DALLAS — Little Rock, Ark., voters approved an increase in the sales tax rate Tuesday that will generate $196 million for capital improvements over the next 10 years and $32 million a year for operations.
The increase, from 0.5% to 1.5%, will go into effect Jan. 1, 2012. It will be the first time the city sales tax rate has gone up since it was first levied in 1994. The election was the sixth time since 1981 that city voters have decided on a tax hike.
The increase was presented in two separate questions, both of which passed by 54%. Around 20% of registered voters cast a ballot.
A 0.375% portion dedicated to capital improvement projects will expire at the end of 2022 unless voters extend it.
The 0.625% portion of the additional tax for operations is a permanent levy. It is expected to generate $32 million a year by 2015.
The 1.5% city tax will be on top of Arkansas’ 6% sales tax and Pulaski County’s 1% tax. Little Rock also levies a 2% sales tax on restaurant meals and hotel rooms.
The city’s 0.5% sales tax generated $22.7 million in fiscal 2011. Little Rock also received $38.4 million from the county’s sales tax.
Mayor Mark Stodola, who proposed the tax hike, said he would like to securitize the capital portion of the revenue so the city could issue bonds to get road and construction projects under way as quickly as possible.
The temporary capital improvement portion of the tax will provide $67.5 million for streets and drainage projects, $17 million for parks projects, and $38 million for economic development efforts that include a $22 million research park and $10 million of upgrades to the city’s port on the Arkansas River.
Little Rock will also build two new fire stations and replace its 27-year-old emergency radio system. After a victory party on Tuesday night, Stodola called the election results “a very gratifying win.”
“The citizens of Little Rock decided to invest in the future of this city,” he said. “It was their investment, and their decision.”
Stodola said the new operational tax will allow the city to fill more than 200 vacant positions left open due to revenue declines. He said the city will be able to hire 52 police officers and 36 firefighters, and retain 27 officers now being paid through federal grants that will expire soon.
“We’ve been gutting many of our departments while trying to maintain public safety staffing,” he said. Without the additional revenue, Stodola said, developing the next city budget would have been “very difficult, very brutal, and very bloody.”
Voters in November 2003 authorized a property tax increase to support $70.6 million of general obligation bonds issued by the city a month later. Proceeds financed street projects and public safety facilities.
Little Rock’s outstanding debt includes $87.5 million of GOs and $31.7 million of revenue bonds. The debt is rated Aa3 by Moody’s Investors Service and AA by Standard & Poor’s.