change three years ago? Well, the change has
Speaker 286
2:46:37
been happening over the past three years. Gradual? Gradually, yes.
Speaker 46
2:46:42
All right, thank you. Thank you, Mr. Chair. Representative
Representative Jeff Wardlaw
Unverified
2:46:49
Wardlaw. So, I don't remember who asked the question a while ago. I think it was Senator Payton again, but they asked you about notification and who you notified, and you kind of walked through the folks that were notified and that Director Gary had notified county judges. When you guys told us that in council a couple weeks ago, I asked that question in council. I called my county judge when I walked out of that meeting.
I said, hey, do you remember getting told federal surplus shut down? He goes, no. He said, they told us there was an issue, but they didn't tell us it was shutting down. And then I also asked you that day, did you notify the leadership of the legislature? And your answer was no. At 10%, if my math's wrong, let me figure it real quick so I can make sure my math is correct.
We walked away from hundreds of millions of dollars off of $900,000 times 10. i just don't understand why we couldn't have had a meeting and said hey here's what we're looking at because you know we don't have chris here he's a director correct yes sir you know chris is a guy we should have at the table right now because he's a guy that runs a program knows of the program and
all that but i'm telling you if you if you restrict or handcuff whatever word you want to use and earlier in my question i used the word handcuff if you restrict what he can screen you're absolutely going to be in the hole and my understanding and i've had some conversations indirectly with chris lately he was very much restricted way before july on what he could screen and maybe that was a good thing i don't know by who it wasn't by us and that's where i was asking that question a while
ago is who who is doing that was it director gary's office director gary and i see his head not know
Speaker 290
2:48:56
but yeah right and i don't mean this line but i can tell you without even looking at director gary that he's got a lot more on his plate to worry about without telling chris how to screen property at the federal surplus program so i can tell you that while we did restrict him after this all came about about we we can't pick up more because we're going to have to liquidate this it's going to cost us money to get to move a lot of this you know so we certainly don't want
have gained more he was not under any kind
Mike Hager
Unverified
2:49:26
of restriction not from anybody at dps leadership or director gary because
Representative Jeff Wardlaw
Unverified
2:49:30
it was under director gary directly before now correct still is and still is indirectly through you right
Speaker 375
2:49:36
that's right mr chair i asked my question
Representative Jeff Wardlaw
Unverified
2:49:38
to you and the staff and i've heard some other members ask for some information they've agreed to get Is there any way to put this on the agenda for next month and invite Chris or Suspena Chris, however that process works, to
make sure we get Chris here to testify before the committee?
I think both chairs are good with that. We'll see
Speaker 332
2:50:08
when we can get that scheduled. Thank you. Representative Ladyman. Mr. Chair,
Representative Jack Ladyman
Unverified
2:50:12
Mr. Secretary, I've got another question based on all the discussion here. about what really happened three years ago. Because even going back to when I was buying things, I could order stuff on .gov if I wanted to and send somebody to Oklahoma City, the air base, and go get it.
Or I could get it from you guys, probably maybe even a little bit cheaper, and then I'd have to go get it. But that was
always available through this webpage. So what really
Speaker 299
2:50:47
changed three years ago? My understanding is
Speaker 290
2:50:50
the ability for those agencies to liquidate their own property and bring it back within their agencies. I think before it was something more similar to what the state does.
For instance, I wish that the state, state police, was
Speaker 292
2:51:04
able to liquidate our cars and recoup that expense and bring it back into our budget line to offset our operational expenses regarding fleet. But we don't do that because the way the state liquidates property, we wring the life out of it and we send it to M&R. And then M&R sells it for whatever they can get. My understanding is, and again, I don't know and I can't speak in great detail about that, but my understanding is, generically, the federal government was allowed to do that.
They were allowed to sell their larger ticket items, their more valuable items, and put that back into their call center or their agency instead of, like, just putting it out to general funds. That's the generic explanation I was given. So the way these
Representative Jack Ladyman
Unverified
2:51:50
federal agencies made stuff available was changed. Right, that's what's changed, exactly. Because they were getting no money for that. Now
they may be getting money for that.
Speaker 290
2:52:01
Right. Truthfully, they got more efficient with their tax dollars, which that's great,
but it negatively impacted this program just like if we looked at it from a state standpoint and said that it's it's not a good business model for the state to spend good taxpayer dollars after bad that's something that's not sustainable but again unfortunately then the cities and the counties and these other entities now they're going to feel that so the the problem is that why i certainly don't want to pass that issue on to our
Speaker 292
2:52:29
local partners and our more rural partners especially you know to all of your points the ones that are funded the least the problem is again it just it
doesn't need to be lost that they the the types of items that they used to be able to get that were so critical and vital or vital they're not available anymore i mean they're just very few and far between i'm not saying it's not ever going to happen that but they're they're just not available
Speaker 350
2:52:58
anymore so you know in a nutshell it's that's that's the dilemma okay thank you
Representative Jack Ladyman
Unverified
2:53:04
for that one more question mr chairman hurry up we're running away uh it
was said that we could not do anything
until session i assume we could do it in the fiscal session as far as funding of this program putting money aside for that but uh i believe and this may be staff instead of you but uh I believe money could be moved from another line item. Budgetary changes could be made. We do that all the time. We move money from one line to another. I think that could be done to cover the cost of this program if this legislative body wanted to do that.
I guess that's a question for staff. Well,
we can't do that here today, I can tell you that. No, I'm not saying today. That's something, I mean, it's going to take a lot of things
to get involved in that. That's something we can discuss. Okay. But, yes. All right. All right, thank you. thanks each one for your testimony and i thank you for your testimony and i think we've questioned
out on your side and we're going to release y'all
um we're going to bring up the other side and let them come in and talk and um if you have time to stay you might want to listen to this okay i'm going to bring up now mr bill barnes and mr sammy angel if both of y'all want to come on up i believe both of you are signed up to test to testify
gentlemen i believe you know the process but once you sit down punch your green mic there get it green and then announce who you are and
Speaker 384
2:55:21
who you're with thank you mr chairman committee members sammy angel lake village arkansas chicot county alderman former legislator fire chief and chair of a hospital board of a rural hospital I've never done
Bill Barnes
Unverified
2:55:36
this before, so I'm learning. You're there. Do I hold it down? Okay. My name is Bill Barnes, and I'm from Montgomery County, chief of the Joplin Volunteer Fire Department,
one of nine volunteer departments in our county, and chief of a department that is 47 years old and that
has used the federal surplus property program over 40 years. Okay. We're glad to have you all here today.
You've heard the testimony from the previous group, and you are welcome to give what you would like to discuss or like to talk about. We'll let you put that out. Just proceed, and you're welcome to work back and forth between yourself. We know who you are now.
Speaker 390
2:56:17
Thank you. Okay. Thank you, Mr. Chairman. And to those of you that are here,
Bill Barnes
Unverified
2:56:23
thank you very much for being patient and working through lunch and allowing us to talk. Like I said, I've never done this before, so I'm learning. so y'all be patient with me for a minute. But I want to start by just asking all of you this. If you're from urban or from rural Arkansas, or if you have family in rural Arkansas, if there is an emergency, if there is a 911 call, if there is a car wreck or a medical or something like that,
in almost all of our state, who shows up? Volunteers. Volunteer fire departments. Those are the people, there are about 1,000 fire departments in the state of Arkansas, and there are about 50 paid. So that leaves about 950 departments, as in my county, which has nine, that are volunteer. None of them have much funding. Most of them work contributions only or a little bit of city funding or county funding.
This program that was formed in 1949 in the state of Arkansas, that has existed every year since then, and even to today, has not cost the state of Arkansas a penny because it's paid its own way, has gotten into financial trouble. Now, like many of you, I'm a businessman, and you can get into financial trouble for a lot of different reasons. Overstaffing, poor management, lack of inventory, all kinds of things like that.
But a lot of the testimony about the program has, quote, changed or not changed in the last three years. It's a variance of what the program used to be. The program hasn't changed. All of the property that comes into the state of Arkansas, all of the property that has always come into the state of Arkansas is free. None of it ever has been purchased. The state transports it in, catalogs it in, and then markets it and distributes it.
The general rule of thumb over all the years that I've worked with the property is that they take the federal acquisition cost and they try to mark it up about 10%. Now, that varies with the value of the property. Sometimes it's more than that. Sometimes it's less than that. But it's about 10%. So over the course of all these years, from large items to small items, the savings to the citizens of our state, to the organizations of our state, has been about 90% of federal acquisition cost, less depreciation, because it's almost all used.
How can you put a value, though, on that truck that can run to go save a life at a wreck? How can you put a value on something as small as a hand axe that if that's used to enter a structure where there's a fire and it costs $15 because it could be purchased as opposed to $50 or $75 for a new one, how can you put a value to that? The savings to our state is really two tiers.
The savings to the organizations that provide all the services to the people of Arkansas, water districts, sewer districts, nursing homes, daycare centers, SBA-approved veterans' businesses like the gentleman on the farm that he got his tractor and stuff through the property that he otherwise could not have had. How do you put a value not only to the property, but to the services rendered to our citizens?
Our state's government is here to protect and defend and support the people of our state. And there is no better vehicle for that than the federal surplus property program that provides goods to over. there are 900 plus registered entities approved to use federal surplus now that's not people that's entities from daycare centers to hospitals to fire departments to counties
to cities it's it's everyone water districts this last year 25 there were 700 right at 740 entities that visited the state there were from all over the state 90 there were 968 transactions from 306 organizations 92 percent ladies and
gentlemen of Arkansas's counties were at the federal property warehouse this year now are there fewer big ticket items yes actually the federal government started auctioning a bunch of stuff back many many many years ago it wasn't
three years ago but there are fewer big ticket items but the big ticket items
folks a dump truck a backhoe a road grader a bulldozer those items are not what serves the vast majority of the organizations that use this program it
isn't the job and volunteer fire department doesn't need a bulldozer Montgomery County did and they got one through FSP but we need the little things our training room is heated and cooled by an air conditioner system through federal surplus property all of our tables and chairs in our training room are from there. The standby generators that we use in the fire department are from there. We're one of the disaster areas for Montgomery County. The cots,
the medical gear, the ability to sustain people, the blankets, those things, that's all federal surplus property. We couldn't do it. We could not honor those requests and answer those calls. If we didn't have the Federal Surplus Property Program, an entity that has been in existence and has been cash positive since its inception in 49.
I sat and Sammy sat on the advisory committee for the Federal Surplus Property Program for a number of years until it was disbanded under Governor Hutchinson. Every year, ladies and gentlemen, there was at least a million-dollar surplus, at least. There were a couple of times when the federal government said they would curtail allocations if the balance was not reduced.
So the warehouse where this is done was re-roofed, remodeled. All those kinds of things were done to honor the request of the federal government. Colonel Hager says that it started losing money three years ago, but they didn't discover it until this year. It is unfortunate that something wasn't noticed three years ago. Now, the federal property people don't make the bank deposits. They don't do that. But a question that I have, you can't do business without inventory.
You can't provide a service and attract people without inventory. And I believe that there were at least encouragements back early summer to not screen as much stuff. And I know after the decision was made, they were told you may not screen anything else.
Now, the comment is made, only this much revenue has been brought in. Well, if inventory started reducing in June or July or August, if there was no more product coming in after that, then how can you continue to do business? How can you attract people? Whether you're looking for an engine for a fire truck or chains to put on your fire trucks or your county equipment or light poles to light a town, how can you do that?
And what attraction is there to us, the customers, if there
is no more product? It's a two-edged sword. They were always cash
flow positive. The big ticket items were always a tiny, tiny, now it may have amounted to $150,000, $200,000 in revenue, but as far as serving the people of our state,
those were always utilized by a very tiny percentage of the customers. We relied on the property program for everything from generators to towels to band-aids to face masks. Those are the items that serve the people of Arkansas and provide the ability for little volunteer fire departments like mine to respond and honor the calls.
Could we continue to do that? Yes. Would we have the resources we have now? No, because we don't have, and virtually all of the volunteer fire departments don't have the revenue, the money, to buy any of this other than through federal surplus property. A mayor called me from a little town, and I just want to give an example, and I'll get off this. And she said, Bill, the desk and chair in my office came from federal property.
Our council room is completely furnished from federal surplus property. The pickup I drive is from federal surplus property. That goes on over and over. And ladies and gentlemen, yes, the big stuff, maybe there's not as much of it. But it is still out there. Humvees were screened and told they couldn't get them. There is that kind of property. And I want to make this point. The folks at Federal Surplus Property were specialists in what they did.
And you all know, every one of you, regardless of your walk of life, relationships are very important. GSA allocates the amount of property to go to a state based generally on population. So Arkansas was at a disadvantage because of our wonderful little state. But the screeners, because of their relationships with the federal folks at the various depots and areas where they get it, the GSA folks, they always got our fair share plus more.
Our organization, Arkansas Federal Surplus Property, was one of the most highly awarded organizations in the United States for securing, transporting, and distributing property to our people. Generally, $20 million to $30 million worth of property a year at a cost to the people of Arkansas of about $900 to $1.3 million a year. That's the value.
The value is in every little piece from a blanket to a bulldozer. standby generator to a cot and everything in between, that's the value. It isn't just the big stuff. I would urge you all, because this decision, this decision was made, the pipeline was cut off, the people were laid off, nobody knew what was coming,
not one customer was asked what's the value and to my understanding not one legislator was made aware of it this affects thousands and thousands and thousands of people in our state ladies and gentlemen from kids stole folks and everybody in between and if it was losing three hundred thousand dollars a year i think i think it ought to be i think it ought to be reinstated brought back online the folks that are there and hopefully some will come back that have been laid
off are allowed to do their jobs certainly with a look at efficiencies and give them three years to prove they can come back and be a positive cash flow item they can't do it in a year You know, if I close down my business or any of us close down our business for six months or a year, we couldn't come right back. So they've got to be given time because the entire federal surplus property program has been damaged dramatically because of the way it was shut down and the reason and the fact that nobody, not one person was asked, is there value in this?
$100,000 loss over three years, $600,000, and I want to remind you that no additional revenue the rest of this year, maybe it wouldn't lose that much at the end of the year if it had been left alone. Those are numbers that are about July numbers. But my goodness, with the amount of money that this state spends to care for its people, $300,000 to fund it, give them three years to prove that they can get it back up and running without encumbrances put on them, from trucks that have a million miles on them that cost a gazillion dollars to maintain instead of taking a less expensive approach.
i can't express to you in my little county what the federal property program means to our little towns like norman to our our nine volunteer fire departments to the city of mount idah so i could go on and on uh but i just i thank you i honestly don't believe the program was ever looked at and given a chance thank you mr chair mr angel you have a statement
Speaker 384
3:12:01
yes sir mr chairman committee members i'll be very brief considering the time that we spent here today uh if i was standing in colonel hager's shoes and i was looking at the numbers uh i would probably have the same opinion uh that his agency and himself does of the program but once upon a time, when I was sitting on the other side of this table, fiscal impact statement was done on everything we did. And I don't know that we've taken a deep dive into the impact that closing
this program is going to have on the citizens of this state. And I think if we do, we would look at the $300,000 deficit as decimal dust. And I understand that it is a self-funded program. And I understand that it's difficult to go find things to patch it up. But management has played a real hard part in federal surplus property. It's been kicked around like a stepchild from workforce education to Adam into public safety.
And I think that we have lacked management. And I think that goes from the top to the bottom. Obviously, there could have been things done different. I mean, Dillard's department store has merchandisers that go out and look and they know what they're looking for. And as Mr. Barnes says, inventory is what your market is. If no cities, no towns, no fire departments desire anything that you have in that building, then you're going to fail.
But I don't know that federal surplus property has had guidance as they have in the past. And I will agree, as everyone has said here today, that big-ticket items are few and far between. I don't know that they're going on GovDeals, but I think a lot of them are going on Iron Planet, which is another online-based auction company, and I realize that. But I think this program is worth a look to look a little deeper and a little longer to try to save it
because the entire state, or at least the rural small communities, are going to suffer from its closure. Thank you, sir. All right, Ripson, Wardlaw. Thank
Representative Jeff Wardlaw
Unverified
3:14:25
you, Mr. Chair. I'm not a member of this committee, but this is a request of you. Could you get with the Bureau of leadership and work on that financial impact study for the following meeting that we will have Chris at, please? We will do that. Thank you.
Senator Terry Rice
Unverified
3:14:44
sir russ thank you thank you all for being here
today mr barnes and i have discussed this quite a bit and mr angel i appreciate your passion on it too you know i think it's been uh clarified here today that the program has much more value than what on the surface it looks like uh it's going back and looking at five years uh which is something i was able to do and i hope we
can get something to the committee uh there's value here's what i do as a businessman i live in the now today i have the companies i deal with it things change we all do and we don't know what want to know if and if you know please let us know now and if not i hope we we can find out just what is actually available and mr barnes i appreciate you covering because that was going to
be something i wanted the committee to know is how arkansas gets that they get a percentage and that showed that on some of the data that i saw and and the fact is those relationships you can get in business I get calls and offered deals from my companies just because I've had a relationship with them some of them for 30 40 years and they're usually not people around that long but even if I've had it five years they'll call and offer me something that they don't put
out to the whole dealer network that's what Mr. Barnes is talking about that has value So I'd like if we can substantiate what's really out there, and you've done a good job explaining it, but I think if we're going to sell this to more legislators, we've got to let them know there's still value in this, and it's going to take some money. Now, we keep kicking around this $300,000 because that was the loss each year for the last couple of years, or maybe three if it goes the same this year.
That may not be the figure we need to appropriate and put in there. It may be a half million. I don't know. I don't know what that figure is. Like Representative Bladieman said, we appropriate money all the time. You've got to get enough legislators to do that, and I'm going to have to find out even after being here as long as I have how you can get that done
midterm. I do not know, especially when the executive branch has said, shut it down.
They've given their blessing to shut it down. Colonel Hager works under the executive branch authority, so I understand where he's at. He received this agency, is my understanding. Is that right, Mr. Barnes? The Secretary of Public Safety inherited this and didn't always have it, correct? That is
Bill Barnes
Unverified
3:17:51
correct. It was workforce education for most of its life.
Then went to Adam, and I think under additional reorganization, my understanding is then under additional reorganization, Adam went under public safety. And under Adam, I think, is where I'm
Senator Terry Rice
Unverified
3:18:07
going to say it flourished because we've got a lot of people that's going back a few years in the past, and I think the program was more robust and people received a lot of benefit from it. That's what we need to be able to get to a broader section of legislators,
what the value is currently, what's possible, and let us know. and I know both of y'all are working towards that, and I'm open to that. I support what you're trying to do, but it's got to make sense, and we're going to have to get some more people on board to get funding
for it. But it is still available, correct? We just have to kind of rebuild. Is
Speaker 384
3:18:56
that what both of you understand? Sir, I think that would be determined by the screeners. They search that material.
obviously i don't have access to any of that information but the screeners would most likely be the best source of what's available out there for a small ticket large ticket items i think there is an organization that also represents federal surplus properties across the country and that may be another source as well okay thank you all mr chair a couple
Bill Barnes
Unverified
3:19:28
of things if i may Yes, you may. First, Senator Rice, I think your approach is absolutely right on.
Here are the issues. Just a couple. The screeners have been released. They've been laid off. So there's nobody in the organization. Now, there are people that know how to get on a computer, but there are only four out there, and they were told the program was going to close, and when it did, they would lose their jobs. There's no morale. The screeners themselves are gone. All those relationships are gone. Sammy's point, there is an association of state surplus property agencies,
and they, I'm sure, could tell us roughly what kinds of property are still out there. But as far as being able to quantify what Arkansas could screen right now, we've lost that resource completely, and it would have to be rebuilt. Another cost that hasn't been discussed at all, under the federal regulations, Arkansas can't just decide it's going to quit doing this. It has millions of dollars of federal property that it has to account for.
There's equipment out there that is inspected every year by Arkansas, by federal surplus property compliance inspectors that has to be inventoried every year. So shutting this program down is not going to be a, we'll just save the state $300,000. If all the reserve is gone, then y'all are going to have to fund, Colonel Hager is going to have to fund, someone's going to have to find the money to go through the shutdown process,
which could very easily take a year to a year and a half, which is money thrown away when the program could continue and all of that could be negated. Colonel Hager has written a letter to the federal government telling them that the program is being discontinued in Arkansas. That letter needs to be rescinded. The feds need to be told that we're thinking about this and we need to figure out how to give them a three-year window to try to prove without encumbrances
because y'all know how management can affect things without encumbrances on how it's done. And I just want to leave y'all with just three thoughts. One man's junk is another man's treasure. Colonel Hager's statement that the federal government can't buy there at all is incorrect. After property is held at the warehouse a certain length of time, and I think it's a year, but it may not be that long, it goes into a reserved area for GSA sale, and that is auctioned to the general public.
So things that the warehouse can't move within about a year goes into GSA there and is available to purchase by the general public. And I think half of that auction proceed goes back to Federal
Property Warehouse. So that's how that really happens. And that's just, I just wanted to share those items.
We, I'm done. I could talk all day. Thank you very much. I have a couple more than one. I'm going to limit it to these two. I have two that have lights on. I'm
Speaker 113
3:23:26
going to limit it to those two. Representative Maddox, you're
Representative John Maddox
Unverified
3:23:28
first. Am I good? Okay, thank you. First, I just want to thank you, Mr. Barnes, for all of your work. You and I have had numerous conversations on this, and you've given so much information.
But if any members want to get more information offline from Mr. Barnes, he has a list of every entity that's used this program. I think you stated 92% of every county in the state of Arkansas has used this program just in the past year. My concerns are numerous. I'm just now starting to hear from mayors in small towns, fire departments. It's they're just now hearing about this. I promise you, they don't know yet, but they're going to know. And when they do, we're all going to hear about it.
So I want to take a real close look at this and look at what we might can do to salvage it. And Mr. Barnes actually took what I was going to say when we talk about a reference was made that this was junk. Well, what he talked about, that's not junk to fire departments in my community. That's not junk to senior citizen centers. That's not junk. That's how they sustain themselves and survive. and the notes I wrote down said $9 million in property over the past year. Just over the past year, $9 million, and we're talking about losing $300,000.
Now, I know we all say this, and I'm going to say it too. I'm also a small business person, but I'm going to go further and say that's a net benefit to the state. We're not losing money. That is a net benefit if there's $9 million in property, and it costs us $300,000. And I know we can't do anything in this committee today, but I'm asking the legislature to look at any way we might can remedy this problem. So thank you, Mr. Barnes. Thank you, Mr. Angel.
We do studies that cost more than $300,000 all the time.
That's what's really crazy. Representative Wooten, you
Representative Jim Wooten
Unverified
3:25:17
recognize. Thank you, Mr. Chairman. And I agree with the witness relative to the cost to the state is infinitesimal. as it relates to the total good of the program. And so far as it being tossed back and forth and back and forth to agencies, when I was at DFA, like Representative Gassaway, my desk came from, when I was director of DFA,
my desk came from federal surplus. And Representative Angel, you know exactly the benefit to the school districts. It's greatly in the same thing. And here's the problem that I see. One, we've asked the state police director to be in charge or have control of the federal surplus program. He's a state trooper.
I was a state trooper. He doesn't have the time that it takes to be involved. Neither did Mr. Gary. It's a program that's good to the state, and we've talked about $300,000. How much did it cost for us to have to go outside the state? We don't have a number outside of the federal program to be able to be beneficial to state agencies as well as school boards, counties, cities, individuals.
So we need to take a long, hard look at this. And we talk about, I don't know, four, five, ten employees being laid off. My gosh, we added 1,000 to the state rolls last year. So what does this amount to? I think someone above the colonel has made a decision that impacts the whole state, but they do not care to be exposed, and they don't want their name out there.
But it's time that we stood up and did something for the good of our volunteer fire departments and others and police departments. And I'm from White County, and we've got several, several volunteer departments that depend upon this agency to be able to secure what they need. And I realize it's limited, or maybe the scope has changed, but it's still beneficial, as was pointed out by the speaker.
Thank you. Thank you, Mr. Chairman. Thank you. And we will be getting some information
together at a future date. Hopefully this next month we'll try to put something together. I know November is a really busy time for everybody, but as soon as we can get information, that will kind of tell us when we can have another meeting and if at all available, and we'll notify the ones we'd like to have come back and speak again.
And if you have anybody else or if you all have any information that you'd like to get to us and get to our Bureau, then we would appreciate that too. So I think we are done today. We've held a long meeting this morning, and I appreciate everybody staying around, And I appreciate y'all coming, and Colonel Hager, and I appreciate y'all coming also. And all the ones before, I think everybody's gone that we had here earlier, but I appreciate everybody hanging around. Thank y'all, and we'll be seeing you soon. We are adjourned.
Agenda
A. Call to Order
B. Consideration to Approve September 9, 2025, Meeting Minutes [Exhibit B]
C. Discussion of Arkansas Broadband Equity, Access, and Deployment (BEAD) Program
D. Discussion of Arkansas Federal Surplus Property Program
E. Other Business
F. Adjournment
Documents
| Title | Type | Pages | Source |
|---|---|---|---|
| Agenda — JOINT PERFORMANCE REVIEW (JPR), Oct 27, 2025 | Agenda | 1 | Official source ↗ |
| Exhibit B-JPR Draft Minutes 09-09-2025 | Exhibit | 1 | Official source ↗ |
Speakers
Speaker 2
Representative Bruce Cozart Chair
Unverified
Speaker 7
Speaker 12
Speaker 14
Speaker 15
Speaker 17
Howard Gorder
Unverified
Senator Jane English
Unverified
Speaker 28
Speaker 31
Speaker 33
Senator John Payton
Unverified
Speaker 52
Speaker 58
Speaker 80
Senator Terry Rice
Unverified
Representative David Ray
Unverified
Speaker 107
Senator Steve Crowell
Unverified
Speaker 116
Speaker 49
Senator Kim Hammer
Unverified
Speaker 128
Speaker 123
Representative DeAnn Vaught
Unverified
Representative Jim Wooten
Unverified
Speaker 29
Speaker 143
Senator Jonathan Dismang
Unverified
Speaker 54
Speaker 173
Speaker 180
Speaker 177
Speaker 195
Speaker 13
Representative Stan Berry
Unverified
Speaker 178
Speaker 202
Speaker 207
Senator Dan Sullivan
Unverified
Speaker 234
Speaker 238
Representative Brian S. Evans
Unverified
Speaker 242
Representative Zack Gramlich
Unverified
Speaker 259
Representative Johnny Rye
Unverified
Speaker 270
Speaker 186
Speaker 46
Speaker 132
Speaker 275
Speaker 279
Mike Hager
Unverified
Speaker 285
Speaker 290
Speaker 293
Speaker 294
Speaker 289
Speaker 292
Representative Jeff Wardlaw
Unverified
Speaker 311
Gail Choate
Unverified
Representative Richard McGrew
Unverified
Representative Jack Ladyman
Unverified
Speaker 346
Speaker 349
Representative Jimmy Gazaway
Unverified
Speaker 364
Speaker 367
Speaker 368
Speaker 286
Speaker 375
Speaker 332
Speaker 299
Speaker 350
Speaker 384
Bill Barnes
Unverified
Speaker 390
Speaker 113
Representative John Maddox
Unverified