By NMA Member Tom Beckett
Editor’s Note: This post is the second in at least a three-part on the complicated funding for roads in a mostly rural state. Check out Part 1 of the Arkansas Report.
Back in 2012, Arkansas voters approved a half-cent sales tax increase to generate revenue dedicated to transportation. With this ballot initiative, the state portion of the sales tax became 6.5 percent. Counties and municipalities could also add levies to the state tax, which many have already done.
I live in Siloam Springs, where the combined tax is 9.5 percent; Fayetteville is similar, but it has also added a one percent bite onto restaurant sales, and a half percent for something else, bringing its sales tax to 11 percent, which is a real bounce to the check when you go to eat an even modestly priced dinner.
Due to all the sales tax stacking, Arkansas has an average rate of 9.465 percent, second highest in the nation, only slightly behind Tennessee’s at 9.469 percent.
On the 2012 ballot, Measure 1 or The Arkansas Tax Increase Question passed by 58.2 to 41.8 percent. Voters agreed that starting in 2014, residents would be levied a half-cent sales tax to pay back $1.3 general obligation bonds for the construction of four-lane highways. Revenue for the sales tax is split 70 percent state/15 percent county/15 percent local. Officials vouched that the bonds would be paid off in 2023, and the tax would then expire. It has now been enshrined as Amendment 91 of the Arkansas Constitution.
As of June 2019, 13 projects totaling $532.6 million had been completed. Nine projects totaling $525.9 million are still under construction, and 14 projects are currently scheduled.
The current estimate of the Department of Finance and Administration states that the tax will bring in $293.7 million this year, with $205.59 million going to the state, with county and local each getting $44.055 million.
Arkansas has 75 counties, and each county should average $587,400. Without looking, I’d venture that the counties in northwest Arkansas—Benton, Washington, Madison, and Carroll (with the cities of Bentonville, Rogers, Fayetteville, Springdale, Eureka Springs, and Huntsville) as well as Pulaski (Little Rock), Crittenden (West Memphis), and possibly Sebastian (Fort Smith)—get a good bit more above that average. For example, just in Benton County, there are several major projects in progress on I-49.
Issue 1 is back on the ballot for November 2020. The extension of the half-cent sales tax is now called The Arkansas Transportation Sales Tax Continuation Amendment.
Even though that election is eight months away, there is already motion to push for passage of the measure. The Arkansas Municipal League held its winter conference in Little Rock recently. Speakers urged local leaders to emphasize the need to continue the dedicated sales tax because, as the Association of Arkansas Counties Executive Director Chris Villines put it, “Infrastructure is important to all of us….there are no red or blue potholes.”
According to Villines, the tax would provide money for thousands of miles of interstate highways and farm-to-market roads, as well as money to repair and replace deteriorating bridges. If we lose funding, then cash for road repairs would have to come from another part of the budget, like rural policing. “Poorer services and poorer roads.”
Arkansas DOT executive director Scott Bennett said the measure is needed because highway money has remained relatively flat over the last 30 years:
“We have had three gas tax increases since 1983, but people are also buying more fuel-efficient vehicles. It has kept the revenue relatively flat while prices for construction and repairs have continued to increase.”
Governor Asa Hutchinson has also come out in favor of the extension.
I have a couple of thoughts on the issue of taxation.
The first is about government in general: any time a government body has a revenue stream, they are extremely reluctant to give it up—hence the proposed Amendment.
The other thought: they get you one way or another.
With that in mind, as I noted in the last post, to some extent, ‘you get what you pay for.’
When I moved to Arkansas from New York in 2006, part of the decision process was the level of taxes.
It turned out, though, Arkansas’ sales tax was more expensive than New York’s. When I left Tioga County, NY, the sales tax was 7.75 percent, and in Arkansas, it is now 9.5 percent.
Conversely, though, my property tax was significantly lower, and I qualified for a Homestead Credit, which in New York I did not.
My property tax here is a lot like my Town and County tax was in New York, as it covers a variety of non-school government services—things like sheriff patrols, roadway maintenance, fire department, courts, etc.
Arkansas schools are funded by a personal property tax or a “car tax,” since it is assessed on motor vehicles and boats. We did not have this in New York, but we did have a separate levy for schools there.
Even with a 2001 Stratus R/T, a 2013 Toyota RAV4, and a 2017 Winnebago, my car tax was around $1700 last year—less than the $2000 I paid to the Union-Endicott district in New York in 2006. The NY tax had gone up $800 over 14 years, and is probably higher still, a dozen years later. The plus side of the Arkansas car tax is that it’s based on the value of the vehicle. For each passing year, my vehicles grow older and my tax declines, so I’m gaining ground there.
As much as I hate to pay more in taxes, making the half-cent sales tax permanent, in the long run, is a good idea.
I don’t want to start another civil war, but one thing I’ve noticed over the years while driving for a living is that the south tends not to spend a lot of money on roads. Up north, where taxes are higher (with some exceptions), the state highway networks appeared to be better built, and though recent ASCE ratings would belie this, better maintained.
In New York, it’s pretty common to find most two-lane state highways with wide lanes and broad shoulders, even the bridges. Down south, it’s more of a mix. More recently, built roads have those characteristics, but older roads often have narrower lanes, and once you’re over the white line, you’re in the ditch.
I remember once driving on US-84 in Mississippi, and noting that there was no shoulder whatsoever—so almost immediately if you left the roadway, you were going down a 20-foot embankment into a swamp. Pray you don’t get a flat!!
The assessments of the DOT and county association officials have some merit. As cars have gotten more fuel-efficient, they use less gas, thus bringing in less tax revenue.
The money to fund not only new construction but to maintain what’s already in place is not keeping up with the demand. Maintenance requirements grow every year as more and more vehicles are on the roads.
At least a half-cent sales tax is a permanent solution to an issue that will be with us as long as there are cars and trucks on the road, something I don’t see changing in my lifetime (while I’m already 60, that should be quite some time to come). A permanent sales tax will eliminate the periodic shortfalls that must be addressed every few years. As long as the tax money is used for its intended purpose, this will be a winner in the long run.
Now, if only the Arkansas DOT would address a couple of wish list projects for me:
- Complete I-49 over the Ouachitas, from Fort Smith to Texarkana, and
- Widen I-40 from West Memphis to Little Rock, one of the most congested stretches of highway away from the east coast.
Maybe in my lifetime!!
Author’s Note: I had planned on addressing Amendment 100, which allowed for casinos to operate in Arkansas, with some of the tax revenue going to highways-it’s the third leg of the funding stool-but it’s proving to be a bit more complicated than I initially thought. There’s litigation in Pope County. I’ll take that up in a future post.
Tom Beckett is a retired driver and fleet manager for JB Hunt, where, in his driving career he ran 770,000 accident free miles, and has driven over two million miles since 1975 in all kinds of vehicles. A New York native, he is a resident of northwest Arkansas since 2006. He lives in Siloam Springs with his wife Diane and four sleepy cats.
Editor’s Note: The opinions expressed in this article are those of the author.
