New Legislation Could Ease XNA’s Exit From Highfill

Northwest Arkansas National Airport, known as XNA

Editor’s Note: After this story went to press, we discovered that the governor signed Senate Bill 414 on April 12.

Original story: With help from the Arkansas Legislature, the Northwest Arkansas National Airport is closer than ever to departure from Highfill city limits.

The 94th General Assembly this month approved Senate Bill 414, giving the 14-person Northwest Arkansas Regional Airport Authority the ability to detach the airport from the small city in Benton County by a two-thirds vote.

Gov. Sarah Huckabee Sanders had yet to take action on the bill when Arkansas Business went to press on Thursday. But if she signs it, XNA, as the airport is known by its location identifier, would be a step closer to deannexation two decades after its first attempt.

“It is a long time coming, honestly,” XNA CEO Aaron Burkes said. “This has been a long process. We have had various issues and complications that have arisen over time. It is really something that we decided it was time to get this issue resolved permanently for the future of the airport.”

Burkes said the airport was never meant to be a member of a specific community but rather an autonomous entity governed by the authority, whose board is made of two members from each of the five major cities of the region — Fayetteville, Springdale, Rogers, Bentonville and Siloam Springs — and two from Benton and Washington counties.

Highfill officials said losing XNA would cause financial stress. Mayor Chris Holland said his city doesn’t have many tax-generating businesses outside of the airport’s vendors.

What it does have, though, is about $7 million in water and sewer bonds, the payments for which come from annual sales taxes of between $600,000 to $700,000 collected from airport operations. That range is about the same amount of the annual bond payments.

“We are just guessing that it is $600,000,” Holland said of the taxes generated by the airport. “The only thing we got in Highfill is the airport, a Dollar General and a gas station. Our sales tax revenue is just over $1 million, and I can’t see Dollar General and a gas station bringing in $400,000.”

SB414, sponsored by Sen. Jim Petty, R-Van Buren, and Rep. Mindy McAlindon, R-Centerton, prevents XNA’s detachment from Highfill unless the outstanding bonds are satisfied, either from a lump-sum payment or other agreed-upon payment plan.

No Negotiations

Holland is in his first months as mayor after years as a councilman; he said the city has always tried to work with the airport. 

But Burkes said XNA has suffered because the tax dollars generated by its on-site operations — parking, restaurants, rental cars and more — go toward Highfill bond payments and not toward maintaining and improving airport infrastructure.

When the latest attempt to get a detachment bill through the Legislature began, Holland and city officials traveled to Little Rock to speak to legislators and members of the XNA board. Before the final vote, Holland said, the city offered to share half the sales tax revenue with the airport but XNA “shot that proposal down.”

“We have done nothing but done our planning and zoning around what they wanted,” Holland said. “We have always been there to help them whenever they have asked. We tried multiple times … to come to an agreement on something, but they’ve never come to the table and asked for anything.

“You have to have two agreeing parties to come to the table.”

For XNA, the city’s offer might have come too late.

“The conversation would be much different [if] for the last 25 years, they had taken half that sales tax and invested in our roads or building roads around the airport,” Andrew Branch, the COO of the airport, said. “For the last 25 years, they have taken sales tax from the passengers and not invested in the airport. We have some aging infrastructure, we have a road that is about at the end of its life that is heavily utilized by local traffic. The only Highfill roads that touch the airport are dirt roads.”

Branch said there have been no formal negotiations with the city and none are planned.

“The way I understand it is if we don’t agree to the airport terms they put toward us then it don’t matter,” Holland said. “They walk away from the table.”

Smoothing Edges

Burkes said it is not the airport’s intention to cause Highfill financial stress. 

He points out that XNA can’t detach from the city until the outstanding bond balances are paid off. In its lobbying with legislators, XNA officials said the financial net effect of detachment to Highfill would be zero because the loss of tax revenue would be balanced by the settlement of the bond expenses, Branch said.

Highfill will continue to benefit from being adjacent to the airport even if XNA is no longer officially within the city’s borders, Burkes said. Highfill had a population of 583 in 2010 but it has since grown to more than 3,000; Holland said six new subdivisions are under construction or planned for the city.

“Our board and staff want to make sure we manage this detachment in a way that was not harmful to Highfill,” Burkes said. “They are going to have organic growth that should more than make up for the loss of sales tax revenue, which will not occur for probably 10-14 years.” 

While Burkes seems to suggest that any detachment would be at least a decade off, the ability to detach would give XNA leverage.

“Under the current situation, Highfill has no incentive or reason to give some of those tax dollars back to XNA,” said Jim Krall, the chairman of the authority board and the vice president of university advancement at John Brown University in Siloam Springs. “It is important that when people are taxed, those dollars get used where those tax dollars come from. 

“In the future, we will have the ability to deannex, so it will in a sense encourage both of us to sit down at a table and discuss future tax revenue. It levels the playing field between Highfill and XNA so that we are able to, in the future, work together.”