Little Rock Launches Bid to Gain Support for Tax-Hike Referendum

DALLAS — Proponents of a plan to finance capital improvements in Little Rock with a sales tax increase began a campaign Tuesday to gain public approval for Mayor Mark Stodola’s proposal.

Voters in Arkansas’ capital and largest city will decide Sept. 13 whether to raise the sales tax rate to 1.5% from 0.5%. The rate has not been raised since it was first levied in 1992.

The Committee for Little Rock’s Future officially opened its effort in support of the tax hike on Tuesday, a week after a group called $500 Million Tax — Too Much! was established as a political action committee to oppose the tax increase.

The group of proponents filed documents Tuesday with the Arkansas Ethics Commission to be recognized as a ballot question committee.

Opponents contend the tax hike is too much in a weak economy and would finance economic development projects that should be state rather than local efforts.

The tax-hike proposal consists of two questions on the ballot: a temporary 0.375% increase that would finance $195 million of capital improvement efforts over 10 years, and a permanent 0.625% increase expected to generate almost $32 million a year for municipal operations.

The capital improvements tax would expire at the end of 2012 but could be renewed by voters.

If voters approve both increases, the new 1.5% city tax would be on top of the state’s 6% sales tax and Pulaski County’s 1% tax. The city also levies a 2% sales tax on restaurant meals and hotel rooms.

The current 0.5% tax generated $22.7 million in fiscal 2011. Little Rock also received $38.4 million from its share of Pulaski County’s 1% tax.

The City Council on Tuesday night rejected a request from trustees of Little Rock’s Police Pension board to put on the ballot an alternative 0.5% sales-tax increase to bolster the pension plan’s finances. The state said earlier this year that the fund would become insolvent within 10 years without increased contributions or revisions to the funding method.

The proposal would provide $1 million to the police pension fund, double the $500,000 allocation in Stodola’s plan, and eliminate funding for parks and economic development projects.

At a news conference, pension board trustee Farris Hensley said the mayor’s proposal was too vague about which projects the city would fund with the $67.5 million allocated to road and drainage projects.

“It would appear that voters must rely on faith in the city government,” Hensley said.

Stodola said it was too late to put an alternative proposal on the September ballot. The City Council passed the election ordinance July 13 and Pulaski County Election Commission approved the ballot July 20.

The capital improvements portion of the sales tax also would provide $38 million for economic development efforts. Projects include $22 million to establish a research park, $10 million for improvements to the city’s port on the Arkansas River, and $6 million for infrastructure for businesses that would generate new jobs.

Little Rock’s $115 million of outstanding debt includes $87.5 million of general obligation bonds and $31.7 million of revenue bonds. The city’s debt is rated Aa3 by Moody’s Investors Service and AA by Standard & Poor’s.

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Arkansas
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