Friday, November 19, 2010

TOP STORY > >Road-tax plan needs traction

Leader senior staff writer

A special committee that has been studying ways to pay for highway improvements hopes it can convince state officials to raise taxes, although that might be difficult to achieve.

Among its recommendations: Index state gas and diesel excise taxes to the cost of road construction, add a wholesale fuel-sales tax and divert sales tax revenues from the sale of vehicles, batteries, auto parts and similar highway-user items from the state’s general fund—where they have traditionally gone—and into a new highway trust fund.

Those are three of the main changes the state’s Blue Ribbon Highway Finance Committee will recommend in its Dec. 1 report to Gov. Mike Beebe, the state General Assem-bly and other interested parties, according to state Sen. John Paul Capps, committee co-chairman.

The committee was charged with finding permanent, sufficient and flexible financing to keep the state’s aging road system in good repair.

Most states already dedicate sales tax from vehicle sales and vehicle-related sales to their highways, but in Arkansas, where state revenues have been hard to come by, those taxes generate about $400 million a year to help fund schools, prisons, Medicare and Medicaid, according to Jim McKenzie, executive director of Metroplan and a member of the committee.

Diversion of the vehicle associated sales tax revenues would not begin until general revenues exceed the $2.2 billion mark set in 2007, according to Capps, and then would be phased in over a decade.

Currently, the state Highway and Transportation Department projects that it needs $19 billion over the next decade just to maintain the highways it has, but expects only about $4 billion in revenues.

A new wholesale-fuel tax would be phased in over six years, McKenzie said.

The recommendation will include a constitutional amendment for a half-cent general sales tax to fund bond issues, which would allow the department to undertake major new highway construction, McKenzie said. He added that the highway- construction lobby supports that idea.

The problem in financing highway and road construction and maintenance is that Arkansas has the 12th largest state highway system in the nation and the 10th largest county system, but is only 36th in population and 47th in percapita income.

Currently, the state spends about $400 million a year to maintain highways, but to provide the same level of maintenance in 2020 will cost an additional $150 million a year.

To completely reserve the system and meet urban congestion problems would cost $10.9 billion over 10 years, of which $800 million a year would need to be new revenues.

If the state implemented all the revenue-increasing measures recommended, it would have barely enough to begin that level of maintenance, McKenzie said.

To add significant new capacity to the state highway system would cost yet another $700 million a year.

The committee asked the governor and legislature to review or undertake new studies.

What would it cost to reduce the size of the state highway system by turning roads such as Broadway over to the counties after bringing them up to snuff?

Also, there needs to be a new federal study evaluating the cost to state roads of the heavy trucks. That could lead to increases in licenses and fees on those trucks to more fairly pay for the damage they do.