Selling a tax in a tepid economy

In these tough economic times business leaders across Northwest Arkansas have the arduous task of selling a tax to voters across the state in the November general election.

That challenge hasn’t dampened the enthusiasm that would fund the widening of Interstate 540 to six lanes from Bentonvillle to Fayetteville, complete the two-lane phase of the Bella Vista bypass and start a four-lane 412 bypass that would link Springdale to the Northwest Arkansas Regional Airport connector.

Arkansas Highway Commissioner Dick Trammel said voters will have a chance to move Arkansas forward if they approve a ½ cent sales tax with a constitutional amendment. The tax would raise $1.3 billion and food, medicine and fuel would be exempt from the added tax. When added to existing revenue the state could put $1.8 billion to work improving its roads.

While Northwest Arkansas would be a clear winner if the amendment passes, Trammel said, $670 million will help improve the four-lane road system in every corner of the state as all cities, towns and counties will get some money back for street and road repairs.

He said Northwest Arkansas would get 24% of the total revenue generated by the tax. Central Arkansas would receive 40% and the remaining 36% will be dispersed elsewhere in the state.

Benton County would receive $12.888 million over the 10-year period and the 19 cities in the county would share $30.431 million. Washington County would get $12.297 million, with 13 cities sharing $30.461 million over a decade for local road work.

Sebastian County and the 10 cities there would share $26.362 million — Fort Smith getting the lion’s share with $15.355 million. Crawford County and its nine towns would share $11.745 million.

“When all those Arkansas fans from the eastern side of the state come to see their Razorbacks, they would have four-lane roads or interstate the entire way from Pocahontas to Fayetteville,” Trammel said Friday (July 20) at the Urban Summit in Bentonville.

Trammel says that helps everyone.

He knows there will be folks who don’t want to approve a tax, but he wants voters to understand the tax is limited to 10 years and would help provide as many as 40,000 jobs over the next six years.

“Anytime there is progress, there is also some pain. Getting this additional funding from the tax on the heels of the Garvee bond revenue will allow the state to expedite a better road system that would take 15 years to begin otherwise,” Trammel said.

Mike Malone, CEO of the Northwest Arkansas Council, wholeheartedly supports the tax initiative saying the temporary one-half cent tax is a great opportunity to advance major highway projects that will decrease congestion for local residents and improve access to and from this region for businesses and industry.

Malone said there are benefits in the short and long run as the tax would help create thousands of construction related jobs over the next few years.

But the larger payoff is that infrastructure investments like completing the unfinished links around the Bella Vista bypass will make it easier to recruit industry to all of western Arkansas and entice existing companies to expand if they can more easily move their goods in and out of the region.

“This proposal is the best opportunity that I can see for getting the large-scale projects that our area desperately needs finally moving forward,” Malone said.

Perhaps no other sector has felt the brutal sluggish economy more harshly than small business owners and getting their approval on another tax won’t be an easy sale.

Shelly Parson, of Farmer’s Insurance in Bentonville, said as a consumer who lives in Springdale and works in Bentonville she totally understands the need for added lanes to I-540 and better alternative routes both north to south and east to west.

That said, Parson as a small business owner is less likely to approve another tax given that she faces unpredictable health care costs and certain higher taxes in 2013.

“I am seeing my own customers struggle and trying to save every penny they can for the things they have to purchase. I don’t see that improving this year, not by November,” Parson said.

Malone thinks the tax has a decent shot at passing because the highway needs are so great throughout the state.

Trammel said Arkansas ranks No. 42 of 50 states in terms highway budget and has seen stagnant revenue for the past decade as the 21 ½-cent tax on fuel sold in the state is the major revenue source — roughly $230 million annually.

The needs are so much greater than the funding readily available, Trammel said the tax is the best way to make the biggest impact to the state’s aging highway system. If voters pass the amendment $1.3 million will be

“In our area, we have residents and commercial vehicles stuck in traffic on a regular basis,” Malone said. He adds that even in challenging economic times voters in several communities have been demonstrating that they're willing to pay for infrastructure if – and only if – the plans are well defined and if taxes are temporary in nature. 

The 10-year sunset clause and that the fact that food and medicine will be exempt is also helpful Malone said.