Rough Roads Await Blue Ribbon

Members of the Blue Ribbon Committee hope to untangle the knot currently jeopardizing the future of more than 99,000 miles of roadways.

An 18-member panel, the Arkansas Blue Ribbon Committee on Highway Finance was created under Act 374 of 2009 and charged with finding new ways to pay for improvements on Arkansas’ state highways, county roads and city streets. That appears to be a tall task given Arkansas State Highway and Transportation Department director Dan Flowers’ estimate that an additional $200 million will be needed on an annual basis to maintain the current system.

“The sources of revenue that the Highway Department depends on are flat, and are likely to go down … because cars are getting better mileage,” said Fayetteville’s David Malone, a Blue Ribbon Committee member. “On the other side of the coin, the department is facing increased costs of building the roads.

“Those two things are going the wrong direction … so when you project the needs out there for 10, 20 years, it gets real scary as far as what conditions the roads are going to be in.”

The Blue Ribbon Committee first met in May 2009 and was given a July 1, 2010 deadline for delivering a set of recommendations to Gov. Mike Beebe.

“There’s still a lot of work to be done,” committee member Jim McKenzie said in advance of the group’s next scheduled meeting, on April 14.

McKenzie is the executive director of Little Rock-based transportation planning agency Metroplan, and the chair of the Blue Ribbon’s new revenue subcommittee. Another subcommittee is studying ways of shifting existing revenues.

Malone, also a member of the new revenue subcommittee, said shifting existing revenues might not be feasible for several reasons. For starters, such monies likely would be diverted at the expense of other government-funded programs, like education and the state’s prison system.

“It needs to be done in a way that won’t hurt those agencies,” Malone said.

There also appears to be an even bigger stumbling block in terms of shifting general revenues.

“The governor has said he’s not in favor of it,” Malone said. “That’s a pretty big obstacle right there.”

The governor’s opposition was announced after the revenue transfer subcommittee unveiled a plan to move more than $400 million from the general revenue fund. That plan hinged on the transfer of the sales tax raised from new and used vehicles and other transportation-related items such as tires, batteries and other parts.

“We’ve always opened up to new ideas, but a $425 million hit to general revenue is not something we can consider – $425 million that we have to find somewhere else just to keep the rest of state government at the current level,” Gov. Beebe’s spokesman Matt DeCample told the Arkansas Democrat-Gazette in December.

 

New Money

Because of the governor’s apparent stance and certain opposition from other factions, revenue transfer on a grand scale seems doomed. That is why the work of the new revenue subcommittee has drawn so much interest.

The subcommittee, under McKenzie’s leadership, explored no less than 11 potential sources for new income, according to a report it issued to the entire committee in January. Sources studied were:

• Income Tax
• General Sales Tax
• Removal of the Sales Tax Exemption on Motor Fuels
• Special Sales Tax on New and Used Autos
• Special Sales Tax on Auto Parts and Service
• New Excise Tax on the Wholesale Price of Motor Fuels
• Indexing the Current Gas and Diesel Excise Taxes
• Vehicle Miles Traveled Tax
• Carbon Tax
• Weight Distance Tax
• Public Private Partnerships/Tolling

While exploring these options, both McKenzie and Malone said, the subcommittee narrowed its focus to means that would satisfy three requirements. McKenzie’s group wanted new revenues to be elastic, have the ability to be phased in, and also be user-based.

The group eventually settled on two strong recommendations: indexing the current gas and diesel excise tax and implementing a new excise tax on the wholesale price of motor fuels.

According to the report, indexing gas and diesel taxes to the three-year trailing construction cost average would mean the current 21.5-cents-per-gallon tax on gasoline would be equivalent to 30.1 cents per gallon. That’s assuming the base year was 2005, the theory used by the subcommittee, and would result in the state collection about $100 million in additional state fuel taxes.

A 6 percent excise tax on the wholesale cost of fuel, meanwhile, might raise another $100 million, according to the report. That’s using $1.93 per gallon as an average wholesale price, which translates to $2.33 per gallon at the pump.

And while Malone believes these kinds of measures are more likely to be adopted by the Legislature, he’s not sure it would do so in the upcoming session. That’s because not only do both measures require a 75 percent majority vote in both houses, but they also would be presented at a time when legislators likely will be hesitant to endorse new and/or higher taxes.

“When you’ve got a political season in front you, that’s very hard to do,” Malone said, referencing the upcoming November elections.

Taking the political season – and climate – into consideration, Malone wondered if the measures being pondered might be better received after the next scheduled legislative session. Malone voiced that option even while acknowledging waiting another year for a remedy will be hard for many to swallow.

 

Hard Choices

One temporary fix regarding Arkansas’ road construction and maintenance woes is on the way. It will come in the form of more than $350 million the state expects to receive in federal stimulus money.

That’s part of $48.1 billion the stimulus package set aside for transportation infrastructure projects – including $27.5 billion for highways and bridges – nationwide.

Still, $350 million pales in comparison to the more than $23 billion the ASHTD estimates it will need to meet the needs of Arkansas roads over the next 10 years. Malone said studies have shown many other states in similar fixes.

What that means, he added, is the U.S. Congress might eventually be forced to help states maintain and improve their infrastructures in terms of roads. Barring such relief, however, Arkansans likely face some difficult decisions concerning their state, county and city roadways.

Some type of new taxes seem practically imminent, and not just for new projects like the long-proposed Bella Vista Bypass or highways connecting Northwest Arkansas to places like Jonesboro and Texarkana. Instead, Malone pointed to needs like widening current roads, exit ramps and overpasses.

At worst, Malone said the Blue Ribbon Committee is “trying to keep everything we’ve got from falling apart over the next 20 years.”

That’s the same sentiment McKenzie said he hopes the people of Arkansas keep in mind when such measures are discussed. A lot of people can be convinced to vote for the construction of a road, McKenzie said, but they often fail to realize it’s not a one-time proposition.

A new road, whether it be state, county or city, can’t be built and then forgotten.

“You have to maintain it forever,” McKenzie said.