Bills would raise yearly $200M for Arkansas roads

Panel approves measures on issuance of bonds, 6.5 percent tax on wholesale fuels

A House committee, in two meetings Thursday, approved a legislative package that would raise more than $200 million annually for highway maintenance if voters also approve it.

The package includes House Bill 1726, which would allow the Arkansas Highway Commission to issue bonds for 20 years, subject to voter approval, and House Bill 1727, which would apply the 6.5 percent state sales tax on the wholesale price of gasoline and diesel, a price that excludes state and federal excise taxes on fuel. The bills now go to the House for consideration.

The bulk of highway funding now comes from fuel excise taxes paid at the pump. The Arkansas excise tax on gasoline is 21.5 cents per gallon and on diesel it is 22.5 cents. The federal excise tax on gasoline is 18.4 cents per gallon and 24.4 cents on diesel.

If both bills are enacted, the tax wouldn't be collected unless voters approve the bond issue. An amendment to HB1726 would put the bond issue on the November 2018 ballot.

"It's real simple," the bills' sponsor, Rep. Dan Douglas, R-Bentonville, told the House Public Transportation Committee. "You have to put down asphalt, concrete and steel to build roads and bridges. You need money to do that."

Supporters of the proposal say the state's 16,000-mile highway system badly needs the extra money to maintain the roads and lengthen their lives at a minimal cost, rather than allowing them to deteriorate and then require more expensive rebuilding. Resurfacing a mile of state highway costs about $200,000 versus $1.5 million to rebuild that same stretch.

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The package is the latest attempt to come up with a long-term funding plan for roads. The department has been unable to keep up with demands for road construction and heavy maintenance. Construction industry inflation and increased fuel efficiency has eaten away the effectiveness of fuel excise taxes, which are consumption based and haven't been raised on the state level in nearly 20 years.

The proposal is an outgrowth of a working group Gov. Asa Hutchinson formed two years ago to develop recommendations for highway funding. He later asked the Arkansas Good Roads Foundation to use the recommendations to develop a politically palatable proposal for the Legislature to consider.

Even before that, another group, the Blue Ribbon Commission on Highway Funding, developed a similar set of proposals. It came up with two short-term fixes that voters approved in 2011 and 2012.

The measures included renewal of $575 million in bonds to pay for interstate repairs and a 0.5 percent increase in the statewide sales tax to build regionally significant projects. The sales-tax increase is in place through 2023. Together those initiatives are paying for $3 billion in road and bridge work.

But the department is struggling with its state and federal monies devoted to other projects and ongoing maintenance associated with the 12th-largest state highway system in the nation. The funding equals about $1 billion annually.

The department halted its overlay program several years ago to shift that money to help pay the match for its share of federal highway money. Most projects on state roads are paid with 80 percent federal money and 20 percent state money. Agency officials now are unsure whether a stopgap measure passed in a special session last year will enable the department to match an additional $50 million in federal money due later this year.

"We've talked it to death," Douglas said. "It's time we have to do something."

Scott Bennett, the director of the Arkansas Highway and Transportation Department, said the extra money from the legislation considered Thursday would enable the agency to address maintenance needs throughout the system. Now, the department largely focuses on the 50 percent of the system that carries 90 percent of the traffic.

Rep. LeAnne Burch, D-Monticello, asked if the department had visual aids to show people where the money would go.

"If you pull out a map of the state highway system, that's it," Bennett responded. "It will be used on every highway all over the state."

Turning its attention to the rest of the highway system will help two pillars of the state's economy -- agriculture and tourism, he said. Further, better roads will cost motorists less wear and tear on vehicles, help attract business and create or sustain 2,300 jobs in the first year alone, Bennett added.

Applying the 6.5 percent tax on the wholesale price of fuel would cost the average Arkansan about $75 annually, he said.

Some committee members expressed reservations about voting for the bills even though voters would have the final say.

Rep. Andy Mayberry, R-Hensley, said it can be argued that applying an existing tax to a new item -- in this case, the wholesale price on a gallon of fuel -- isn't a tax increase.

"This is not a new tax, but for many people it is," he said. "Perception is reality."

And lawmakers, Mayberry added, are "providing what essentially is an endorsement if we refer it out."

Representatives from two organizations with conservative leanings, Americans for Prosperity and Conduit for Action, opposed the bills.

David Ray, state director for Americans for Prosperity, said based on his calculations, the tax would cost motorists more than $200 annually and offset any savings realized by a reduction in the income tax rate for Arkansans making less than $21,000 in taxable income.

But former House Speaker Bill Stovall of Quitman, who now is executive director of Arkansas Community Colleges, said he found in his experience as a convenience store operator that a tax on fuel often didn't translate into an increase at the pump. He also said a significant percentage of people who will purchase fuel are out-of-state travelers.

Most of the debate came during the committee's regular morning meeting, but the committee had only enough time to recommend HB1726. After the House adjourned, the committee met briefly to recommend, also on a voice vote, HB1727.

Kenny Wallace of North Little Rock, who describes himself as a conservative activist, spoke during the afternoon meeting. Wallace said the highway funding proposal, if passed, would be the latest tax increase as a result of the legislative session at a time when the executive and legislative branches of government are Republican held.

Pending is a bill aimed at encouraging online retailers to apply state sales taxes to their transactions. Amazon announced that it would begin collecting the tax at the beginning of March.

The Legislature also passed a bill to create rim fees of $3 for new tires and $1 for used tires. The fees would be paid every time a tire is placed on a car. Fees are now charged on new car and truck tires at the point of sale. The funds would be distributed to regional waste districts based on how they dispose of old tires.

"I don't think the people of Arkansas wanted that when they voted in the last election," he said.

A Section on 03/10/2017

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