Saturday, October 29, 2011

US Gov't Mandates Bikeways & Walkways/Text of Highway Bond Ballot

Picture of Green Transportation: Bikeways & Walkways!

US Department of Transportation Secretary has the authority to withhold approval for projects that would negatively impact pedestrians and bicyclists and recommends "Considering walking and bicycling as equals with other transportation modes." USDOT further says, "Transportation agencies should find ways to make facility improvements for pedestrians and bicyclists during resurfacing and other maintenance projects. (This is called sustainable or green transportation.)

Text Of Ballot Title For Highway Debt Bond Election, November 8, 2011 link: From this link:
I personally am going to vote against this bond indebtedness. I believe we all have the right to make our choice and argue our case without hard feelings, but I wanted to point out a few things that concern me.

We have been told by different proponents of the bill that this money cannot be used for anything except for the repair of the interstates. We have also been told it can't be used for bikeways, walkways, and pedestrian bridges. However, the language in the text of the ballot (see text of ballot at end of email) appears to allow for those: "The bonds shall be issued for the purpose of paying the cost of constructing and renovating improvements to interstate highways and related facilities in the State of Arkansas." Another phrase from the ballot says the bond money can: "include the acquisition, construction, reconstruction, and renovation of such interstate highway system and facilities appurtenant or pertaining thereto."

I am not saying that the bond funds WILL be used for bikeways, walkways, and pedestrian bridges, greenways, or mass transit stations; but I am saying I see nothing in the ballot that would keep that from happening. And I will be surprised if some of the money (and maybe more than we would even envision) is used for these "sustainable or green" forms of transportation. I base my belief on research I have done on the trends of transportation and on the "US Department of Transportation Policy Statement on Bicycle and Pedestrian Accommodation Regulations and Recommendations", signed on March 11, 2010 by Ray LaHood, United States Secretary of Transportation.

Below are quotes (Emphasis added) from that document that can be found at this link:

"The United States Department of Transportation (DOT) is providing this Policy Statement to reflect the Department’s support for the development of fully integrated active transportation networks. The establishment of well-connected walking and bicycling networks is an important component for livable communities, and their design should be a part of Federal-aid project developments. Walking and bicycling foster safer, more livable, family-friendly communities; promote physical activity and health; and reduce vehicle emissions and fuel use. Legislation and regulations exist that require inclusion of bicycle and pedestrian policies and projects into transportation plans and project development."

"The DOT policy is to incorporate safe and convenient walking and bicycling facilities into transportation projects. Every transportation agency, including DOT, has the responsibility to improve conditions and opportunities for walking and bicycling and to integrate walking and bicycling into their transportation systems."

"The Secretary has the authority to withhold approval for projects that would negatively impact pedestrians and bicyclists under certain circumstances. "

"The Secretary shall not approve any project or take any regulatory action under this title that will result in the severance of an existing major route or have significant adverse impact on the safety for nonmotorized transportation traffic and light motorcycles, unless such project or regulatory action provides for a reasonable alternate route or such a route exists." 23 U.S.C. 109(m).

(Three bullet points under Recommended Action:)
"Considering walking and bicycling as equals with other transportation modes:
"Integrating bicycle and pedestrian accommodation on new, rehabilitated, and limited-access bridges: DOT encourages bicycle and pedestrian accommodation on bridge projects including facilities on limited-access bridges with connections to streets or paths."
"Improving nonmotorized facilities during maintenance projects: Many transportation agencies spend most of their transportation funding on maintenance rather than on constructing new facilities. Transportation agencies should find ways to make facility improvements for pedestrians and bicyclists during resurfacing and other maintenance projects. "

All of this sounds just like Obama and his power grabs, doesn't it? After next election, perhaps we can have a more sensible Secretary of Transportation and can be assured our money during these hard economic times is spent on actual highways rather than wasting it on bikeways, walkways, mass transit, rail, and greenways.

If you are wondering why Obama's administration is pushing so hard for the mass transportation, bikeways, and walkways, it is because they want to get us out of our automobiles and onto these other forms of transportation to save our planet from global warming. Driving up the price of gasoline and making it so expensive to travel by car is one way they intend to get us there. And Obama is marketing all of this through his plan of "rebuilding our crumbling roads and bridges" through his so called jobs bill that is just another stimulus bill. I really don't want Arkansas to be an enabler in Obama's plan.

For a couple of articles that will give you more information about what people have in mind for our future highways, see the links below:

"What if we could make those highways using the corridors for more than moving cars and trucks/ What if we thought of them as the backbone of a new, more diverse 21st-century transportation system? more and more people go by bike, why not use the many acres of urban interstates to move human-powered vehicles?" From "Should highways be the new bikeways?

But it’s time for us to look at the interstate system not as an aging network of highways in need of repair or replacement but instead as we might look at a navigable river...It encompasses a lot of land. Funds were appropriated at the outset for the purchase of two million acres; according to one estimate, the system actually takes up 40 acres per mile, or 1.87 million acres....This is not a radical idea. Obviously, the interstate, with its generous rights-of-way, is a prime spot for new rail lines, both high-speed intercity trains and commuter rail...And one more thing: say we reimagine the interstate system so that it becomes not just a route for cars and trucks but an intermodal-transportation-and-energy corridor. From "Rethinking the Interstate"

Wednesday, October 26, 2011

Meeks Opposes Nov. 8th Debt Issue

Rep. David Meeks (R) Conway, has come out against the proposal to add more debt for highway maintenance.    The issue will be decided when voters go to the polls on November the 8th.

Meeks was voted #1 legislator in the state of Arkansas by a panel of grassroots activists here on Arkansas Watch.   Most legislators have been reluctant to come out against the issue, because powerful figures from both parties support the debt plan.

Borrow and Build No Sure Bet for Highways

Perhaps the most frequent argument of those who support taking on more debt for highways is that when we  tried a similar debt program in 1999 we "won" because highway construction costs shot up from 2000-2004 at an inflation rate that was in excess of the interest rate we paid on the bonds.   My counterargument has been that they are fighting the last war.   Even if they are correct that they "won" in 1999 using a strategy of borrow and build, it does not mean that the same bet will be a winning one for the next five years.  If you won, great.  Now walk away from the roulette wheel.   This is not a time for us to borrow money to give you more chips.

I used data from Oregon because they had a handy set of graphs, but I could have used data from Washington or many other places.  The pattern is pretty clear.  While over the course of decades there has been inflation ever since we left the gold standard, there are ups and downs over the course of a single decade.   From 2000-2006 we were in a liquidity fueled boom and had significant inflation in road construction costs.   In 2007 the wheels started to come off the economy due, and that accelerated in 2008 and continued at the beginning of 2009.   Obama's stimulus road money helped jump-start surfacing costs in 2009, but that money is mostly spent now.  One could expect downward cost pressures to resume.   The underlying problem in our economy of too much bad debt has not been solved.

So that same "borrow and build" strategy that they argue "worked" from 1999 to 2004 would have been a disaster from 2008 to present (with Obama's stimulus spending only partially masking the scale of the disaster).   It would have left us paying interest with construction costs that would have been if anything higher than if we had waited a year or two.  

There are other variables to consider as well.   Example: Consider the growing use of oil resources from oil shale and oil sands.   It is very heavy oil.   That means to get a given number of gallons of gasoline, they produce a larger amount of asphalt than they have in the past using say, West Texas Crude.   And that could mean a growing glut of asphalt on the market.    I expect the price to continually drop in the coming years relative to dollars adjusted for bond interest rates.

My position is that they are not smart enough to know which outcome will prevail over the next five years.  It is risky, not conservative, to borrow on the idea that our government officials can repeatedly out-nimble the market with regard to hitting the sweet spot between swings in construction costs and swings in interest rates.  Bear in mind, they cannot even issue all of the bonds for about three years.   We cannot know today what the situation will be then either with regard to construction costs or interest rates.  To believe otherwise is to have a naive faith in the abilities of government officials- again far from the conservative position of healthy skepticism about the good things government can do with more OPM.

Tuesday, October 25, 2011

Secure Arkansas Bond Issue Round-Up

Many people have asked for resources to help them sort through the fog of conflicting information (more fog here) that state officials and spokesmen for "Move Arkansas Forward" have put out about the proposal to take on more debt.  The vote for this debt proposal is November the 8th!  Early voting starts Nov 1st.  Secure Arkansas announced it's opposition to the measure in early September.    Since then, Tea Party and Patriot groups from every corner of the state have joined us in opposition (that list from last week is already incomplete).

We do oppose using continual debt to do routine road maintenance.   This is not a question of who wants good roads vs. who does not, it's a question of whether we should rely on debt as far as the eye can see to get them.    The revenues dedicated to paying on similar bond program from 1999 have been around $74 million a year.    Those are the same revenues they propose to use for the new bonds.   Those revenues are available for highways whether we use them for road maintenance on a pay-as-you-go basis, or pledge them as collateral for a bond issue.    

Here is the key paragraph where we run the basic numbers: If we just spent this money as it came in, we would have over half of the amount they are proposing to borrow in just four years ($74 million * 4 = $296 million).  It took them three years to get all the bonds issued last time and it will take them that long again to get all the bonds issued this time.   To get the rest of that money, $279 million, ($575 million - $296 million = $279 million) nine years early it cost us $228 million in interest, and it would have cost us more if we had not refinanced.  We don't know how much we have paid in refinance fees, bond brokers commissions and fees, through mark-downs and the like.   We know that legal fees alone for the initial bond issue were close to another $1 million.   We feel like the highway money ought to go into highways, not bankers, bond brokers, lawyers, interest payments and administrative costs.

There has been an argument made that the Highway Commission sort of " won the bet" in 1999 by borrowing and spending.  Their argument goes that they got more road because from the key construction period of 2000-2004 construction costs had an inflation rate higher than the interest rate we paid for the bonds.   While there a several ways to look at those numbers, that argument is basically the Highway Commission telling the taxpayers "we won the bet last time so give us some more chips on credit."   I don't think that's a good argument.   It's really irrelevant whether or not you won the bet last time.  We don't want you gambling with our debt.  Especially now that we know that the taxpayers of Arkansas are facing an astounding $25 BILLION dollars in debt once one includes unfunded state pension obligations.  Enough already.

I am amazed that some self-styled "conservatives" want the taxpayers to go further into debt as the economy is collapsing. Especially based on the idea they can "win" by basically timing shifting costs in the interest market and the construction market. That they think they can repeatedly out-nimble the market using the clumsy mechanism of government debt is a testimony to their lofty self-image. Gambling on borrowed money is not a conservative value.  Hey, if we won doing that from 2000-2004 then great, now walk away from the roulette wheel. Furthermore, debt supporter's claims about how well they leveraged the money last time do not add up.

The economy is very different than it was from 2000-2004 we were in a boom time then with rising costs every year and low interest rates.   In that kind of boom borrowing might make sense.  Now we are in a deflationary period.  Too much debt is getting people into trouble.    We still have low interest rates right now, but these bonds won't be issued right now.   It will be three years at the minimum before all these bonds are issued, and no one knows what interest rates will be then, or even this time next year.  Look at Europe and how fast their fiscal crisis has changed bond interest rates in some of those nations. 

We also don't know that oil won't go back down to $50 a barrel in a few years, making asphalt costs lower each passing year for the next decade.   The heavy oil from the shale that is coming on now may mean that materials costs will level out or even go down over the next ten years.  We just don't know.   When you don't know, the conservative position is to avoid risk.

The other argument proponents of the debt put out is that roads fixed early require far less money spent to repair them than if you let that road deteriorate.    The first thing I would say about that is, "If there is such a crisis, why have you mismanaged things so that if you don't get all this money right away then our roads will deteriorate?"  My second question would be "if we have been put into an emergency situation then wasn't that under your management?  Why should we trust the same people who put us in this position going forward?  Shouldn't somebody be resigning over this?" 

But of course, while we do agree the interstates need repair, we are not convinced that the need for this debt is as dire as they make out.   It may be a dire loss for the bond brokers who will sell them, and the law firm that will do the legal work on them, but not for the interstates.   We are quite used to public officials on all levels claiming that it will be an absolute disaster if they don't get more money right now.   Again, they can't get the whole amount of money prior to three years even if the bonds pass, and if they simply spend the revenue streams that they want to pledge as bond collateral  then they will have over half the amount they propose to borrow in only four years.

The balance of the funds could come from within their existing budget- if there is a true emergency.   Their annual budget is enormous.  Add to that,  in 2009 they got a surprise $230 million windfall in discretionary funds from Obama's stimulus plan.   If the interstates are really in such poor shape in 2011 that we must vote to go into debt now, then why didn't they spend that $230 million windfall repairing those interstates two years ago and spare us this "crisis?"

The question has been raised whether or not this truly represents a liability for the taxpayers of the state.  Just look at the language on the ballot.  It says that if the pledged revenue sources are not enough to meet the bond payments then the bonds become a general liability for the state.    Since most of that money comes from the Federal Highway Trust Fund and is supported by a federal highway gasoline tax then we will be counting on the federal government coming through for the next fifteen years to avoid having this liability fall on us. 

The federal government is in an ongoing fiscal crisis.   There is a history of taking money from the federal gasoline tax and diverting it to deficit reduction.   The tax has to be renewed from time to time and may become a national campaign issue.   It's just not as safe a bet as it was in 1999 that those federal funds are going to keep coming in like we hope they will.

The other tax pledged as collateral on these bonds is a tax on diesel fuel.  If ever we paid off these bonds, which we still owe $200,000,000 on, then those tax revenues would be pledged to an expense that no longer exists.  We should finish paying on them by the end of 2014.   As we get closer to that time, we should have a discussion about whether we should transfer the revenues from that tax into the Highway Department, end the tax, or keep the tax on diesel fuel and us the proceeds to reduce the state fuel tax on gasoline in order to bring us in line with surrounding states.

When they say there would be "no tax increase" if the bonds are approved they might be narrowly technically correct, if the feds come through for the next fifteen years.  But depending on how you look at it, they could be wrong too.  If we pay off the existing bond program in 2014 as planned then we will have to do something with the diesel tax dedicated to paying off that bond.  It will be one of the three options I outlined above, and two of them involve a tax reduction. 

So is voting to continue a tax that would otherwise be scheduled to end an increase in future taxes?   I could make the argument that it is, but that's not the main argument I would make.   They propose that we borrow $575 million dollars.   That does not happen for free.   We are going to pay for it somehow, whether it be in fewer dollars going to roads and more to interest and bond dealers, or whether it be the continuation of a tax that we could end if we did not borrow the money.  

Many people have asked about our opposite number on this issue, the advocacy group "Move Arkansas Forward."  We are a grassroots organization with many small contributors, most of whose contributions consist of "sweat equity" such as forwarding this email to their friends. "Move Arkansas Forward" has been thrown together to push this highway debt plan.   It is funded mostly by entities connected to the Chairman of the State Highway Commission (IOW the group who would get to oversee the expenditure of these public funds) and a bunch of contractor interests who are hoping to make money off of this debt.  While we salute the positive contributions Mr. Murphy has made to his hometown, we do question the propriety of an appointed official so directly connected to funding a campaign that would in essence give the commission he chairs access to a large pool of public funds to spend.

One last point.  Some of the proponents of this program say that it will "create jobs."   Government debt for the most part does not create jobs, it only borrows jobs from the future, minus interest.   We think the main reason we are in so much trouble in this economy now is too much borrowing in the past.   Now all that past debt is taking jobs from us in the present as there is too much debt overhanging our economy.

The people who claim this debt will "create jobs" sound just like Barack Obama when he talks about borrowing for his "shovel ready" stimulus spending.   In the long run it doesn't work.   If government borrowing and spending on public works programs really created jobs, then we'd have jobs.   Borrowing takes jobs from the future.

I think most of the taxpayers in this state are working and sacrificing to pay down their personal debt.   At the same time, these public officials are pushing for those same people to take on more public debt.   That's tone deaf.  It's not where responsible people are right now.

With great respect,

Mark M. Moore

Debt Supporter Claims Do Not Add Up

Supporters of taking on more debt for highway maintenance in a November 8th special election are making increasingly unbelievable claims about the numbers.   I am not saying they are necessarily lying or being deceptive, but it's hard for a person that thinks through their claims to take them at face value.    One of the latest examples: Rep. Nate Bell of Mena is an outspoken supporter of the debt plan.  He claims $1 billion in road work was done as a result of the $575 million bond program.  He attempts an explanation for the paradox....

How do you get $1 billion in work from only $575 million in bond sales?

A person needs to remember that the $575 million in bond proceeds only pays for a portion of the work. The bond proceeds are leveraged because of the timing of the federal and state revenues coming in and the construction expenditures going out. Proceeds from the issuance of a series of bonds come in all at once, and federal and state revenues come to the Department over regular, frequent intervals. However, construction expenses are paid out over the life of the contract, usually 1-3 years. That timing builds up cash balances which earn interest that further adds to the amount of work that can be accomplished.
Financial advisors will be used to formulate a plan to maximize the amount of work that the Commission could achieve through the issuance of $575 million in bonds. By taking into consideration all revenues available (bond proceeds, federal funds, and state funds), and structuring principal and interest payment schedules, the advisors were able to make about $1 billion available to the Commission for Interstate projects in the 1999 IRP, and similar results are expected for the 2011 proposal.
Even if you consider government borrowing at interest to gamble that they can invest the proceeds and get back more than the interest is a sound practice to rely on, which I don't, these numbers don't make sense.  I can't buy the explanation that the revenue on top of the $575 million came from investment net profits.
The funds were raised over a period of 2000-2002.  Elsewhere Bell uses the years from 2000-2004 to describe when the work was done.   So they were raised from 2000-2002 and spent from 2000 to 2004.   They never even had the $575 million in their hands at once as near as I can tell, yet we are expected to believe that they turned that stream of money into an extra $425 million?   It's preposterous.   I challenge them to open their books on these investment accounts.   I doubt they netted even one tenth that amount during the period in question.  There is something they are not telling us.   
I guess they could also have made a little money from 2005 to present off of the gap between the federal highway and diesel tax money coming in to pay on the bonds and the date on which bond payments had to be made.   So in the best case six million dollars a month comes in and in December the money is used to make the bond payment.   That would give them a rolling average of $32 million to invest from 2005 to 20011.
Go throw those numbers in a compound interest calculator.  $32 million given seven years to grow with even an amazing 10% annual return would give you about $62 million dollars- in other words $30 million in profit.  That's if you did not spend the earnings but let the interest compound.   I don't think there was anyway they got that kind of return from 2005 to present.   Look at your 401K numbers and tell me the same people got the state 10% annual returns during this period.   
Now when I said "$30 million in profit" that would only apply if you were not using borrowed money that you were paying interest on to make the investments.  That is not true in this case.   They were paying as much as 5.25% interest on those bonds.  If their returns earned less than that on that particular tranche of bonds then their gross "profits" were actually net losses.   One thing that might explain some of the gap is if they counted all profits as additional money to the program but ignored all costs.  
So without accusing anyone of deliberate deception, it is my position that these claims of an investment bonanza are not credible.   There is no way they earned a net of $435 million additional dollars from investing these proceeds.   If public officials are going to make these claims to get votes for the program, then let's open the books and find out what the real numbers are.

Monday, October 24, 2011

AHTD Got Windfall in 2009

Activist Par Excellence Christine Keller put us wise to this jewel: The Obama Stimulus plan "American Investment and Recovery Act" gave over $375,000,000 in borrowed money to the Arkansas Highway and Transportation Department. Over $230,000,000 of that was in "discretionary funds."

 Given that they got a windfall of $230 million in discretionary funding in 2009, I find it particularly outrageous that proponents of the November 8th debt issue are claiming that the roads need so much maintenance that they will deteriorate if we don't vote to go $575 million in debt over the next few years to repair them. Didn't they know what the condition of the interstate system was when they got the $230 million windfall two years ago? Why didn't they use that money to do the maintenance?

Look, I think the Highway Commission is crying wolf, like public officials always do when asking taxpayers to give them more money. I think even if we vote the bonds down we can keep up the highways, and put ourselves in a stronger position going forward because we will not have to spend another $228 million on interest payments. But if they aren't, if the highways really are at the point of serious deterioration so that we really must borrow this money immediately, we should demand that they all resign at once. It would be shocking incompetence for them to blow a $235 million windfall they got two years ago on things beside interstate highway maintenance if the condition of the interstates really was so poor that we need to take on a lot more debt now to keep them from deteriorating. Either way, it would be most unwise to give this bunch another $575 million on credit.

Arkansas Public Debt Soars to $25 Billion

Talk Business with Jason Tolbert cites a report which puts Arkansas' public debt in excess of $25,000,000,000. The amount includes our unfunded pension liabilities and the amount we owe the federal government from the unemployment insurance fund. In other words, most of it is debt that we the people did not vote to take on. Our state officials have run this debt up without our permission, as the state constitution requires.

 Speaking of that, on Tuesday November the 8th they are asking us to go vote to allow them to take on an additional $575,000,000 in debt for interstate highway maintenance. Most people I know are working hard and sacrificing to reduce their personal debt, but the politicians want to add public debt faster than we can pay down our personal debt. When will it end? When we start telling them "no."

Sunday, October 23, 2011

Yes, I'd Like to Know Where the Money Went

Yes, I'd like to know where the money went.

We have been paying on the GARVEE Highway bond program since 2000, so that is either eleven or twelve years.   Every source I can find indicates this amount has been around $74 million dollars a year since the inception of this program. Let's give them the benefit of a doubt and say they have only paid for eleven years.    $74 million * 11 years = $814 million.

Presumably, that money went to pay off the $575 million principle and $228 million in interest payments plus $1 million in other costs that public officials like Rep. Nate Bell say constitute the total cost of the bond issue.  $575 million + $228 million + $1 million = $804 million.

That's fairly close to the $814 million that we estimated that the program took in.   There is only one problem.  We still owe $206.5 million on the bonds.

Yes, I'd like to know where the money went. Preferably before the November 8th special election where we will be deciding whether to give them authority to do it again.  In all probability there is a perfectly innocent explanation, but its one we ought to hear before the vote.  It could all be resolved with more information and communication.

An Opaque Sort of Transparency on Highway Bonds

"Everything is good, nothing to see here, just give us the money and move on"

Some of our state officials seem very upset that us peasants are asking so many questions prior to the November 8th vote where they expect us to authorize $575 million dollars worth of borrowing against our credit.  

The condescending approach, where they put out misleading and contradictory information and then tsk us for "not understanding" is wearing a bit thin.   One gets the feeling that there is a lot they don't want us to understand.  Just one example, Craig Douglass is a publicist for Move Arkansas Forward, the straw group thrown together by Highway Commissioner Madison Murphy and some contractors hoping to make money off of this bond deal.   Here is what he told Washington County Tea Party Chairman Jeff Oland when Mr. Oland complained that the commission has often built highways and projects in the past in the wrong places....

"No new Interstate highways will be built with this program. It will only modernize approximately 300 miles of existing Interstates. It is, in fact, an accelerated maintenance and rehabilitation program designed to maximize the efficiency of modernizing Interstates sooner rather than later. The program will only fix what we currently have."

Meanwhile, the Stuttgart Daily Leader had this quote: "Arkansas County Judge Glenn “Sonny” Cox said, if the measure is approved, the state would eventually make the stretch a four-lane highway all the way through. He said county officials would then work on getting U.S. Hwy. 165 made into a four-lane highway. It’s a possibility that Stuttgart’s new overpass and bypass made into a reality."

They should get their stories straight.  Not that any of that matters to Mr. Oland's point that people in under-represented portions of the state, like NWA, Central Arkansas,  and the River Valley, should insist on reform in the way the Highway Commission is structured before approving new loans.  It makes no sense to throw away your leverage for the next 15 years and get no reforms from a system that assigns representation like its 1936.

Now Rep. Nate Bell from Mena throws in his lot with the aggrieved and annoyed upper crust who are irritated at all the bother from us commoners, whose apparent function from their perspective is to shut up and fund their visions.   Only recently, after being called out on it, has the Highway Commission given anything like the details needed for a proper evaluation of the plan to the public.   Even the recent stories lack detail.  "Improve nine interchanges."  What does that mean, two new lanes or landscaping and flowers?

Bell answers the complaint of activists that there has been no map presented,  that the Highway Commission and associates have given vague and contradictory statements about what this money would do, by pointing to a map that has a date of July on it.  This is the map he holds up as evidence that the Commission has presented us "a map", as if it contained enough details about their plan to invalidate our complaint.  I invite you to take a look at the one page map and tell me if you think it contains enough detail to justify approval of a $575 million loan.   No bank would give you a 70K refi on your home with that little documentation.

The map is not even from the Highway Commission itself, but from "Move Arkansas Forward", so if they go "off the map" so to speak who is responsible?   And they draw red lines all over the state and carefully label them "potential GARVEE projects."   That's a lot of potential, but what are the order of priorities so that we can know who will be left out should the hints they are dropping to everyone about all the goodies they will get not pan out?   And they make no distinction on this map on what is to be resurfaced, what is to be re-constructed, or even what if anything is to be widened.

The thing is, we are going to get money for roads anyway.   We are going to get road improvements anyway.   The only question is whether we should use that money on a pay as you go basis or pledge it against a loan and get a big pile of money to spend at once.  Based on what I have seen, they don't seem ready to efficiently spend a big pile all at once.

Gamble With Your Own Chips

Feeling lucky? Rep. Nate Bell and the Highway Commission are, so why not vote to give them $575 million worth of your chips on Nov. 8th? 
Arkansans will be asked to take on more debt on November the 8th when a special election will be held for a highway bond issue.   I have been opposed to the plan, but in the back of my mind I had a reservation or two.   The biggest reservation was the idea that once a road starts wearing out, if you don’t spend a little money fixing it now you have to spend more fixing it later.  It turns out that even without going into debt, we ought to be able to prevent that from happening, for reasons described here.    I see this as our chance to get out of this negative cycle of using debt for routine road maintenance.
The other point was a half-reservation. Rep. Nate Bell of Mena is a big supporter of the debt plan.   He goes through the calculations comparing interest paid to measured inflation in construction costs.   His point was that construction inflation was higher than interest rates during the four years of road construction (2000-2004).  In that accounting, we got more road maintenance by borrowing and paying interest than we would have by waiting for the money to come in.   He argues that with interest rates currently very low and possible inflation on the horizon, we should vote for the debt and make that bet again.
It may be a valid policy position, but I would not call it a “conservative” one, as Bell does.   Let me tell you what real conservative people are trying to do all across this state right now- they are trying to pay down their personal debt.    And as they struggle to pay down their personal debt, here is what I think they don’t want- they don’t want politicians pushing them to increase their public debt. 
His whole argument is based on assumptions that may not hold anyway. Take his assumption that the bonds will be issued at a lower interest rate than the previous series was.    In the very similar 1999 bond series it took until 2002 before all the bonds were issued.    We don’t know what the interest rates for bonds will be even next Spring, much less in three years.   Most people don’t know it, but Germany had a failed bond auction this week!  Things can change very fast, but once we give them permission to issue debt on our behalf, they can issue debt.    There is no provision in the bond issue which says they can only issue the bonds if rates remain low.
While I also expect inflation eventually, it is also possible that there will be a deflationary collapse for several years and that we could get the roads maintained even cheaper by stretching it out a few years and avoid interest payments to boot.   Maybe we will get a President who will let Americans drill for oil and it will go back down to $50 a barrel, meaning that asphalt prices would face downward pressure.  We just don’t know.   I just know that this is not a good time to take on a bunch of additional debt.
But more importantly, statistics from Bell himself show just how unnecessary the whole debt program is.     The revenue streams devoted to bond repayment on a similar program are around $74 million a year.   That is for a total of $575 million in loans.   If we just let the $74 million a year come in rather than pledge it for collateral, we would have over half of the $575 million in just four years and we would not owe a penny in interest!  And in the original 1999 program on which this debt issue is based, it took them three years to float all the bonds and get that $575 million!  The interest costs on that bond issue was over $200,000,000- about 40% of the principle amount.
Rep. Bell notes that the debt plan is only 5% of projected AHTD revenues. Combine that with the fact that we could get half the $575 million within four years just by letting it come in rather than pledging it to bonds and you have to wonder why they couldn’t just move some money around to get a lot of the proposed construction done in the next four years without resorting to a bond issue.  

Bell claims that even if the feds did not send in the projected highway funds, there would not have to be a tax increase because this bond issue is only 5% of the projected AHTD revenue stream.   He said they could just slow some stuff down and move money around and cover things without a tax increase.  If that's so, then WITH the money coming in they ought to be able to find a lessor amount somewhere to combine with that money and get the job done without debt. This would leave us over $200,000,000 in interest savings that would put us in a strong position going forward. That would get us away from this cycle of using debt for routine maintenance- hardly a “conservative” policy.

Not One Good Reason

Although I am adamantly opposed to the debt plan to be voted on November the 8th, in the back of my mind I did have one reservation about my opposition.  That was until yesterday.  Now I realize that there is no good reason for the average citizen to vote for this plan- not one.  Ironically, it was information from one of the debt plan’s most ardent supporters which helped me realize that my reservation was groundless.
Rep. Nate Bell of Mena has come out in favor of the debt plan being pushed by the Arkansas Highway Commission and a group which calls itself “Move Arkansas Forward.”   The plan would pledge all our federal highway money for the next 14 or 15 years, plus revenues from an existing diesel fuel tax, toward repaying the bonds.   Should those funds fail to materialize, they would become general obligations of the state’s taxpayers.    
Opponents of the plan, like me for instance, noted that counting on the federal government to come through with promised funding for the next 15 years is not as sure a bet as it used to be.   We may be setting ourselves up for a tax increase at a time we can least afford it.  Here is what Rep. Bell had to say about that issue…

“There are claims that if the federal revenue stream disappeared for some reason then a raid on general revenue or a tax increase would be required.  While the legislature could choose to do this, the pledged revenue stream is less than 5% of the AHTD budget and could be absorbed by slowing the pace of other work if the federal revenue was eliminated.”
Well, first of all I am sure that in such a case the Highway Department would push for a tax increase to make up the revenue rather than shift their budget around because that is what they do.  Example: There will be a tax increase proposal on their behalf on next year’s general election ballot, and that is in addition to the loan they are asking for two weeks from now. 
But more importantly, that statistic shows just how unnecessary the whole debt program is.     The revenue streams devoted to bond repayment on a similar program are around $74 million a year.   That is for a total of $575 million in loans.   Why, if we just let the $74 million a year come in rather than pledge it for collateral, we would have over half of the $575 million in just four years and we would not owe a penny in interest!  And in the original 1999 program on which this debt issue is based, it took them three years to float all the bonds and get that $575 million!  The interest costs on that bond issue was over $200,000,000- about 40% of the principle amount.
If all goes well, we are going to get the $74 million for the next 14 years ($1.036 billion) anyway- whether or not we vote yes or no on those bonds.   Why pledge it to repayment on bonds that will only bring in $575 million?
The one reservation I had about opposing this bond issue concerned the timely repair of highways.   I know that if you let them go too long, it costs more to fix them than if you repaired them early.   The fact that the whole bond issue represents only 5% of the AHTD budget, combined with the fact that an additional $74 million a year is available even if we don’t use debt, tells me that they don’t need to resort to debt for routine road maintenance. 
In the long run, we will have much better maintained roads if we bite the bullet and get away from the idea of using debt for routine road maintenance.  Too much money is going into interest payments and not enough is going into highway maintenance.

Wednesday, October 19, 2011

Tea Party-Secure Arkansas Coalition Opposes More State Debt

The Washington County Tea Party has released an excellent letter about the debt election on November the 8th.  They and Secure Arkansas are leading a growing campaign against more state debt that now includes the following groups: 

Secure Arkansas (
Washington County Tea Party (
Pulaski County Tea Party ( 
River Valley Tea Party (on FB) 
Boone County Tea Party (
Little River Patriots (on Facebook) 
Americans for Constitutional Government (Fort Smith)
Northeast Arkansas Tea Party ( Miller County Patriots (

Of particular note: a similar bond plan started in 1999 appears to have cost us $264 million highway dollars in interest to get $575 million a few years early.   That does not include bond fees, brokers commissions, or legal fees.  We could have had over half that $575 million in only four years simply by spending the money as it came in.
The letter follows.....
“I go on the principle that a public debt is a public curse.” -James Madison, the Father of the Constitution

 Everyone is on "issue overload," but public debt is an important issue, and once again a "special election" is being called (November 8), hoping you won't pay attention or care so they can keep us loaded down in more debt.  This is becoming a disturbing trend in Arkansas--"special elections" where 2% to 5% of voters turn out and vote more taxes on the thousands of other citizens who were not even aware of the election but will now have to pay the tax.  This needs toSTOP.
Washington County Tea Party has created a flyer which is being distributed around the state for educating the public (attached).  Notice the list of tea party groups who stand in agreement in opposing debt. Every corner of the state has been reached with activists who agree with the anti-debt message and are distributing this flyer.  Can you help print and distribute a few to people you know?  Can you forward this to your Arkansas contacts and ask them to forward it to their Arkansas contacts?  We have potential to reach a lot more people that way.
We are finding that even some activists had misunderstandings about the "debt election" on November 8, but most are 100% on board with opposing more debt, a major tenet of tea parties across the country.  We have compiled some "frequently asked questions" (below) which may answer some questions you might have about this so you can be informed and able to educate people you know about why we must stand opposed to debt. This information is also on our web site, so you may refer your friends to  
"We the People" still have power to stop this if enough people do just a little bit and help spread the word.
Frequently Asked Questions
 1)   The roads in my area of the state need to be repaired. I want my roads fixed, so isn't this a legitimate means to do that?
This debt measure does not affect any state or local roads, so your local roads will not get fixed just because this bond passes.  The bond money is supposed to be used only for maintaining existing interstates.  . 
2) I am a conservative, but I think maintaining roads is something the public should spend money for. 
Please understand, we all want properly maintained roadsWe agree that maintaining roads should be a priority as a legitimate use of taxpayer money. Since Arkansas is known as the highest taxed Southern state, why can they not find a way to maintain roads without going into debt? We need to address that issue before we agree to continue the vicious cycle of debt for routine road maintenance.
Put another way, if it is really true, as "Move Arkansas Forward" is claiming, that we must maintain or "modernize" our roads by going into debt to do so, then that proves our point that highway funds have been mismanaged, and the answer is not to keep repeating the same mistake.
By the way, Move Arkansas Forward is co-chaired by the same man who chairs the Arkansas Highway Commission (Madison Murphy of Murphy Oil--Wal-Mart gas pumps), and they are putting out conflicting information about what this bond money would do.  They insist on one hand that this is only about maintaining what we already have, while also promising to "modernize" and add exits, ramps, and bridges. So which is true?  How can we know?  The Arkansas Highway Commission is not elected or accountable to us for how the funds will be spent.
Which brings us to the next point--how can anyone know what roads will need maintenance 15 years from now?  No one can, so why not just use existing federal funds to pay as we go where it is needed most?
3)  Since this does not raise taxes, why should we not agree to a bond measure if it will fix our roads?
First of all, a bond is still debt, and debt is a still a form of enslavement, as it has been throughout time.

“We must not let our rulers load us with perpetual debt” - Thomas Jefferson

Secondly, the ballot language clearly states that if revenues from federal highway funds or fuel taxes do not come in, repayment will have to be made from the general fund.  That means we taxpayers will be on the hook should those funds not come through.  There is a potential then for a tax increase to cover it, or else spending will have to be cut somewhere else, and how likely is that? 
4) Wouldn't we save money in the long run if we go ahead and invest now while they are able to get this reduced interest rate?
Interest rates were not very high in 2000 either, yet we will have paid an estimated $264 MILLION* in interest to get that $575 million a few years early.  You read that right. That figure does not include bond commission fees or legal fees.  It does not make economic sense to keep letting our highway funds be eaten up in interest and fees.  If we just spend the money as it comes in, we would have over half of it in just four years with no interest or fees!  Bear in mind they took three years to get the full $575 million the first time, and no one can guarantee what interest rates will be 3 years from now.

*See this story from 2005.

5)  Businesses, particularly tourism businesses, need good roads.  If businesses lose revenue because of poor roads, it takes years to attract business back to the state.
Agreed, and again, this is only about interstates, and debt is not the solution.  The fact is, the high taxes in this state are an even bigger deterrent to business, and there is potential for even higher taxes if we end up without enough revenue to pay back these bonds.

Sunday, October 16, 2011

OWS and 99% vs. 1%


"Occupy Wall Street" has a slogan "99% against the 1%."   But who are the one percent?

Apple founder Steve Jobs passed away last week.   He was certainly in the top 1% of Americans as far as personal wealth goes.   And the reason he was there, was because with his life he served people well.  He provided products that people wanted.  People voluntarily gave him money in order to get those products.   His long success shows how many were happy with the exchange.

Former Goldman Sacs boss Lloyd Blankfein is also in the top 1%.   He got there by running a firm that lied to its clients.  It sold them what they claimed were sound securities while at the same time they were betting that the value of those securities would crash.   When his firm made investments that were profitable, they kept the money.   When they made disastrous bets that threatened the very solvency of the firm, they used their political connections to force the U.S. taxpayers to take those bets instead.  
Both of these men are in the top 1%.   One of them was a blessing to the lives of millions of Americans.   The other was a parasite who produced nothing real of value.    He enriched himself and his cronies off the labors of honest Americans.   Occupy Wall Street would be wrong to treat both of these members of "the 1%" the same.

Using the principles found in Scripture as a basis for public policy, as well as a basis for living private life, I find that I cannot endorse the politics of envy.   Just because someone has more than us is not justification to have the government come and take it from them.   "Thou shall not steal" and "Thou shall not covet" are simple, direct, honest, commands.  And in our times, they are the exact reverse of what is practiced in post-modern politics.

Experience has shown us that demagogues elected on promises to the masses that they will loot "the rich" on their behalf are not kept.  The truly rich have many options.  They don't normally consent to hang around to be made into tax slaves for the benefit of the demagogue's purchased popularity.  If they can't arrange loopholes for themselves they simply leave.   At that point the man whom the masses elected to hold the gun for them simply turns that gun on the middle class.   This group of people is much easier to plunder.   They have far fewer options to escape the demagogue's robberies than do the truly rich.   

A just public policy would not treat Steve Jobs and Lloyd Blankfein the same just because they were both in the top 1%.   A just public policy would be one that distinguishes the part of the 1% who earned their money serving others through honest and voluntary trade from the 1% who got their money by fraud and deceit, and political favors.   Members of the first group should be praised by the state.  Members of that latter group should face the sword of government justice.

We live in times where lying is typical and it is hard for an honest man to make a living.  Because so much wealth in our current economy is ill-gotten, it is easy to fall for the idea that all those who have wealth got it by cheating, and therefore it is OK for government to take it from them.   But not all wealth was obtained by cheating.  Most of it, especially among the upper middle class, was obtained by living well and serving others well.   Society is best served by them staying at it, and that means letting them keep most of what they have earned to give to others as they see fit.   It’s not those who have wealth that should be targeted, but those who obtained it falsely.  

Immigrants Increase Deficit Spending

Not just illegal immigrants, but according to this article immigrants as a whole are responsible for 17% of our federal debt.  I guess our screening programs are not what they used to be.   It looks like they are calling for more restrictive legal immigration policies.   I'd prefer more restrictive federal government spending instead, but they have a lot of facts behind their case.

Helena Drug Busts Includes Five Law Enforcement

We have heard quite a bit about Helena-West Helena in the national news, little of it good.   Mayor Arnell Willis seems to be trying to straighten it out, but he has a long row to hoe.   A federal drug bust in his city reeled in five crooked members of "law enforcement."

Without a minimal amount of virtue in the population, self government in a state of civilization is impossible.  When man finds he lacks sufficient virtue in himself, he must turn to God in order to get virtue or surrender his freedoms to tyrants.

Saturday, October 15, 2011

Black This Out

Black This Out Money Bomb

Dear Mark,

18 minutes, 47 seconds.

That’s how much time I’ve been given TOTAL during the last three Republican debates to explain my message of liberty to the voters.

But since poll after poll has shown me in third place nationally over these past few months, surely that amount of time left me in the middle of the pack when compared to my establishment opponents . . . right?


Out of all the candidates, my speaking time was DEAD LAST – even behind candidates I’ve been beating in the polls for months!

Mark, I know this is nothing new - especially after the outright censorship my campaign experienced after my incredible finish at the Iowa Straw Poll.

But don’t shrug your shoulders.  Don’t become jaded and give up.

Help me break through the media BLACKOUT.

This Wednesday, October 19, is your chance.

So won’t you please immediately pledge to contribute as generously as you can to my Black THIS Out Money Bomb?

The truth is, we’re nearing make-or-break time for my campaign.

After all, we can’t count on the national media to use their megaphones to cheerlead for my campaign as they’ve done for others recently.

There’s nothing the establishment hates more than my message of liberty, sound money, and limited constitutional government.

So the national media does everything it can to IGNORE us.

And after Florida moved up its primary date, it was only a matter of time until Iowa, New HampshireSouth Carolina, and Nevada all followed suit.

That means our time is running out to get my message to the voters!

That also means it’s crunch time.

And that’s why October 19's Black THIS Out Money Bomb is my campaign’s most critical money bomb yet.

Can I count on you for a generous pledge?

Click to Pledge

The truth is, I’ve been amazed at what we’ve done so far during this campaign.

But as I told you in the beginning, I’m in this to WIN.

I’m traveling all over the country.  My campaign is running hard-hitting TV ads, and we’re bringing in hundreds of new supporters every day . . .

But it’s not just my establishment opponents I have to deal with in this race for President.

As much as I hate to say it, despite the polls, despite my campaign’s success, and despite the fundraising numbers we consistently put up - the national media continues to pretend I don’t exist.

Well, I’m determined to break through their blackout and talk straight to the voters.

But I can’t do it without your generous support.

TV, targeted voter mail, email, and nonstop campaigning all cost money.

I’m not raking in the big checks from the Wall Street bankster fat cats like some of my opponents.

So I’m depending on you.

Please pledge to make your most generous contribution to my campaign’s Black THIS Out Money Bomb on October 19.

I’m counting on you.

For Liberty,

Keeping Out the Tea Party Trash

The Lords raise up the draw bridge, lest any peasants get big ideas about entering the castle.
The Republican Party of Arkansas' Executive committee has voted to roughly double filing fees for state representative, state senate, and U.S. Congress.   That ought to keep the Tea Party trash out of your primaries, right fellas?   The insiders overwhelmingly agree that voter choice ought to be restricted to candidates with adequate corporate and special interest funding!

I view it as sort of a tax increase on participation in the political system.

Studies Show Unvaccinated Children Safer

What could possibly go wrong with subjecting the immune systems of infants and toddlers to 20 or 30 vaccination injections?  Plenty according to these studies.   Not that these studies are high-budget affairs- those are bought and paid for by the drug companies and the government does not want to touch this one.

"No study of health outcomes of vaccinated people versus unvaccinated has ever been conducted in the U.S. by CDC or any other agency in the 50 years or more of an accelerating schedule of vaccinations (now over 50 doses of 14 vaccines given before kindergarten, 26 doses in the first year). Most data collected by CDC is contained in the Vaccine Adverse Event Reporting System (VAERS) database. The VAERS is generally thought to contain only 3 to 5 percent of reportable incidents. This is simply because only some immediate reactions are reported by doctors; but many are not admitted to be reactions to the vaccine. Most importantly, the VAERS numbers are only immediate reactions, which I would place with a few hours to a few weeks. Long-term vaccine-induced diseases and disorders are not recognized by parents or doctors when these conditions develop perhaps a few months to five years or more and would never be realized to come from multiple vaccinations."

Tuesday, October 11, 2011

Romney and the Mormon Issue

Because He did not get it right the first time: The book of Mormon claims to be "Another Testament of Jesus Christ."
Well, the Rick Perry campaign has distanced itself from statements by a prominent supporter that Mitt Romney should not get the votes of Christians because he is member of a cult, specifically Mormonism.

My views on the issue have not changed much since Huckabee stepped more gingerly into the same buzz saw four years ago.   I am no Perry fan, but I don't think candidates should have to make statements calling on specific supporters to retract  something the supporter said that the media does not approve of.   The media would love to get candidates pounding on their own supporters in a no-win situation.

Here are some things I want you to take away from the current dispute about this issue....

1.  Asking whether or not Mormonism is a "cult" or if Mormons are "cultists" is asking the wrong question.   "Cult" is a relative term.   It's a religion that I think is false.    The right question is "Are Mormons Christians?"   The answer to that question is, no, they aren't- at least not orthodox Christians.   They have a different answer to the central question of the faith "who is Jesus Christ?"    A different answer to that question leads to many different answers about who man is and what his relationship to God is all about.

The technically correct and politically incorrect term for Mormons with respect to Christianity is "infidels."  Like Muslims, they claim to worship the same God that is in the scriptures, but they do not represent who He is with fidelity, thus "infidels."    Hindus don't claim Him as God, and therefore are not infidels but more correctly pagans; worshipers of a different God who they acknowledge as different.

 I realize that accurately sorting all these terms will offend some.   We live in times where precisely speaking the truth and correctly assigning labels is considered an outrageous offense.  That's not my goal.   My goal is to help people understand and you can't do that without accurately distinguishing one thing from another thing.

Now for those of you who are Mormons and wish to attack me for differentiating your faith from that of orthodox Christianity, I would advise you to stow it.   The Mormon faith is predicated on the idea that all other Christian churches are basically apostate.   I promise not to get offended at that claim if you agree to not get bent out of shape when I say there is a difference between your faith and my "apostasy."

2. Another question that has come up is whether or not Romney's Mormonism disqualifies him from getting the vote of an evangelical Christian.   I'd rather have a real Mormon than a fake Christian.   Although it is not the same faith as orthodox Christianity, there is enough commonality there where you might rely on them to maintain similar principles of civil government.   It's not like voting for a Wahabbi Muslim.

Notice I assume that at some point of differentiation, it is proper to make a candidate's professed faith disqualifying.    Those who object, I look for your endorsement of the next Aztec practitioner of human sacrifice so long as they claim to be right on other issues.

While in principle I could support a Mormon, in practice I would find it distressing to vote for one of the two most prominent Mormons in American politics (Mitt Romney) and impossible to vote for the other (Harry Reid).   That's due to their polices, not their faith.  I don't rule out a vote for Romney, and prefer him to Perry in some limited ways.  Romney is more nationalist and Perry more globalist. Where Perry is more conservative than Romney, I suspect it is simply an artifact of his political career being in Texas rather than Massachusetts.   Perry took the positions he had to take to be elected where he was running.   I believe Romney to be sincere about a faith that is incorrect and suspect Perry of being insincere about a faith that is correct.    In some ways I prefer the former to the latter.   Of course, it is only the establishment that is trying to force the population into this false choice between Romney and Perry.  

Friday, October 07, 2011

Expense Issue Changes Some Filings in House

The State Senate seems to be more resistant to changing their ways, but eleven house members have altered their previous pattern of filing for expenses from past months, possibly due to the awareness raised by the suit and by the efforts of Conservative Arkansas on the issue.   Five of the eleven who have altered their filing habits in some way were on our "Top Ten" list or one of the additional five to make honorable mention on that list.

If you are not familiar with the controversy surrounding the expense reimbursement issue for Arkansas legislators, here is a site dedicated to the issue.

I previously did an article on this which explains where I am on it.

Brief Primer on City Sales Tax Reduction Effects

There has been some debate lately about renewing sales taxes. In Fayetteville for example, a one cent sales tax is up for renewal. The Mayor is, like almost all politicians when faced with a potential revenue cut,  predicting dire cuts to emergency services like police and fire if the tax is not renewed. They almost always say the cuts will have to come out of fire and police, because if they told you they would have to lay off their idiot cousin who is on the payroll down at Parks and Recreation people might vote to give themselves a tax cut.

 So if city residents do vote to cut their taxes next week, the police and fire departments would be eliminated, armed gangs would roam the streets raping, looting, burning, pillaging, and raping. Also, an asteroid would literally wipe the city off the face of the earth but the remaining citizens would actually welcome that because life without the government getting that extra once percent sales tax would instantly degenerate into a barbaric cauldron of human disease and suffering that would make "Mad Max" look like Tea with The Queen. I exaggerate mildly for effect, but you have to admit their claims get pretty shrill sometimes.

 Such tactics are not a debate on public policy that respects citizens. Rather, it is an effort to frighten the easily spooked and shallow-thinking into continuing to turn their earnings over to their benevolent overlords in government. A calmer, rational look at what a sales tax cut would do presents a different picture.

 A city faced with a sales tax cut needs to consider two factors. The first and largest is "what percent of the time to shoppers in this city purchase in this city?" The second question is"how will this tax cut affect how competitive we are with area cities on big-ticket items?"

 Let's say my mom lives in Fayetteville, where she spends 90% of her money. Instead of paying $500 in Fayetteville city sales tax per quarter, she pays only $400 after the cut. The one cent sales tax reduction saves her $100 a quarter, and "costs" the city $100 a quarter. Or does it? The truth is, she is going to spend 90% of that $100 she saved in Fayetteville, because that's where she buys 90% of her stuff. So the city actually gets $100 x 0.9 X 0.08 = $7.20 additional cents from that hundred. If the person that she bought from also shops in Fayetteville 90% of the time then the city gets $82.80 x .9 x 0.08 = $5.96. If they also bought from a person who spends 90% of their money in the city then the city gets $5.53 cents of that money.

The amount declines very slowly from there so that once you consider the re-shopping effect the city barely loses over half ($58) of the revenue they thought they were going to lose. (Someone who is better at calculus than me says that continuing this series out would result in $42 of the initial $100 being returned to the city in taxes). This principle works well in cities like Fayetteville, who have the best shopping in the area. It does not work so well in cities like Farmington where people from the city spend a lot of their dollars shopping in other towns- like Fayetteville. Instead of spending 80% or 90% of their dollars in their own city, they may only spend 40% or so there. Those are the cities that need to be most concerned about a sales tax cut, not a town like Fayetteville. Too bad the Mayor is too busy cowering behind his nine foot executive desk to realize that. 

This brings us to the second point. For most big ticket items, a lower sales tax rate than other cities in the area would make Fayetteville a more attractive shopping option. Why pay 9% sales tax in Rogers when you can buy that $18,000 used car in Fayetteville and save $180 in taxes! In other words, some extra revenue would be generated just because the lower taxes would change behavior and cause other people to shop your city. While there, they may eat lunch and buy gas and do other things. It's hard to put real math to this, but let's say 5% of the tax cut to 7% could be returned this way. So instead of a $100 loss of revenue, the tax cut results in a $58 loss of revenue after factoring in re-shopping and perhaps somewhere around $74 in lost revenue when factoring in the lower tax rate's consequences in consumer purchasing. So instead of the city making $500 off of my mother last quarter, they only make $448.

 That's off the sales tax of course. Her $500 in property taxes would be unchanged. So instead of getting $1000 off of my mother in total revenue they make $948. Honestly folks, is the city going to have to close down your police protection over that? That loss of revenue probalby reflects what their budget was three to five years ago, and I distinctly remember the city having fire and police protection at that time. Question is, who will protect us from fear-mongering politicians?

Thursday, October 06, 2011

Questions for the Highway Commission on Bond Issue

Secure Arkansas and some Tea Party organizations want the Highway Commission to answer some basic questions about the proposed bond issue voters will be asked to approve on November the 8th.  

1.      It appears that the primary funding source to pay off these bonds is the money we would otherwise get from the federal highway trust fund.   If for any reason the federal government fails to deliver the expected monies from this fund over the next 15 years would the state and its taxpayers be expected to make up any shortfalls needed to pay off the bonds?

 Editor's note: we have found that the answer to this question is YES.

2.      The federal gasoline tax is the primary means the federal government uses to replenish the federal highway trust fund which appears to be the primary source you are relying on to pay off these bonds.  Is the tax “permanent” or is it a tax that has to be renewed from time to time?  Since it was first levied in 1956, has this tax ever lapsed or been diverted to purposes other than the federal highway trust fund?

Editor's note: we have found that the tax has been diverted to deficit reduction twice since 2000, and that the tax does have to be renewed.  It may actually be technically lapsed right now.  It was supposed to end September 30th unless renewed, and I can't find anyplace in the news where it was renewed.

3.      The question before us seems to be whether we simply spend the federal highway money as it comes in, or borrow against those expected revenues and get as much money as we can up front.   We understand that the loan amount we can get is $575 million dollars, but we don’t know the other amounts.  How much money did we get from the federal highway trust fund each year over the last five years, and how much revenue did we get from the four cent diesel tax that is also dedicated to bond repayment?   How many total dollars from these sources do you expect to take in over the next 15 years?

 Editor's note: Those numbers appear to be about $58 million each year from the feds and $15 million from the diesel tax, so we are giving up roughly $73 million in annual revenue over the next fifteen years ($1.095 billion) to get the $0.575 billion early.  We would get about $300 million, or over half the money from the issue, simply by letting the money come in over four years.  

4.      Approximately how many dollars will be paid in interest for this $575 million?  How many dollars will be paid in bond fees, brokerage fees, and commissions?   How many dollars will be allocated to pay legal fees necessary when floating a bond issue? 

5.      Which firms will be retained to broker the bond deal and provide the legal work for the bond deal?  Also, how were these firms selected (were these jobs ever competitively bid)?

6.      There is currently a four cent a gallon diesel tax which was brought into existence to pay off the last round of GARVEE bonds.  It seems to us the dedicated revenues would have “nowhere to go” should we finally pay off these bonds.   While it is not a “new tax”, it is a tax created for and devoted to paying off these bonds. So while no “new tax” would be needed to engage in another round of borrowing, it seems to us that an existing tax could be ended.   Should there be no bonds, isn’t it true that the legislature could simply end this tax without a loss of state fuel tax money going to your department?  If the legislature redirected this fuel tax to your department instead of to bond repayment, isn’t it true that your department would receive more dollars from state fuel taxes than they do now?   If so, how many cents could the legislature take off of the state’s gasoline tax and still break even in fuel tax revenues?

7.      Please provide us with the total number of road dollars you intend to spend in each congressional district with this bond money.

8.      There is confusion about what this money is to be spent on.   Some officials are saying that new construction will be associated with this project.  Some say that the plan is only going to fix what we already have.   Others say that it is a two-phase program with some of each.  Could you provide us with a map that shows where you intend to do what?   Also, a definition of what the terms mean.  For example, does “improve” simply mean that you resurface a road, or are you permitted to add lanes, on-ramps, exits, new bridges, and the like?

9.      Some of us are concerned about money paid in gasoline taxes being diverted to subsidizing mass transit and alternative locomotion whose users “free ride” on vehicle users.  We feel that the free market should determine the mix between mass transit and private vehicle use.   Can you guarantee us that no money from this program will be spent on facilities or infrastructure for mass transit, trollies, light rail, bicycle paths, or recreational trails? 

10.  There are rumors that this plan will borrow money before the Highway Commission even needs it to fund road work.  As this rumor has it, they plan to turn the money over to financial traders who will use it to speculate on various investments with the idea that they can make money trading until they spend it.  If true, we feel this is a volatile time to try such a scheme, and that there is an unacceptable risk of them losing money and leaving us to make good what they lost, plus the interest on what they borrowed to speculate.  The only ones sure to win in such a plan is the financial firm that does the trading and rakes in the commissions.  

What do you do with funds that you get off the bonds but have not yet spent?  What is the maximum amount of time between the day you expect to raise bond money and the day you expect to spend it?  If there is a plan like this in the works, how much do you estimate it will cost you in payments over the life of the program to the investment bankers who will manage this program?  Also if it is true, what firm are you going to use and how were they selected (was the job competitively bid)?