LITTLE ROCK — Former gas company executive Sheffield Nelson announced Wednesday that he will submit to the attorney general a new version of his proposed initiated act that will include the creation of a $20 million fund to go toward repairing city streets.
Nelson had already cleared the last of the legal hurdles to begin collecting the signatures required to put his proposed initiated act on the ballot for the 2012 general election. But, he said, his travels around the Fayetteville Shale area as well as conversations with mayors convinced him that more money needs to be set aside for city streets that are damaged by trucks carrying heavy loads through the shale region in north-central Arkansas.
“They have a mechanism for taking care of state highways,” Nelson said. “They have a mechanism for taking care of county roads. But they do not have a street aid fund for the cities. It’s a disaster for them [cities] because they don’t have budgets that allow them to do what needs to be done.”
Nelson’s proposal would increase the severance tax on natural gas to 7 percent. The rate currently floats between1.25 percent and 5 percent, after being raised by an act passed during a 2008 special session of the Legislature.
Severance tax revenue brought in $54.6 million between November 2009 and October 2010. Nelson said his tax would have raised $250 million in that period.
Originally, Nelson’s proposal divided up the additional tax revenue with 1 percent going toward the Constitutional Officers Fund and 2 percent toward the State Central Services Fund, and then of what’s left, putting 70 percent toward the State Highway and Transportation Department Fund, and 30 percent toward county and municipal aid funds.
Nelson, a two-time Republican nominee for governor, now wants $20 million, or about 8 percent of the revenue generated by the tax, set aside each year.
After the $20 million is set aside, the remaining would be divided up in the same manner as his original proposal. Nelson said he wanted to add special funding for state aid to municipal roads, similar to a program in place to fund special projects on county roads.
A panel set up in Act 1032 of 2011, would decide which cities and road projects receive money. That act created a state aid fund for municipal street projects, administered by nine mayors appointed by the governor, the speaker of the House of Representatives and the president pro tempore of the Senate.
Rep. Kathy Webb, D-Little Rock, who sponsored that measure, said that currently there will be funding for the program only if voters approve House Joint Resolution 1001 - a constitutional amendment that would include a 0.5 percentage-point increase in the sales tax for road construction.
She said she had not seen Nelson’s proposed change but that cities and towns have “huge need” for roads and infrastructure.
The Highway and Transportation Department has a state aid road fund for county roads, created by the Legislature in 1973. One penny of the state tax on gasoline and diesel goes toward that fund, bringing in about $20 million each year, said Randy Ort, spokesman for the department.
Don Zimmerman, executive director of the Arkansas Municipal League, said a “semblance of a law” outlining a fund for municipal roads has been on the books since the early 1970s. Money for city street projects would have come from the state’s share of federal general revenue sharing, but funding was never restored after the U.S. Congress ended the revenue-sharing program in 1987.
“That will be of great assistance to a lot of cities if we can obtain funding for this state aid city street program,” Zimmerman said. “We’re excited there’s a possibility of getting that funded.”
The league first endorsed Nelson’s proposed initiated act in February, before he decided to amend it. Now that he’s revising it, it will undergo a new evaluation by the attorney general, whose task is to make sure its language is clear and not misleading.
The severance tax applies to the market value of gas when it is extracted, minus the cost of transportation and treatment. Gas companies pay it when they take the gas from the ground.
Nelson said his initiative would also remove exemptions for low-producing wells and “high-cost wells.”
Nelson needs to get 62,507 signatures of registered Arkansas voters by July 7, 2012, to put the issue before voters.
Arkansas, Pages 9 on 06/16/2011