Government Affairs Committee Hears from AHTD

Arkansas voters will have a plethora of choices on their ballot in November 2012. Redistricting at the local and state level resulted in every state legislative and city council seat being on the ballot this year. Not only will voters be selecting candidates, but they will also vote on at least two proposed state Constitutional amendments.

One proposed amendment relates to the creation of a new type of tax exempt bond called a Sales Tax Anticipation Revenue bond. These bonds utilize new sales taxes from retail developments as a source of repayment. The Chamber will be discussing these bonds in detail at our July Government Affairs Committee meeting.

The other Constitutional amendment deals with highways. Arkansas is facing a tremendous disparity between highway needs and the resources to meet those needs. This is especially true in Northwest Arkansas where traffic congestion centers around the region’s primary north-south arterial, I-540.

Improvements to I-540 are already in the works. Arkansas voters approved renewal of an interstate rehabilitation bond program in 2011 that will allow the Arkansas Highway and Transportation Department (AHTD) to improve interchanges from Fayetteville to Rogers. These improvements will ease traffic flow on and off the interstate, which should help make travel safer and reduce congestion. Additionally, improvements to the interchanges prepare I-540 to be expanded to six lanes. AHTD estimate that work on the interchanges will cost more than $100 million.

Finishing improvements to I-540 and expanding it to six lanes will cost hundreds of millions of additional dollars. However, under the current funding formula, the entire state of Arkansas has approximately $250 million per year to spend on construction projects. These funds must be spent around the state thus leaving Northwest Arkansas without sufficient funds to complete an expansion of I-540 in the near term.

Proponents of the second proposed Constitutional amendment believe they have a way to complete some of the most critical highway projects in Northwest Arkansas and around the state within ten years. The proposed highway-related amendment is seeking a ten-year, 0.5% sales tax dedicated to highway funding. This tax is estimated to bring in $230 million per year of which 70% goes to AHTD and 30% is split among the cities and counties.

During his presentation to the Chamber’s Government Affairs Committee in January, AHTD Director Scott Bennett outlined the projects that would be funded if voters approve the temporary sales tax. The tax would fund expansion of I-540 to six lanes, a two-lane Bella Vista Bypass and construction of the first phase of the Springdale Northern Bypass (I-540 to Hwy 112). Mr. Bennett remarked that with the interstate rehabilitation program and the proposed sales tax funding, “Arkansas would arguably have the best interstate highways in the country by 2020.”

The sales tax question could find strong support from cities and counties around the state. Local government stands to gain more than $330 million over ten years that could fund street repair, construction and maintenance as well as transit-related expenses. AHTD estimates that the city of Rogers could receive almost $1 million per year in turnback from the sales tax while Lowell could receive more than $130,000 per year. Benton County could see $1.3 million in turnback funds each year if the sales tax passes.

The past few years have seen Arkansas voters take a positive view of proposed Constitutional amendments. They have amended the state Constitution to create fiscal sessions for the legislature, established a scholarship lottery and increased the maximum rate of interest that can be assessed. But will Arkansans be willing to tax themselves to build roads? It is definitely a difficult economy to be seeking a tax increase and supporters will have a long road (pun intended) ahead to convince voters of its necessity. Stay tuned and follow the Chamber’s Government Affairs Division for additional information and education opportunities on this issue in the coming months.