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.