Many articles have examined the highway funding discussions of the 2019 legislative session. If 2020 general-election voters approve a measure to continue levying a one-half percent sales tax, cities and counties could receive more than $100 million annually for road funding based on measures passed during the 92nd General Assembly. These funds will improve transportation statewide, but local governments may also address other deferred infrastructure needs.
Let’s highlight three outside-the-box options local governments could use to supplement existing funding and increased state spending for highways and roads, as well as a financing mechanism that’s not currently available to local governments but could be helpful if the law were amended.
Vehicle Tax/Revenue Bonds
A vehicle tax and associated bond issuance may be available to local governments to fund infrastructure, particularly the maintenance, construction and rebuilding of streets. Two different statutory regimes let local governments vote on levying a privilege tax up to $5 per vehicle for operating motor vehicles on public roads and highways.
If Title 26 of the Arkansas Code is used, cities must use some of the funds raised for local parks or outdoor recreation, or to operate a public transit system. If Title 14 of the Code is used, some proceeds must be used to pay city law enforcement and firefighters.
If revenue bonds are used, then special obligation bonds with interest up to 4.5% per annum can be issued. A county in a regional mobility authority may impose two motor vehicle taxes.
Regional Mobility Authority
A single county or contiguous counties and/or cities can form a transportation agency through a regional mobility authority. An RMA transportation system includes streets and bicycle paths and allows local governments to better partner with the Arkansas Department of Transportation on projects, supplementing state and federal dollars. RMAs are financed through local sales or motor vehicle taxes. Bonds can be issued for RMAs, as well as state rollback funds. A revolving loan fund can also be created.
Improvement Districts
Various improvement districts are authorized for financing Arkansas infrastructure projects like road and bridge construction, maintenance and repair.
Municipal improvement districts (MIDs), suburban improvement districts (SIDs), property owners’ improvement districts (POIDs) and rural road improvement districts (RRIDs) each offer unique advantages. Each improvement district has rules governing the formation and regulation of each type of district. In general, each improvement district is authorized to assess real property within its boundaries and use the funds for the benefit of the district. In addition, these improvement districts can issue bonds.
Public-Private Partnerships
All these mechanisms could be effective as local governments and individuals address infrastructure needs. However, one tool not currently available could be very useful — public-private partnerships (P3s).
The Partnership for Public Facilities & Infrastructure Act (P3 Act) is another option for projects that serve the public. Examples include mass transit facilities, bridges, roads, etc. Under current law, only state agencies (excluding ARDOT), boards and commissions can contract with a private entity for a P3.
While some jurisdictions have had negative experiences with P3s, others have seen significant benefits. A governmental entity must remain vigilant, ensuring it and its constituents are aware of both the rewards and risks associated with partnering with a for-profit entity on infrastructure projects.
During the 2021 legislative session, the P3 Act could be amended to allow local governments to use P3s for infrastructure projects, including transportation-related projects.
One or more of these mechanisms could be an effective tool for local governments and their citizens to uncover additional funding for infrastructure improvement projects.
While some are available now, others may require additional work at the next legislative session.
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William A. Gruber is vice president of government relations and strategic partnerships for InVeritas, which has offices in Little Rock, Rogers and Washington. Email him at WGruber@InVeritasInfo.com. |
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