HIGHFILL -- Northwest Arkansas National Airport's attempt to deannex from the city of Highfill landed at the Legislature this week with the filing of a bill Highfill officials said they intend to fight.
Senate bill 414, if passed, would allow regional airport authorities to deannex from a city, levy their own taxes on airport property and create an infrastructure and development commission to then spend those tax proceeds on operating and improving the airport.
The measure would allow the board of directors of the Northwest Arkansas National Airport to detach from Highfill by a two-thirds vote of the board.
"We worked the better part of two months with outside counsel to put together what I think is a pretty strong legislative bill," Brian Burke, the airport's attorney, said Tuesday. "If passed, it will put regional airport authorities on par with cities and counties and other subordinate political subdivisions. And, it provides a detachment mechanism for the authority to implement, should it so choose."
Burke urged the airport board in December to consider trying to get the law changed during this Legislative session by pursuing an amendment to the state's Regional Airport Authority Act to allow regional airports to deannex.
Highfill Mayor Chris Holland said he opposes the bill because it would hurt Highfill.
"I don't like it. It's one-sided, the way I'm reading it," Holland said Thursday. "We've had no input in writing it."
Holland said Highfill budgeted for just over $1 million in revenue this year, and it expect to get about $600,000 of that from its 2% sales tax on businesses at the airport.
"That would put a big dent in our budget," Holland said.
City officials intend to actively fight the bill in the Legislature, Holland said.
"We're going to Little Rock the week after spring break to testify on it," Holland said.
Holland said he'd like to see Northwest National remain in Highfill.
"I think there are avenues that we can work with them to help them save some of their money. Some of the services they're offering over there, we could do to help them save money," Holland said. "Obviously, I don't think it's good for any business to leave a city. And, we'll lose a big chunk of sales tax."
Holland said the bill wouldn't just hurt Highfill.
"It hurts the state of Arkansas. It's basically taxation without representation," Holland said. "The way I read the bill, they're going to allow the board to impose a tax out there and none of them are going to be elected by the people."
The bill was filed Monday by Sen. Jim Petty, R-Van Buren, and and Rep. Mindy McAlinson, R-Centerton. It has 14 bi-partisan co-sponsors, most from the Northwest Arkansas. The bill was read twice this week and referred to the Senate City, County and Local Affairs Committee for consideration.
Airport Authority officials began exploring how to amicably leave Highfill in September. Airport Authority board members said they never wanted the airport to be annexed into any city in the first place.
"Annexation of the airport by Highfill was never in the airport's interest, but the airport had no say and no vote when that occurred,"said Aaron Burkes, Northwest National CEO. "This legislation gives the airport board the ability to determine what is best for the airport and its customers."
Airport officials also don't like losing a big chunk of revenue to the city when they provide most of their own services, including police and fire.
"Our passengers deserve to get the best possible value from us," Burkes said Friday. "It's hard to justify taxing all of our customers exclusively for the benefit of one single community within our service area."
A potential sticking point is that Highfill has issued bonds based at least in part on revenue the city collects from businesses operating at the airport. The city has two water and sewer improvement bond issues of about $5.8 million that rely on sales tax revenue from the airport for payment.
The Arkansas Constitution prohibits any law that impairs the obligations of contracts. The proposed change in the law would require the airport authority to pay the city for lost revenue that would have gone toward repaying those bonds as part of any deannexation.
"This bill provides a very generous detachment process, should the airport board elect to pursue it, where sales tax revenues will continue to go to Highfill until all currently outstanding debts of the city are paid off," Burkes said.
Highfill gets sales tax money from seven or eight food vendors at the airport, six car rental companies and other various retailers. The city also sells water to the airport. The city spends $700,000 a year in bond debt service.
"While the airport's growth and use has increased dramatically over the last decade, Highfill has invested little--if anything--to the cost of constructing or maintaining the airport's essential infrastructure, such as roads or parking lots, and XNA has no ability whatsoever to force Highfill to contribute to those costs," Burkes said.
"This bill will put XNA on more equal footing to negotiate a good faith agreement with Highfill so they can pay a fair share of infrastructure costs in relation to the sales tax revenue they receive, and we look forward to having those discussions."
The bill also clarifies that regional airport authorities are entitled to statutory immunity from being sued and establishes a conflict of interest policy for regional airport authority board members that is similar to cities, counties and other state boards and authorities.
A deannexation would also have to be signed off on by state and county officials.
Under current law, there would be only one option: deannex from Highfill and annex into another city, according to airport officials. But, that would be complicated and it would be unlikely the airport could detach the entirety of the property it owns without creating "islands" within Highfill, which are prohibited by current state law.
Senate Bill 414
The bill is described as an act to amend the Regional Airport Authority Act; to create a procedure for annexation and detachment; to levy tax on retail sales on property of an Authority; to create a Regional Airport Infrastructure and Development Commission; and for other purposes.
Here's a link to SB414: https://www.arkleg.state.ar.us/Bills/FTPDocument?path=%2FBills%2F2023R%2FPublic%2FSB414.pdf
Source: Staff reports