Bill would tap tax for railroad needs

Funds over $20M set for infrastructure

Some ad valorem taxes collected on railroads would go back to the industry under a bill that won the state House Public Transportation Committee's recommendation Tuesday.

Almost all of the money now collected from railroad ad valorem taxes goes to the Arkansas Rural Services Department. Annual collections have grown from $7.7 million in 2003 to nearly $20 million last year, according to state Rep. Matthew Pitsch, R-Fort Smith, the sponsor of House Bill 1472.

The bill would earmark any money collected exceeding $20 million to go into the Arkansas Rail Development Grant Fund, which would be used to pay for improvements to railroad infrastructure.

"What this is doing is trying to invest in the infrastructure that is causing that ad valorem tax," Pitsch told the committee.

The bill was structured in a way not to hurt the Rural Services Department.

"We see an ad valorem tax that has almost tripled from 10 years ago," Pitsch said. "At $20 million, that ought to be enough to run a department that was run with $7.7 million a few years ago."

It also would create an advisory committee to make recommendations to the Arkansas Highway and Transportation Department on who will receive the grants or loans made from the fund.

The committee would include representatives from railroads, planning and development districts, regional mobility authorities, regional intermodal authorities, the Arkansas Waterways Commission and the Arkansas Economic Development Commission. The committee recommendations won't be binding, according to the bill.

Eligible expenses that would be covered under the program would include acquiring right of way; constructing, improving or renovating a loading facility; repairing or replacing track; and other improvements relating to railroads.

The bill is similar to legislation enacted two years ago to take some of the ad valorem taxes on waterway facilities and direct it to the Arkansas Waterways Commission.

Gene Higginbotham, the commission's executive director, testified in favor of Pitsch's bill.

"Let's take a tax on an industry and have it benefit that industry," Higginbotham said.

The Highway and Transportation Department has no designated budget for rail improvements and is limited to being the designated rail-planning agency for the state, according to Scott Bennett, the agency's director. It also has some federal money available to pay for improvements at railroad crossings.

The new bill would give the department more authority and provide money to improve short-line railroads around the state, he said.

"This really takes it to the next level," Bennett added. "This is a good economic development bill that will help with those things. There are a lot of areas of the state that will benefit from rail access."

Committee members found little to quibble over with the bill.

Rep. Jana Della Rosa, R-Rogers, questioned a provision in the bill allowing the Highway Department up to 10 percent of a grant amount to administer the program, which would amount to as much as $100,000 on a $1 million grant.

"That's a pretty steep administrative fee," she said.

But Pitsch said the figure was standard on government grants. "Basically, that's wording on most federal grants because this will be a grant [program]," he said. "Typical numbers on most federal grants is a 10 percent administrative fee.

"You're going to have to have someone file the grants, review all of the grants. Someone is going to have to deal with the applications, the processing on the committee itself."

Metro on 03/04/2015

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