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Bull Shoals Mayor Bill Stahlman has given two conflicting accounts of what happened to a voter-approved 1% sales tax the city pledged to repay its sewer bond. The competing explanations came one day apart. They raise fresh questions about how the city has handled the tax in a town already under state and federal financial scrutiny.
In a written statement posted to the city website June 3, Stahlman said the tax had been collected and placed in the general fund. He wrote that required transfers into the bond fund were not always made. The city now needs to move $398,513.80 from the general fund into the sewer construction bond fund so both accounts show the correct figures, he wrote.
A day earlier, on June 2, Stahlman told former Mayor Michael Savu that the tax had never been collected at all. The mayor estimated the uncollected amount at about $500 a year. That account came in a recording of the conversation that Savu provided to the Observer.
The two versions differ by a wide margin. One describes money that was collected but left in the wrong account. The other describes a tax that was never charged. The city has not publicly reconciled the difference.
The question surfaced through an open-records request. Savu filed a Freedom of Information Act request May 19 seeking bond records, transfer slips and ledgers showing how the 1% tax had been collected and spent. The city delivered its response June 2.
Savu resigned as mayor in April 2024, citing dysfunction he said he could not work through with the council at the time. He has continued to examine the city’s finances as a private resident. He is the same figure whose refusal to sign a reimbursement check in office led to the 2024 felony prosecution of former Mayor David Nixon, and who later filed ethics complaints against Stahlman and a councilman.
Voters approved the 1% sales and use tax in a May 2017 special election under Ordinance 2017-03. The tax was pledged to retire a sewer improvement bond capped at $5 million. The 2018 financing ordinance directed the city treasurer to deposit the tax revenue into a dedicated bond fund as it came in.
Savu said one record he asked for was missing from the city’s response. He requested receipts showing transfers from the general fund into the bond fund. He said he was told the receipts do not exist because the account to receive that money was never set up.
Bank statements in the city’s response show steady monthly deposits of about $1,119 into a 2018 reserve account from late 2024 into early 2026. The records show the bond payments have continued. Both Stahlman and Savu said the bond is being paid.
State law draws a clear line on which utility charges can be taxed. Water service is a taxable utility sale, and the provider is responsible for collecting the tax. Sewer service is specifically exempt. The rules cite Arkansas Code 26-52-301 and state Gross Receipts Tax Rule GR-6.
That distinction matters here. Stahlman said in the recording that the city cannot charge the 1% tax on sewer service, which is correct under the rule. The water side of the system is taxable, though. If the city never applied the 1% to its water bills, it would be a tax the city was positioned to collect and did not.
The gap also touches a rate study the city paid for last year. Kopke and Associates completed the study June 26 and submitted it to the state to meet requirements under Act 605 of 2021. The study built its sewer projections on about $210,000 a year in city sales tax revenue. It found the sewer system financially healthy and recommended no sewer rate increase, while recommending a 24% water rate increase phased over time.
Savu argues the study’s numbers cannot be trusted if the tax was never collected as the ordinance required. In a June 2 letter to the City Council, he asked the council to order an independent accounting of uncollected tax revenue since 2017. He also asked for a review of who configured the city’s billing system and for the city to notify state oversight agencies before any enforcement action.
The tax question is the latest financial problem to surface in Bull Shoals. The city signed a consent order with state environmental regulators in 2025 over 56 sewer overflows that released about 1.2 million gallons of untreated wastewater into the White River since 2019. State tax authorities issued the city two business closure warnings in 2025 for unfiled or unpaid taxes. Routine audits stalled during the pandemic and have been slow to catch up.
The throughline across those episodes has been a city that keeps changing leadership without resolving its underlying finances. The 1% tax was enacted under one administration, carried through Nixon’s tenure, and is now Stahlman’s to explain.
Stahlman laid out his version of events in his June 3 statement, which remains posted on the city website. He has not publicly explained why that account differs from what he told Savu a day earlier. The Observer will continue to report on the city’s handling of the tax as more records become available.
