Tuesday, July 05, 2011

EDITORIAL >> Supporting better roads

The trucking industry gave up its claim to a sales tax exemption for big tractors and trailers in the face of wide criticism last week and everyone agreed not to hold an election on a nickel-a-gallon tax on diesel fuel. We are tempted to say, like all the players in the imbroglio, that all’s well that ends well. But only tempted. The taxpaying and motoring public is still a big loser.

We still find the episode mystifying. The trucking industry approached the Highway Commission, Gov. Beebe and the legislature with a proposition. It wanted repairs to the degraded sections of interstate highways and was willing to support an increase in the diesel tax. The tax and a bond issue would be submitted to the voters at a special election. There was only one catch. In exchange, the industry wanted their big rigs exempted from the sales tax. Everyone agreed to the proposition, and the legislature passed the whole package.

The good-roads lobby was preparing last month for the campaign for the bonds and tax when the industry suddenly seemed to have a change of heart. It announced that it had conducted a poll of Arkansas voters, who overwhelmingly did not want the big trucks to pay more taxes to repair the roads they tore up. So the industry was not going to support the tax.

Gov. Beebe said fine, he would not call the election, but he would ask the legislature to repeal the truckers’ sales-tax break. The deal had been that if the diesel tax failed, everyone would agree to repeal the tax exemption. But the truckers said they wanted to keep the exemption and they would work to stop the repeal.

Cooler heads prevailed, and the Arkansas Trucking Association announced last week that it would agree to the repeal. The association’s executive director said newspaper columnists were making it sound like the truckers were having their cake and eating it too, so it seemed wise to abandon the tax exemption.

Beebe said he would go ahead with the original plan, which was to call a special election to vote on a new $575 million bond issue to do repairs on the interstate system. The bonds would be repaid from an existing 4-cents-a-gallon levy on diesel. That tax and federal highway aid are now paying off a highway bond issue approved in 1999. The old bonds will be repaid in another three years.

It is too bad that the governor and the good-roads people didn’t go ahead with the election on a new tax and bond issue because we think voters are pretty rational. They know that the heavy rigs destroy the roadways and would be happy for them to pay a small part of their rightful share of maintaining them. It would have freed other taxes and federal aid to repair thousands of miles of primary and secondary roads that serve the vast majority of motorists.

Beebe should exercise some caution about calling another election to renew the interstate bonds. A bond issue is wise only if there is a need for all the highway work to be done quickly rather than piecemeal as tax receipts came in. Even then, bonds are the route to go only if the extra costs of bond financing—attorney and underwriting fees and investor earnings—are reasonably related to the work. The argument for a bond issue has been that materials and labor costs are rising so fast and borrowing costs are so minimal that it saves money in the long run to borrow and build right now.

But no one knows if those conditions will prevail when the bonds are finally issued and the construction performed. The Highway Department in the past has overestimated inflation in materials and labor. More roads could have been built in the 13-year bond-payout span by paying as you build.

Let’s leave that decision until it is time to actually build the roads.