Week In Review

State Capitol Week in Review

LITTLE ROCK – Arkansas voters overwhelmingly voted to renew a bond program that will pay for improvements to more than 400 miles of interstate highways.

The bonds must be issued by December, 2015 but most will be issued in 2012 and 2013, a Highway and Transportation Department spokesman said. Issuing bonds is a way of borrowing money. The statewide vote authorized the Highway Department to issue bonds of up to $575 million. Combined with other sources of state and federal revenue, the vote clears the way for a $1 billion program to upgrade Arkansas interstates.

The bonds will be paid off with future federal highway funds and with the revenue from four cents of the state's motor fuels tax on diesel. The diesel tax will not go up as a result of the vote, and it would not have gone done had voters disapproved the bond issue. The issue was whether the state should borrow money in order to repair highways more quickly, as opposed to scheduling highway projects on a "pay as you go" basis.

The bonds will be for 12 years. The highway improvements they finance should outlast the debt. An argument that some opponents made against the bond issue was that the state would still be paying off debt after the roads need to be repaired again. That should not happen, a Department spokesman said.

A factor in support of issuing bonds was that immediate repairs would be less costly, over the long term. Waiting for revenue to flow under the traditional "pay as you go" method means that the condition of highways is worse when money finally becomes available.

After Arkansas voters approved a similar $575 million highway bond issue in 1999, projects to repair 355 miles were in progress within three years. Under a "pay as you go" method it would have taken 20 years, according to the Highway Department spokesman.

It costs from $1 million to $4 million per mile to repair interstate highways. Sections with a bridge or an overpass are more expensive. Arkansas has 655 miles of interstate highways.

The total net interest paid on the bonds approved by voters in 1999 will be $208 million, according to a fact sheet prepared by the Highway Department. Over the 14 year life of the bonds that averages less than $15 million a year in interest expense.

The outstanding balances of three issues of the 1999 bonds were combined and refinanced last year to take advantage of lower interest rates. Their interest rate is 1.404 percent. According to the Highway Department, current interest rates on 12-year bonds is 2.9 percent.

Other expenses included in the 1999 issue were for bond counsel, rating agencies, financial advisors and printing costs. Those expenses total $938,000.

Turnout in the special election was very low. Late on election night it was estimated to be slightly more than 6 percent, but results were not complete from all the 75 counties in Arkansas.

Early and unofficial results showed that support for the bond issue was about 80 percent. A factor cited frequently by supporters of the bond issue was the fact that highway construction projects financed by the interstate repair program would create thousands of jobs.

Revenue from the bonds may not be used to build new interstates, nor to add lanes to existing interstates. However, it can be used to improve interchanges.