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The City of Bull Shoals has been on a state-issued two-strike warning since November 2025 that its municipal water system could be closed for failing to file or pay state taxes, and an anonymous citizen donation of $4,323.78 was used in February 2026 to pay down IRS payroll tax penalties, apparently without a city council vote authorizing acceptance of the gift.
Those findings emerge from records released this week in response to an Arkansas Freedom of Information Act request by former Bull Shoals Mayor Michael Savu, who served roughly a year before resigning in April 2024 citing “matters beyond my control.”
The documents, covering correspondence and notices from the Internal Revenue Service, the Arkansas Department of Finance and Administration, the Arkansas Division of Workforce Services, and the Arkansas Local Police and Fire Retirement System (LOPFI), depict a city government that, more than a year after Mayor Bill Stahlman took office in December 2024, continues to miss tax-filing deadlines across multiple agencies and accounts.
The FOIA response is also notable for what is missing from it. Savu’s April 24 request asked for four categories of records: payroll tax correspondence, LOPFI documentation, utility records for the Parks Department’s reservation telephone line, and a general ledger summary of all late fees, penalties and interest paid by the city since Jan. 1, 2025. The records produced address the first two categories. The Parks utility records and the penalty ledger do not appear in the response.
Savu confirmed the documents released represent the entirety of the city’s FOIA response.
The anonymous donation
Among the records produced is a handwritten city receipt, Receipt No. 923418, dated Feb. 24, 2026, acknowledging $4,323.78 received from “Anonymous Citizen.” The line marked “For” reads: “Donation to Payroll taxes Penalties 2025 2nd & 3rd Qtr.” The check, numbered 1019, was signed for by Susan Wally.
The receipt is dated one day after the IRS issued Notice CP161 to the city on Feb. 23, 2026, assessing $3,358.29 in penalties and interest on the city’s Form 941 payroll tax filing for the quarter ending Sept. 30, 2025. The IRS notice shows Bull Shoals paid the underlying $30,460.42 in payroll taxes for that quarter, but was assessed $2,744.36 in failure-to-file penalty, $304.93 in failure-to-pay penalty, and $309.00 in interest because the return was filed late.
Savu said the donation was discussed at a Bull Shoals City Council meeting but was never put to a vote. A search of the ordinances and resolutions posted on the City of Bull Shoals website turned up no resolution accepting the donation, no appropriation directing it to be applied against the city’s IRS penalties, and no record of council action on the matter.
Under Arkansas law, donations to a municipality become part of the city’s general fund upon receipt and are subject to statutory budgetary controls, according to guidance published by the Arkansas Municipal League. Article 12, Section 5 of the Arkansas Constitution restricts how public money may be spent, requiring that it serve a public purpose. Acceptance and appropriation of municipal funds typically requires action by the city council.
Mayor Stahlman did not respond to a request for comment by press time. The city’s recorder-treasurer’s office and city attorney also did not respond.
A second handwritten receipt in the FOIA response, No. 923405, dated Jan. 15, 2026, records $4,026.68 received “from General Fund” for “Payroll IRS Refund.” That receipt, also signed by Wally, suggests money was moved between the city’s general fund and its payroll account in connection with an IRS refund. No supporting documentation explaining either transaction was produced.
Two-strike warning on water utility
A Nov. 4, 2025 letter from the Arkansas Department of Finance and Administration to Bull Shoals Municipal Water System carries the heading “BUSINESS CLOSURE WARNING.” The letter, signed by DFA Division Manager Michael Yancey, states that the water system has failed for two months or more either to file or to pay its state withholding tax obligations, and that “any additional occurrences within a 24 month period will result in the closure of your business.”
The warning invokes Arkansas Code Annotated § 26-18-1001, which authorizes the DFA secretary to close any business that fails three times in any 24-month period to file or remit state withholding taxes or gross receipts taxes. The statute is most commonly applied to private businesses; closure can include posting a notice on the premises and physically locking the property, with assistance from the Arkansas State Police if needed.
The Bull Shoals Municipal Water System is the public water and sewer utility for the city, registered with the state under withholding tax account 12267452-WHW. The city’s general government operations are registered separately under account 12357396-WHW.
The FOIA response also includes a March 18, 2025 DFA “Notice of Non Payment” addressed to the water system for the January 2025 withholding period, with a handwritten note in the margin reading “DO IT Jenifer.” A separate DFA accounts receivable summary lists the city’s general account as “Non-Filed” for both February 2025 and March 2025.
A Feb. 2, 2026 DFA “Notice of Proposed Assessment” to the city shows $12,453.09 in withholding tax owed for the quarter ending Dec. 31, 2025, plus $1,138.72 in penalty and $158.63 in interest. After $7,647.78 in payments were credited, the city still owed $6,102.66 on that quarter.
Federal payroll tax filings
Beyond the CP161 penalty notice that preceded the anonymous donation, the FOIA response includes two additional IRS notices, both dated Feb. 23, 2026:
- Notice CP207, demanding that the city submit a corrected Schedule B for its Form 941 covering the quarter ending Sept. 30, 2025. The IRS told the city it had identified errors or missing information in the city’s Record of Federal Tax Liability and gave Bull Shoals until April 9, 2026 to respond. If the city failed to respond, the IRS said it would calculate penalties by averaging the quarter’s liability across the period.
- Notice CP276A, informing the city that the IRS had waived a Failure to Deposit penalty for the quarter ending Dec. 31, 2024, because the tax liability schedule had been “missing or incomplete.” The waiver applies only to that quarter.
The CP276A waiver and the CP207 notice describe the same underlying problem of incomplete or incorrect deposit schedules on Form 941, recurring across two different quarters four months apart.
A check produced in the response, No. 0005247, drawn on the City of Bull Shoals payroll fund at Arvest Bank in Flippin, shows the city paid $7,734.70 to the IRS on Dec. 18, 2025 for the first quarter of 2025, a payment made roughly nine months after that quarter’s filing deadline.
State unemployment and retirement filings
The FOIA response includes two notices from the Arkansas Division of Workforce Services flagging late quarterly contribution and wage reports:
- A March 18, 2025 delinquency notice to the city for the fourth quarter of 2024, signed and dated by Recorder/Treasurer Paula Reynolds on March 25, 2025.
- A June 17, 2025 delinquency notice to the Bull Shoals Municipal Water/Sewer Department for the first quarter of 2025.
Both notices warn of penalties of up to $30 or 15 percent of tax due, plus interest at 1.5 percent per month.
LOPFI documents in the response show the city was billed $5,323.62 for retirement contributions for 23 police, fire, and volunteer department members in April 2025, with payment due May 10. A separate LOPFI account summary shows a $1,202.76 balance owed after $2,393.27 in premium tax billing credits were applied.
Connection to ongoing audit findings
The Arkansas Legislative Audit released its annual review of the City of Bull Shoals on Jan. 8, 2026. The audit, which covered calendar year 2024, documented violations of state accounting law including improperly maintained cash receipts and disbursements journals, lack of reconciliation to bank statements, and prenumbered receipts not consistently issued for funds collected. Auditors identified more than $2,200 in missing court fine payments handled by former Bull Shoals Court Clerk Darla Jo Hulen, who resigned in March 2025. Arkansas State Police arrested Hulen on April 21, 2026, three days before Savu submitted the FOIA request that produced the documents in this story, and charged her with one felony count of theft of property.
The records produced in response to Savu’s FOIA cover the period from January 2025 through April 2026, meaning they document events both during the audit period and continuing well after it.
The 2024 audit period saw three different people serve as mayor: Savu, who resigned April 16; Recorder-Treasurer Tina Bailey, who served as acting mayor for eight days; and Carol Duss, who was appointed April 24 and lost a runoff election to Stahlman in December.
Bull Shoals’ pattern of governance turbulence predates Savu’s tenure. His predecessor, former Mayor David Nixon, surrendered to the Marion County Sheriff in February 2024 on two Class C felony charges of theft of property over $5,000 and abuse of office, following an Arkansas Attorney General Public Integrity Unit investigation that found Nixon had taken unauthorized reimbursements for Medicare Part B premiums while in office.
What the records do not show
The FOIA response does not include records responsive to two of the four categories Savu requested:
- Billing statements, shut-off notices, and service restoration records for the Parks Department reservation telephone line from October 2025 to April 2026.
- A summary or general ledger report of all late fees, penalties, and interest paid by the City of Bull Shoals to any vendor, state agency, or federal agency from Jan. 1, 2025 to the present.
Under Arkansas Code Annotated § 25-19-105, public agencies receiving a FOIA request must respond within three business days, and any portion of a request that is denied must be accompanied by a citation to the specific legal exemption justifying the denial. The records produced to Savu do not include any written denial of those two categories or any explanation for their absence.
