For years, various city officials in Sherwood have flirted with the notion of breaking ties with North Little Rock Electric and going with someone else to provide electric service.

After months of discussion and last month’s public hearing discussing proposals from North Little Rock Electric, First Electric Coop, and Entergy, Sherwood Mayor Virginia Hillman has made her judgment. She believes Sherwood would be best served with staying with North Little Rock Electric.

“The big issue is what we were concerned about from early on – North Little Rock Electric’s infrastructure,” Hillman said.

Hillman said the proposed rates from the three utilities are comparable but the problem for Sherwood ratepayers is if the city cuts ties with North Little Rock Electric then that utility is going to be expecting to be reimbursed for its electricity-distribution system within the city limits of Sherwood.

North Little Rock City Attorney Jason Carter said his city has estimated that NLR Electric’s infrastructure should be valued at $20 million.

Carter told Sherwood officials last month that if that city cuts ties with North Little Rock, a lawsuit could result if his city isn’t amply reimbursed for its electricity infrastructure in Sherwood.

Hillman said it is very likely that Sherwood ratepayers would see extra fees on their bills for either First Electric Coop or Entergy taking over North Little Rock Electric’s infrastructure.

“I think that Sherwood electric customers would come out the losers,” Hillman said.

Hillman added North Little Rock Electric also is offering Sherwood more money than the other two utilities.

All three utilities pay a 4.25 percent franchise fee to Sherwood, which goes into the Sherwood city coffers. However, North Little Rock agreed about three years ago to pay an additional lump sum annually of $475,000 for the privilege of providing electric service in Sherwood.

The agreement was reached between Hillman and North Little Rock Mayor Patrick Hays, and the city councils of both municipalities agreed to the $475,000 annual payment.

The decision came as Sherwood city officials were expressing concern over its increasingly tight budget. The tight budget came at the same time Sherwood’s leadership decided to borrow about $7.5 million to buy the former North Hills Country Club and golf course and convert it into a city-owned golf course now known as The Greens at North Hills. Sherwood’s monthly bill to borrow the money is about $23,000.

Hillman said losing the $475,000 would not be helpful to Sherwood’s tight budget.

The city’s budget is facing some tough decisions in the coming months as Sherwood city leaders get ready to pass another balanced budget for 2013.

During the 2012 budget-making process in late 2011, the mayor, City Clerk Angela Nicholson, and aldermen went over the budget line item by line item, trying to find hundreds and thousands of unspent dollars in late 2011 to more accurately see where tax dollars needed to be budgeted for 2012.

After several budget sessions, the city of Sherwood was able to pass a balanced budget without having to lay off city workers or raise taxes.

But the 2013 budgeting process will be more complicated as earlier in 2012 the Sherwood City Council voted to spend $1.3 million to buy new emergency radios for city police department. The city will be spending $300,000 annually for the next five years to pay for the radios. The first city payment is due in the first quarter of 2013.

City leaders were told by Sherwood Police Chief James Bedwell that if the new radios and communications system were not bought his department would lose communications capability.

Sherwood depends on the system of Little Rock, which is going digital in early 2013 following the decision of voters there to modernize its emergency communications system after residents adopted tax increases to bolster Little Rock emergency services.

Hillman said it is possible that Sherwood may try to negotiate a larger lump sum payment from North Little Rock Electric than the current level of $475,000 annually if Sherwood signs an agreement of 20, 25, or 30 years for electric service.

“That is a possibility,” Hillman said.