Funding plan lags in returns

With more than half of the precincts statewide reporting, voters Tuesday appeared to reject a proposed constitutional amendment to allow local governments to finance redevelopment project districts using bonds payable by sales taxes collected within the district.

With 1,749 of 2,386 precincts reporting, the unofficial results were: For . . . . . . . . . . . . . . . . . .378,203 Against . . . . . . . . . . . . . .488,276

Issue 2, proposed by state Sen. Jake Files, R-Fort Smith, would give counties and cities the ability to create districts for development or redevelopment and fund projects within them with Sales Tax AnticipatedRevenue bonds.

While the increased sales and use tax revenue generated by the projects within the districts would be used to pay off the bond debt, the amendment does not create a new sales tax, Files said Tuesday before the final results were tabulated.

Files did not return several telephone messages left Tuesday night for a comment on polling results.

Don Zimmerman, executive director of the Arkansas Municipal League, which backed the issue, said he still hoped that it would pass because it would allow cities to assist the state with economic projects as well as pay off unfunded police pensions.

“I still commend the Legislature for giving the people of Arkansas the right to voteon it because there were some good things in there for economic development,” he said.

Teresa Oelke, director of Americans for Prosperity’s Arkansas chapter, said she opposed Issue 2 because large corporations benefit over small, local businesses.

“I think it’s time for politicians to realize that [voters] want a fair and equal playing field for all businesses,” shesaid. “And they don’t want the government to continue to pick winners and losers.”

Files said that while any kind of project can go into a redevelopment district, the projects must show how it will pay off the bonds.

If a district is unable to create enough revenue to pay off the bonds, the bond purchasers would take the loss - not the government.

“So the city wouldn’t be at risk, it would be the developers in that area,” Zimmerman said.

Before a city or county could issue bonds for a project, it would have to be approved by “an appropriate state agency as may be determined by the General Assembly,” said John Theis, assistant commissioner of revenue for the Arkansas Department of Finance and Administration.

He said the Legislature may decide if all or a portion of a community’s salesand use tax collected within a district can be directed to the redevelopment effort.

Theis said the amendment does not address the need for a vote of the people to redirect sales-tax revenue to pay the development district bonds.

“My reading of the law seems to say that the vote of the people is not required,” he said.

Before Tuesday’s vote, Oelke said that instead of using sales-tax revenue to pay for bonds, the state should focus on establishing an “overall low tax environment.”

“We definitely need a more competitive environment to bring businesses to the state,” she said. “But we should create a more competitive tax environment by reducing the tax burden on businesses.”

Zimmerman, from the Municipal League, said Monday,“We think that it’s some additional tools to help cities from an economic standpoint as well as from an operational sale point.”

He said he also supports Issue 2 because it would give local governments the ability to pay off unfunded liabilities of closed police and fire pension plans.

The second part of the amendment would allow local governments to issue bonds to retire their unfunded liabilities for the pension plans, and collect a sales or use tax to pay off the bonds.

The tax, which would expire when the bond debt has been paid, would require a vote of the people.

The third part of Issue 2 would allow the local governments to use special revenue - such as from airport fund and park funds - from other sources other than their general funds to pay off shortterm debts.

Northwest Arkansas, Pages 11 on 11/07/2012

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