Bond daddy alert
Will Mike Beebe's little severance tax on natural gas really produce enough highway construction to make it worthwhile, as a few of the Republican critics ask? Beebe said today he probably will propose a $575 million bond issue at the 2010 general election, possibly backed by the severance tax revenues, presuming that the legislature enacts the tax next week.
The proposition would mirror the 1999 Interstate bond issue, the so-called GARVEE bonds, which pledged the state's allotment of federal highway matching funds and motor-fuel taxes. Since his proposal, unlike the Huckabee proposal that voters rejected in 2005, would limit the Highway Commission's bonding authority to the $575 million, Beebe was confident voters would go along. It would not entail higher taxes.
But he was not sure that the severance tax revenues, since they would be linked to the volatile market price of gas, would make the bonds salable. Investors want certainty. But there should be no problem. Just pledge other highway revenues and the state's school funds, if need be. It was not widely circulated but the last bonds had a little caveat: general revenues would be used if highway-user monies were short.
The proposition would mirror the 1999 Interstate bond issue, the so-called GARVEE bonds, which pledged the state's allotment of federal highway matching funds and motor-fuel taxes. Since his proposal, unlike the Huckabee proposal that voters rejected in 2005, would limit the Highway Commission's bonding authority to the $575 million, Beebe was confident voters would go along. It would not entail higher taxes.
But he was not sure that the severance tax revenues, since they would be linked to the volatile market price of gas, would make the bonds salable. Investors want certainty. But there should be no problem. Just pledge other highway revenues and the state's school funds, if need be. It was not widely circulated but the last bonds had a little caveat: general revenues would be used if highway-user monies were short.
Comments
Thanks to eLwood, click on the blue name.
After 50 years of a jokingly low severance tax on natural gas, Mike Beebe , in the face of popular support for raising the tax to a reasonable rate, pulls out a "smoke and mirrors" trick to fool the people into thinking that justice is really being done. His severance tax proposal will not be sufficient to repair the infrastructure and the environment in the counties where the drilling and transport for the gas is done.
The article indicates that the severance tax income will peak at $105 million and drop off after 2015, when we are still paying on the bulk of the bonds. This is not a 5% tax, it's barely better than the current one. Many of the wells will be exempt and some of the severance taxes will find its way back to the payers. Beebe's proposal is a sham designed to stave off a real increase in the severance tax and to protect his corporate buddies.
The temporary riches (hah!) will evaporate away and the state will end up having fewer resources to repair the damage. Once the counties realize this, Beebe's consensus may evaporate also. If the legislators are going to have to take the heat for raising a tax, they should do something worthwhile.
Posted by: Jim Lendall![[TypeKey Profile Page]](http://www.arktimes.com/blogs/arkansasblog/nav-commenters.gif)
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March 26, 2008 09:09 PM
So go ahead Mr. Nelson, get those ballots circulating. It's time we broke those corporate
egg-sucking politicos who hide behind good words and empty deeds.
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"The honest politician is one who, when he is bought, stays bought."
U.S. Senator Simon Cameron (1862)
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Posted by: eLwood![[TypeKey Profile Page]](http://www.arktimes.com/blogs/arkansasblog/nav-commenters.gif)
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March 27, 2008 01:28 AM
Ernie,
It's been a while since we were last together on Arkansas Week. I hope you are well.
Thank the Lord Beebe is finally getting around to the truth of his intentions. I've been making this point for months: Revenues from the severance tax alone are insufficient for undertaking any highway rehab program and that if Beebe wants to do a bond proposal, he would have to pledge the full faith and credit of the state of Arkansas to secure the bonds because no issuer would issue bonds pledged to be paid back with revenue from a commodity with a market-driven price.
One other thing.Beebe is mixing his bond proposals. He said he wants to do a bond proposal using GARVEE bonds, but then he mentions bonds as an option to pay for state road improvements that would be paid from severance tax receipts. As I understand it, he is talking about TWO different bond proposals because the state can't use federal highway dollars, i.e. GARVEE bonds, to pay for state highway improvements. So what has to happen? Unless Beebe wants to use general revenue to pay back bonds, which we know he doesn't, then he will have to go to the voters for ANOTHER tax increase to obtain a dedicated revenue stream if he wants to do a bond program for state roads. I hope lawmakers understand this.
David Sanders
Posted by: djs![[TypeKey Profile Page]](http://www.arktimes.com/blogs/arkansasblog/nav-commenters.gif)
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March 27, 2008 09:05 AM