DALLAS — Recommendations on how to finance improvements to Arkansas highways and local roads include $1.8 billion of revenue bonds supported by a dedicated 0.5% state sales tax.
The 18-member Arkansas Blue Ribbon Committee on Highway Finance will present its report to the Arkansas General Assembly next week. The panel spent two days last week in meetings to refine a number of preliminary proposals into a final report.
Lawmakers will consider the plan when they convene in Little Rock on Jan. 10.
The increase in the sales tax to support the highway bonds would require a constitutional amendment. Voters could be asked in November 2012 to decide on the proposal.
In addition to the dedicated sales tax, the panel will recommend funneling away from the general fund and into a special highway fund revenue generated by the sales tax on new and used vehicles, vehicle-repair parts and services, tires, and batteries.
The proposal will also include indexing current state motor fuel taxes to construction-related inflation and levying a new 6% sales tax on wholesale fuel prices.
A preliminary report by the revenue subcommittee estimated the taxes and bonds would provide $8.3 billion for road construction and maintenance over 10 years.
The state highway department has estimated construction needs over the next decade at more than $19 billion, but current funding sources would generate only $4.1 billion over the period.
Arkansas currently spends about $900 million a year on road projects, including state revenues and federal highway funds. Highway officials said another $200 million a year is needed to prevent deterioration of the state’s road network.
Mark McBryde, a member of the committee, said there is a critical need for an adequately financed program.
“The roads in our state have been barely maintained for years,” said McBryde, who is executive vice president and director of public finance at Stephens Inc. in Little Rock. “Our task was to find revenue sources that would allow an upgrade of our traffic network.”
McBryde said the panel would also ask Gov. Mike Beebe to call a special statewide election to authorize up to $575 million of federal highway grant anticipation and tax revenue bonds to be issued by the Arkansas Highway Commission.
“We have spent almost two years examining the situation in Arkansas and looking into how other states are dealing with similar situations,” he said. “We are a rural state with a small population, and toll roads wouldn’t work in 95% of this state.”
The General Assembly approved the Garvee election plan in 2008, but Beebe has not put the measure on the ballot.
The highway bonds would be supported by federal highway grants and the state tax on diesel fuel. If voters approve, the bonds would have to be sold before the end of 2013.
Voters approved $575 million of 12-year highway bonds in 1999, which were sold in tranches of $175 million in March 2000, $185 million in July 2001, and $215 million in July. However, voters in 2005 rejected a plan for a $575 million Garvee authorization by a 60-to-40 margin.
State Sen. John Paul Capps, D-Searcy, co-chair of the highway panel, conceded that legislators would be reluctant to adopt new taxes.
“The 2009 Legislature charged us with the responsibility for developing an adequate and equitable way of financing the highway system in this state,” he said. “It did not say do this when times are good, don’t do it when times are bad, or don’t do it when there is an anti-tax sentiment.”
“But we have to do it,” he said. “If we don’t, we will lose a valuable infrastructure.”