Governor’s $95 million highway plan breezes through House committee, part of $300 million program

The trifurcated proposal that would fund the first $95 million of Gov. Asa Hutchinson’s $300 million highway maintenance program breezed through a House panel on Tuesday (Feb. 26) and is now headed for what is expected to be a contentious debate on the chamber floor later this week.

In an hourlong hearing in the overflow House Revenue and Taxation committee, the debate on Senate Bill 336 largely mirrored testimony in the corresponding Senate panel nearly a week ago. In introducing the three-part proposal, Rep. Mike Holcomb, R-Pine Bluff, said support of the governor’s proposal by state, local and county policymakers, trade groups and legislators was unlike he has ever seen at the Capitol.

“I just don’t think we can have a perfect bill. I think any way we change the bill, we are going to have some for and some against,” said Holcomb, chair of the House Transportation Committee. “But here again … this is the most collaborative effort I have ever seen across the state agencies and industry to get a highway bill done.”

Earlier in the committee meeting, a roll call of trade groups lined up behind Holcomb and state Arkansas Department of Transportation Director (ARDOT) Scott Bennett to speak in support of SB 336, including the Arkansas Farm Bureau, the state Municipal League, and Arkansas Trucking Association.

In making the case for the governor’s comprehensive highway tax program, Bennett said SB 336 will bring Arkansas up to speed with surrounding states in revenue collected on fuel taxes and registration fees. In questioning from Rep. Lane Jean, R-Magnolia, who co-chaired the pre-session Tax Reform and Relief Task Force, the ARDOT Director said Arkansas lagged well behind other states in revenue per mile dollars from fuel taxes for highway maintenance and repair.

“We will be a little bit on the high end of the fuel tax (compared) to surrounding states, but even with that, we historically and especially recently have either the second or third lowest pump prices in the country,” said Bennett, who often cites a state legislative audit that predicts the state will need to invest an additional $478 million annually to maintain Arkansas highways, roads and bridges.

On the other side of the coin, Glen Hooks, state director of the Arkansas chapter of the Sierra Club, and the same group of private citizens who spoke against SB 336 in the Senate committee hearing again voiced their disdain for the small section in the measure. That short paragraph in the bill would slap a registration fee on the growing number of hybrid cars and electric vehicles that are purchased in Arkansas.

“This is a fairness tax. These vehicles are using and causing wear and tear on our roads, but they don’t pay an equivalent fee for usage,” said Holcomb, noting that the bicameral tax reform panel convened over the past year recommended the levy for the environmentally-friendly vehicles.

But Barry Haas, a North Little Rock resident who has filed several lawsuits against the legislature on constitutional matters, including voter ID legislation, called SB 336 a regressive tax.

“More than 88% of the $300 million per year in new taxes are sales tax. That is an incredibly regressive way to maintain our roads,” said Haas, who was among about a half-dozen people who spoke against the highway funding plan. “I am in favor of adequately maintaining our roads and other infrastructure, but I am opposed to unfair and punitive ways of collecting the revenue.”

Under the complex metrics outlined by Gov. Hutchinson during a press conference nearly two weeks ago, SB 336 by Sen. Terry Rice, R-Waldron, would first raise $58 million per year by enacting a wholesale gas tax that would be the equivalent of 3 cents per gallon, and it would do the same on diesel fuel that would be the equivalent of 6 cents per gallon. That tax could increase by a maximum of one-tenth of one cent per year.

It would also raise a minimum of $35 million from new casino tax revenues, restricted reserve funds and other general revenue sources. Voters passed a constitutional amendment in November allowing four casinos to operate in Arkansas. Finally, it would raise almost $2 million by imposing additional fees on users of hybrid and electric vehicles.

The governor’s highway plan also includes extending a half-cent sales tax extension that would raise $206 million annually and would have to be approved by voters in 2020. Voters first passed the tax in 2012 to fund the Connecting Arkansas Program, which will expire in 2023. That program relied on bond issues, where officials say 28% was consumed through financing costs. If voters pass the new measure in 2020, the extension would fund roads on a “pay as you go” basis.

Much like the Senate hearing, Paul Gehring, assistant director of revenue with the state Department of Finance and Administration (DFA), also offered an explanation at Tuesday’s hearing of the complex formula for collecting new gaming revenue to transfer in the ARDOT’s annual budget. Gehring told the House panel that DFA will dedicate at least $31.2 million annually to the state Highway Department from revenues generated by a gaming tax on three multi-million dollar casino developments at Hot Springs’ Oaklawn Park, Southland Gaming and Racing in West Memphis and another location planned in Jefferson County near Pine Bluff.

Those funds, Gehring told the panel, would begin to flow into state budget coffers by July 1, 2020, and would potentially increase by 4% annually as the casino projects in Garland, Jefferson and Crittenden counties generate more income by 2025.

In the weeks after Arkansas voters approved casino gaming in the November 2018 election, Oaklawn announced it would build a $100 million gaming and hotel complex on its Hot Springs grounds by early 2020. Southland’s owners, Delaware North, also said a $200 million hotel and convention center could be added to its casino operations in West Memphis.

In early December, the Quapaw Nation’s Downstream casino enterprise said it would build a casino in Jefferson County before 2020. Under that scenario, Gehring told the Senate panel that DFA projects revenues from those casinos to grow to $42.4 million by 2022, of which $11.2 million would be transferred into the highway fund. The projected annual transfer to pay for highway maintenance would grow to $22.5 million by 2028, said Gehring.

SB 336, which has more than 20 House and Senate sponsors from both parties, will now move to the House floor. Although it is not yet on the chamber’s calendar, several lawmakers said after Tuesday’s legislative committee hearing that they expect it to come up for a vote on Thursday.