Tuesday, August 30, 2011

EDITORIAL >> Financing highways

Gov. Beebe called a special election on Nov. 8 on whether to issue bonds to speed up repairs to the state’s interstate highway system. Whether you vote and whether voters statewide endorse the debt are nearly immaterial questions. The outcome will scarcely affect your life or change the course of public life.

Either way, the state Highway and Transportation Department will repair several hundred miles of the state’s perpetually disintegrating superhighways. Interstate lanes built only a decade ago are already crumbling under the relentless hammering of 80,000-pound loads. The repairs may be made slightly faster if the bonds are issued, so if that is an incentive for you to vote “yes” on Nov. 8, you can feel can feel good about exercising your civic duty to vote. We would not advise anyone to vote against it.

But everyone should understand what is at issue. The highway bonds will not mean improvements to the streets, county roads or the primary and secondary highways over which most Arkansawyers travel every day for work or leisure. The bond proceeds and the revenues to retire the bonds are dedicated to improving interstate highways exclusively.

The interstate system has become primarily the infrastructure for the transportation industry. It gets long-haul goods to the markets, which means we all have something invested in it even if in much of the state people don’t travel it often. In central Arkansas, interstates are more important to the vitality of civic life.

The big question for voters then is whether it’s better business to borrow $1 billion and spend it in rather speedy fashion, over eight or nine years, or build as the taxes are collected. The highway folks always argue that it is better to borrow and spend because inflation in construction and materials will eat too much of the revenues if the work is spread out over 14 or 15 years. The big interstate bond program of 1999 was probably unwise because inflation did not prove as steep as the industry had predicted, and the state probably could have improved more miles with the same revenue the past 12 years under a pay-as-you-go approach. But highway officials will dispute that.

In this case, the math looks better. Because interest rates are at historic lows and should be little higher when the bonds are ready for sale in another 15 months, borrowing costs should be cheap. No one can anticipate what construction costs will be in 2015 or 2020. So bonds should be a better bargain in 2012 than they were in 1999 or in 2005 when the state made a stab at renewing the bonds.

There is one downside. Retiring the bonds could one day require theft from the public schools if the highway revenues dedicated to the bonds come up short. That would not be a serious consideration except for the parlous times. What if the Republicans block the renewal of the federal tax on motor fuels this fall, as many of them are threatening? The tax expires at the end of September. Many Republicans are sworn to oppose all tax increases, and the sponsors of the antitax revolt consider restoring an expiring tax a tax increase.

If the tax were not renewed, the state’s road improvement program would come to a near standstill. Gone also would be a sizable part of the revenues to retire the bonds. The 1999 highway bond act specifies that if the special revenues dedicated to the bonds fall short, the state’s general revenues will retire the bonds. Tens and perhaps hundreds of millions of dollars would be taken from public school funds to pay for interstate repairs. School children would be subsidizing the shipping and transportation industries. You will remember that the industries reneged this spring on an agreement to raise taxes on diesel to pay for the interstate repairs.

But if the Republicans block renewal of the taxes and take the federal government out of road building, we are sure that Beebe will not push the bond election, at least without first changing Arkansas’ own highway finances. It bears watching.