XNA approves new settlement offer, Highfill OKs another

Northwest Arkansas National Airport (XNA) has amended its original settlement offer to allow Highfill to use $900,000 in sales tax revenue however it’d like. Highfill also approved a settlement offer but not the one city officials said they received from XNA.

The deals are part of XNA’s move to detach from Highfill.

On Tuesday (March 18), the XNA Board of Directors approved the new offer that changes the tax usage amount from $746,560 to $900,000 annually and removes several of the settlement points in the offer that expired at 5 p.m. Friday (March 14).

Following points are excluded in the new proposal XNA Board of Directors approved Tuesday.
• Highfill will adopt by ordinance an airport overlay district with an influence area substantially similar to the one adopted by the city of Bentonville within 60 days following the entry of an order of detachment.
• Highfill will adopt XNA’s model height zoning ordinance within 60 days following the entry of an order of detachment.
• XNA’s status as a water customer of Highfill will be as a user within the city limits until Highfill is no longer entitled to receive sales tax revenue from transactions occurring at XNA.

Brian Burke, general counsel and director of compliance for XNA, said the new proposal would not seek to “claw back” the more than $800,000 that XNA claims the city has improperly allocated since XNA filed its petition to detach.

XNA CEO Aaron Burkes said Highfill Mayor Chris Holland would advocate for Highfill City Council to approve the new offer. The council met at 5 p.m. Tuesday to discuss the new proposal. In the meeting, Holland said he supports an agreement that allows its bonds to be paid and for the city to receive $900,000. Holland said XNA’s new offer differs from the deal reached with XNA officials on Monday (March 17). The city council approved that agreement, not the one XNA sent to Highfill city officials.

XNA and city officials said a new proposal was developed after a state Senate committee meeting on Monday about a proposed bill that would amend a state law approved in 2023 allowing XNA to detach from Highfill without being annexed into another city. The bill, Senate Bill 96 proposed by Sen. Clint Penzo, R-Springdale, would cut the provisions of the 2023 law allowing XNA to detach from Highfill and retroactively revoke any petition to detach as of Jan. 1, 2024. XNA filed its petition to detach in Benton County Court on Oct. 4, 2024.

Burkes said another meeting on the bill is set for Wednesday (March 19).

XNA officials said the 2023 state law requires that once a detachment petition is filed that all sales tax money must be allocated for paying off the city’s existing bonds. XNA will not receive any sales tax money in the settlement, but it shows how much of the money Highfill can spend as it wants while still paying on the existing bonds. Attorneys for Highfill disagree that the state law requires all sales tax money to be allocated to pay the bonds.

XNA board chairman Howard Kerr said the new proposal would allow for $900,000 for the city to spend while setting aside about $1.1 million to $1.3 million to pay off its bonds.

XNA still plans to detach from the city, and once the city’s existing bonds are paid, XNA officials said the airport will no longer have to pay sales tax on its parking revenue or collect the city’s 2% sales tax on purchases made by XNA’s passengers and guests or the 4% tax for rental cars. Burkes declined to say when the bonds would be paid off as it’s dependent on how much sales tax revenue Highfill generates, but it’s expected to take years. Burke said under the original proposal with the lower tax usage amount, it would take the city over five years to pay off the bonds. So, with the higher amount provided in the new proposal, it will take longer than that.

“Let’s say we had another COVID year, and only $400,000 (in sales tax revenue) came in… All of that is going to go to the bondholders,” Burkes said. “There would be zero left over for them [Highfill] for operating expenses. But the $400,000 that’s going in will essentially free up $400,000 from the water and sewer system revenues to come back out and fund operations.”

Burkes said the airport would need to undergo the same detachment process if it acquired new adjacent property in Highfill. Officials plan to do this in batches as XNA acquires additional properties.

After approving the new settlement offer on Tuesday, XNA Board of Directors voted 10-4 to seek a writ of mandamus, which is a court order directing a public official to perform his or her public duty, if Highfill does not accept the new proposal. This would require Highfill to allocate the city’s sales tax revenue to pay for the bonds in accordance with state law. Board members who voted against this didn’t think it was necessary with the new proposal. The board members voting against it were Mike Johnson, Jim Krall, Philip Taldo and Mitchell Johnson.

On Monday, Holland provided the following statement before the new proposal came about.
“From the beginning of this process, we’ve reiterated the need for more time — a sentiment echoed by the Northwest Arkansas National Airport, including in testimony before the General Assembly when the authority stated that the City of Highfill would have an ‘eight to 14-year planning horizon’ to determine the necessary steps to accommodate the loss of sales tax revenue. Its current efforts to force us into a quick and, frankly, irresponsible agreement show that was a misrepresentation of intent as we have repeatedly come to the table willing to reach a common-sense solution to protect our city’s services, residential growth and economic development. The city council was presented with the agreement presented to the city at the regular monthly meeting on Tuesday, March 11. At this time our council members are still doing their due diligence and need more time to make a decision.”