DALLAS — Little Rock voters will be asked in September to approve an increase in the sales tax to generate $511 million over eight years under a plan outlined to city’s Board of Directors on Tuesday by Mayor Mark Stodola.
The increase includes an eight-year 0.5% tax to fund $204 million of capital projects, and a permanent 0.75% tax to generate $307 million for operating expenses over the same period.
The city’s current 0.5% sales tax generated $22.7 million in fiscal 2010. Little Rock also received $38.4 million last year as its share of Pulaski County’s 1% sales tax.
The tax revenue might be used later to support debt for the capital projects, according to Stodola, but that would be easier to accomplish once the increases are in place.
If the tax hikes are approved, he said, voters could then be asked to approve bonds to finance capital projects.
“If we were to put it forth as a bond program, we’d have to put each project as a separate question on the ballot and lay out how much of the tax would go to specific projects,” Stodola said. “We’re not there yet.”
“I’d like to do a bond issue at some point and front-load some of these projects, but right now it is just an aggregate each year,” he added.
Stodola said the two tax hikes would be presented to voters as separate ballot questions.
Even with the increase to a total of 1.75%, Stodola said, Little Rock’s sales tax rate would remain lower than nearby cities.
The rate has not been increased since it was first levied.
The average local sales tax rate in Arkansas is 2.1%, including city and county levies.
The state sales tax is 6%.
Stodola asked the board to put the election ordinance on its June 28 agenda. However, the directors said they needed more time to hold public meetings in their wards on the plan to more than double the city’s sales tax rate.
The board must call the special election by July 19.
Little Rock’s $119 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.
City manager Bruce Moore said revenues from the tax increase are expected to increase 2% annually.
Revenue projections presented to the Board of Directors show that in the first year, the 0.5% capital portion would generate $23.8 million and the 0.75% operational tax would provide another $35.7 million.
The capital levy would generate $27.4 million in its expiration year of 2019, with the ongoing operational tax bringing in $41 million in its eighth year.
The proposal would devote $44 million to police and fire facilities over the eight years, and $15 million a year to public safety operations.
The public works budget includes $70 million for capital projects and $5 million a year for operational spending.
The capital program budget includes $40 million earmarked for economic development and job creation. Stodola said that might include land acquisition for expansion of the city’s port on the Arkansas River.
Little Rock voters in November 2003 authorized a property tax increase to support $70.6 million of GOs issued by the city a month later.
Proceeds from the bond deal were used for street projects and public safety facilities.
