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State highways hungry for money from severance tax proposal Sunday, Mar 16, 2008 By Jason Wiest Arkansas News Bureau LITTLE ROCK - Critics of Gov. Mike Beebe's plan for spending a proposed severance tax increase have it only half right, the chairman of the Arkansas Highway Commission says. True, the amount of money the proposal would provide for state highway improvements is small compared to a forecasted $16 billion shortfall over the next 10 years, but the state desperately needs more highway funding and would put any amount of additional revenue to good use, commission chief Jonathan Barnett of Siloam Springs said last week. Gov. Mike Beebe on Tuesday announced he had reached an agreement with natural gas industry executives to set the severance tax at 5 percent of market value at the time of extraction, with some temporary reductions. The current rate is three-tenths of a cent per 1,000 cubic feet of gas, one of the lowest rates in the nation. The governor said his proposal, if approved by the Legislature, would raise about $57 million next year and about $100 million annually by 2012. He said he wants the bulk of the money to go for state and local road improvements. "Is it enough money? No, we need more money, but does this help? Sure, absolutely," Barnett said. "The transportation infrastructure in this state needs help, any help." Some Republican lawmakers blasted the governor's proposal, noting among other criticisms that under two-thirds of the scant revenue - in road-building terms - would go to state highways. The total would be insignificant for highway needs and could best be used in other areas, some said. "$57 million doesn't even get you close to being able to issue a bond (for highway construction), and you're not ending up with much getting to the cities and the counties to do any kind of repair," Rep. Mark Martin, R-Prairie Grove, said Wednesday. "It could sure do a lot more good if we actually shipped all that to cities and counties," which each would get 14.25 percent of the tax revenue each year. Beebe countered Friday that the State Chamber of Commerce-Associated Industries of Arkansas had endorsed the proposal. "(Martin) might say it's not enough money," Beebe said. "If he wants more tax, I disagree with him. I think this is a fair tax. The cities and counties appear to be satisfied." The additional revenue certainly would not satisfy the numerous needs of the state Highway and Transportation Department, including maintenance, new roads and easing congestion on existing roads, but it would help, Barnett said. Preserving the state highway system, which encompasses 16,400 miles of roads, is the department's biggest need, according to department spokesman Randy Ort. "With current costs and our current funding level, we're just falling farther behind," Ort said. Maintaining current highway conditions would take an additional $150 million a year, Ort said. With an additional $300 million, the department could start to regain lost ground, he said. Revenue from the proposed severance tax increase would total about $101.6 million for the year 2015, the year with the most revenue from the tax by state Department of Finance and Administration projections. About $67.6 million of the tax projection that year would go to the state highway department. Maintaining existing highways is one of "thousands of ways" the department could spend additional severance tax revenue, Barnett said. Others include funding projects of regional significance such as construction of the Bella Vista bypass in Northwest Arkansas or creating additional capacity for the Interstate 430-630 interchange in west Little Rock. "We really almost need $100 million plus a year to fund those types of programs, but $50 million, $60 million, $70 million, that's a good start," Barnett said. The Bella Vista bypass is a $300 million project, but Ort said it could be done for $139 million if the bypass was made a toll road and the highway department used toll revenue to repay debt from the issuance of bonds. Easing congestion at Little Rock's I-430/I-630 interchange, one of the busiest interchanges in the state, would cost an estimated $130 million, Ort said. Barnett also mentioned projects on U.S. Highway 167, U.S. Highway 65, U.S. Highway 412, and I-49, which all are part of the state highway system. If the department decided to work on projects of regional significance, projects would probably be done in each congressional district "so that everybody felt like they were treated fairly," Barnett said. Barnett, who is nearing the end of his 10-year term on the Highway Commission and running for a House seat this spring, said he's fearful legislators might oppose Beebe's proposal because of their possible fears that their district would be left out of funding. "If it comes down to where everybody is simply going to fight over this money and say, 'Well, if I don't get something in my backyard then I'm not going to support this thing,' then obviously it's probably doomed to fail because it's just not enough money to take care of everybody," Barnett said. "That's sad, but it's just a reality." The highway department is in such dire straits because of its method of funding. Most of its money comes from a per-gallon tax on motor fuels, a flat tax. An increase in the price of gasoline and diesel does not increase the department's revenue stream. The shortfall has been exasperated by the introduction into the market of vehicles with improved gas mileage, Ort said. "We're all in favor of fuel efficiency, but as cars are able to travel more miles per gallon, that's more wear and tear (on roads) without increasing our revenue," Ort said. Although the department's funding has grown at an annual rate of about 1 percent, inflation has caused a loss in buying power, Barnett noted. State officials have tried to identify new sources of revenue but have been reluctant to raise taxes, Ort said. An increased severance tax with proceeds going to roads is a step in the right direction, he said. Barnett agreed. "When it's all said and done with the debate, the need is still there," Barnett said. |
