DALLAS — The final report on highway financing in Arkansas, delivered to state leaders on Wednesday, recommends asking voters to approve higher taxes to support $1.8 billion of revenue bonds for transportation projects.
The 48-page report from the Arkansas Blue Ribbon Committee on Highway Finance said the state should replace what it called a “systematically flawed and woefully inadequate” funding system for state and local roads.
Copies of the report were given to Gov. Mike Beebe, several legislative committees, the Arkansas Highway Commission, the Association of Arkansas Counties, and the Arkansas Municipal League.
Sen. John Paul Capps, D-Searcy, co-chairman of the highway panel, said the group was looking at more than just how to raise additional funds for state and local roads.
“Our task was much larger than that,” Capps said. “The committee mainly focused on identifying and recommending appropriate sources of revenue and funding mechanisms that should be utilized to correct those flaws.
“Our goal was to make recommendations for a funding system that will provide flexibility for changing conditions, and sustainability for long-term growth,” he said. “Our current funding system fails miserably in those areas.”
State highway officials estimate Arkansas road needs at more than $19 billion over the next 10 years, but current funding sources are expected to generate only $4.1 billion over that period.
Arkansas currently spends about $900 million a year on road projects, including state revenue and federal highway funds, but the Highway and Transportation Department estimates that another $200 million a year is needed to prevent deterioration of the network of 16,000 miles of state highways.
The system outlined by the 18-member panel includes a 0.5% increase in the sales-tax rate to support up to $1.8 billion of 10-year road bonds. The tax would expire when the bonds mature.
Proceeds from the bonds would finance a five-year program to build a system of four-lane highways connecting major cities in the states.
The sales tax increase requires approval from Arkansas voters.
Voters would also be asked in 2012 to approve $575 million of federal grant anticipation vehicle and tax revenue bonds to be issued by the Arkansas Highway Commission. Proceeds from the Garvee bonds would be dedicated to upgrades and extensions of the interstate highway system.
The Legislature authorized the Garvees in 2007, but Beebe has yet to put the proposal on a general election ballot. If the bonds are approved by voters, the debt must be issued by Dec. 31, 2013.
The proposals also include a new excise tax on the wholesale price of motor fuels and a gradual shift of sales-tax revenue on motor vehicles and parts to the highway fund. The money currently flows into the general fund.
The new 6% tax on motor fuels would generate $262 million when full implemented. The tax would be phased in over a six-year period beginning in 2012.
The panel estimates that transferring the vehicle-related sales tax revenues would provide $425 million a year to the road effort. However, Beebe is opposed to diverting revenues from the general fund without replacing the money that now goes to public education and other state needs.
The state tax on gasoline would be indexed to highway construction inflation under the panel’s plan.
“The trend of stagnant to declining road-user revenues, combined with the trend of increasing vehicle miles traveled and increasing fuel efficiency, is simply a losing proposition,” the report said.