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Legislation that would raise more than $200 million annually to pay for road construction and maintenance was filed Tuesday, but like other recent efforts, it would require that state voters to have the final say.

The legislation is in the form of two bills sponsored by Rep. Dan Douglas, R-Bentonville.

House Bill 1726 would create the Arkansas Highway Maintenance and Bond Act of 2017, which will allow the state Highway Commission to issue bonds for 20 years beginning April 1, 2018, subject to voter approval.

House Bill 1727 would levy a 6.5 percent sales tax on the wholesale price of gasoline and diesel, a price that excludes state and federal excise taxes on fuel.

The Arkansas excise tax on gasoline is 21.5 cents per gallon and on diesel it is 22.5 cents. The federal excise tax on gasoline is 18.4 cents per gallon. It is 24.4 cents per gallon on diesel.

The bond proposal gets around the state constitutional requirement prohibiting the Legislature from delegating to the people the authority it has to raise revenue. The issuance of bonds requires a popular vote.

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HB1727 would require the governor to call a special election or refer the matter to the November general election.

"This is it," Douglas said Tuesday afternoon. "This is the highway bill. It's been a long process. Here we are."

If the legislation becomes law, it will be the third time in six years that voters will have had the opportunity to consider more money for highways.

In 2011, voters approved a proposal to allow the commission to issue up to $575 million in bonds to help finance a $1.2 billion road construction program focusing on the state's interstate system.

In 2012, voters similarly approved a temporary half-percent statewide sales tax to help pay for a $1.8 billion road construction program focusing on regionally significant projects. The sales tax is in place through 2023.

Douglas' legislation is a product of the Arkansas Good Roads Foundation. Gov. Asa Hutchinson in June asked the nonpartisan, nonprofit advocacy organization for better roads, to build support for a permanent source of highway funding.

The foundation, whose membership includes construction, trucking and economic-development interests, said its aim is to promote adequate funding for a "safe and efficient" highway system to foster economic growth and private-sector jobs.

In January, the organization released a statewide survey that showed support for making the temporary half-percent sales tax permanent as a way to address the state's long-term highway needs.

At the time, Hutchinson expressed little enthusiasm for the proposal, saying more discussions were needed to build a consensus.

The governor said he welcomed the legislation Douglas filed.

"I have always said that any new highway funding proposal that includes a new source of revenue should be referred to the people for an up or down vote," Hutchinson said in a statement. "This bill addresses a long term need in our state and I am glad the legislature will consider this proposal as a possible solution."

Craig Douglass, the executive director of Good Roads, said making the statewide sales tax permanent wasn't likely, as it would require a constitutional amendment, and it was doubtful the Legislature would make it one of its two or three proposed amendments it would refer to voters.

The bills, which were assigned to the House Public Transportation Committee, come as the Highway and Transportation Department continues to grapple with funding issues.

Department officials are uncertain if the agency will be able to come up with state matching funds this year needed to obtain an extra $200 million in federal money. Road projects using federal money typically can use only 80 percent federal money, with state money furnishing the remaining 20 percent.

Legislation enacted in a special session last year relies largely on the agency receiving a share of the general-revenue surplus to help raise the $50 million annually the department would need for its match.

Under last year's legislation, the department would receive 25 percent of the surplus. Over the past 10 years, 25 percent of the surplus has averaged about $48 million. But unless state revenue picks up appreciably, it is unlikely the state will end its fiscal year on June 30 with a nearly $200 million surplus required for the department to receive $50 million.

Through the first seven months of fiscal 2017, net general revenue increased by $22.3 million over the same period in fiscal 2016, but revenue was $57.1 million below forecast. The next monthly revenue report is due this week.

State and federal highway officials have been searching for alternatives to the excise fuel tax because federal mandates to increase fuel efficiency in vehicles means that vehicles are traveling more miles yet using fewer gallons of fuel. In short, they say, cars and trucks wear out the roads faster while the revenue cannot keep pace.

HB1727 would remove the sales-tax exemption now in place on motor fuels, Douglas said. "It's a revenue increase. I'm sure some will say it's a tax increase."

In 2018, the measures, if enacted, would raise about $217 million, according to Arkansas Department of Finance and Administration projections. That assumes an estimated wholesale price for gasoline of $1.547 and for diesel, $1.598.

After accounting for $6 million that would be divided between the state Central Services Fund and the Constitutional Officers Fund, the net revenue for roads would be about $210 million.

That figure would be divided between the department and cities and counties under a traditional formula used to distribute road revenue.

The department would receive 70 percent of the $210 million, or about $147 million. Cities and counties would each receive half of the remaining amount, or $31.5 million each. The money for cities and counties is then distributed based on population.

By 2023, net revenue available for roads would rise to $283 million with the department getting nearly $200 million and cities and counties each receiving $42.5 million, according to the projections.

Douglas said he might wait a week before he presents it to the committee.

"We want to get feedback. We want to get buy-in and we want to see if there are any ideas out there that are any better."

A Section on 03/01/2017

Print Headline: 6.5% fuel-sales tax in road-funds bill


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  • Foghorn
    March 1, 2017 at 7:43 a.m.

    This actually seems to make sense: charge those who use the roads for their upkeep and expansion. It'll also stop the pilfering from the General Fund. Need more detail on how the money will be spent. The article only covers how the money will be allocated.

  • TuckerMax
    March 1, 2017 at 7:51 a.m.

    At $2.129 a gallon retail, for example, that's a TAX INCREASE of $0.1378 per gallon: thus $2.267

  • TimberTopper
    March 1, 2017 at 8:11 a.m.

    Since we are in a red state and everyone is to pay their own way, the bill needs to increase more on fuel for heavy trucks, as they do more damage than do private vehicles to the roads. Say double that tax.

  • Foghorn
    March 1, 2017 at 8:41 a.m.

    It is indeed a tax increase but a rare justifiable one, at least IMHO. Better than death by sales tax. But I throttle my support until we know that the money will be spent on transportation and not just more asphalt.
    TT - That crazy talk about trucks is nigh-on blasphemy in the land of JB Hunt and WMT.

  • JA40
    March 1, 2017 at 8:45 a.m.

    I agree 100% that trucks should pay majority. Autos DO NOT tear up the roads. The heavy trucks are guilty. But, they have a lobby to work for them....only our legislators work for us....scary, huh?

    March 1, 2017 at 2:07 p.m.

    Republicans at work to raise taxes on the working man, the one that has to drive in to go to work, and next thing that happens is a tax cut for the Rich, That is the only way Republicans know. It always hits the less well of much harder, Always.