By John Lyon
Arkansas News Bureau
LITTLE ROCK — Revenue from the state severance tax on natural gas allowed the state Highway and Transportation Department to increase total revenues during the fiscal year that ended June 30, but collections from the tax were well below projections, a department official told the state Highway Commission on Wednesday.
Larry Dickerson, the department’s chief economist, told the commission the agency’s total revenues for the 2009 fiscal year were $382.3 million, compared to $380.9 million the previous fiscal year.
“We were $1.4 million ahead of last year, but $6.5 million of that was attributed to the natural gas severance tax, so without that we would have been below last year’s revenue by $5.1 million,” he said.
The $6.5 million the department collected as its share of severance tax revenue fell far short of the projected amount of $15 million, Dickerson said. Lower-than-expected natural gas prices were to blame, he said.
The Legislature voted in a special session in 2008 to begin taxing natural gas companies at a rate of 5 percent of the proceeds they get on the sale of gas, instead of the old rate of three-tenths of 1 cent per 1,000 cubic feet of gas extracted.
The tax went into effect Jan. 1, though at a temporary reduced rate of 1.5 percent or, for marginally-producing wells, 1.25 percent.
The 1.5 percent rate will last three years for high-cost wells and one year for other wells. Marginal wells can pay the 1.25 percent rate indefinitely.
The highway department projects it will collect $23.2 million from its share of the tax in fiscal 2010, Dickerson said.
The department’s share of motor fuel taxes fell 2.8 percent last fiscal year compared to the year before, Dickerson said, but he noted that in March, April and May gasoline consumption was above the levels for those months in 2008. Consumption figures are not yet available for June.
Diesel fuel consumption in May was down 9.87 percent compared to a year earlier, however.
“We’re waiting for diesel to turn around, and we’re hoping that we have seen the turnaround for gasoline,” Dickerson said. “Keep in mind, as far as gasoline consumption, we’re probably around $1.40-$1.50 less per gallon than we were last year at this time.”
Dan Flowers, the department’s director, said the federal government has advised the state that sometime in August or September there is likely to be a drop in reimbursements for work on federal highways, with the amount of the decrease depending on how much money is available in the dwindling federal Highway Trust Fund.
“The wisdom is that we will eventually get our money back, but some correction has got to be made in the balance of the trust fund for that to take place,” Flowers said.
Scott Bennett, the department’s assistant chief engineer for planning, said legislation currently in the U.S. House, known as the Surface Transportation Authorization Act, would provide $500 billion for surface transportation over six years, with $450 billion going to highways, highway safety and transit.
The bill also would take some decision-making powers away from states and would concentrate funding on major metropolitan areas, Bennett said.
Flowers said rural states like Arkansas will have a problem with those aspects of the bill. The state Highway Commission may weigh in on the legislation at some point, and the Legislature and Gov. Mike Beebe may want to as well, he said.
Also Wednesday, Frank Vozel, deputy director and chief engineer for the department, reported that an application for federal grant money for the proposed 20-mile Bella Vista bypass should be ready for submission by Aug. 19. Applications are due by Sept. 15.
The bypass eventually would be part of the proposed I-49, which would run between Bella Vista and Texarkana and connect with highways in Missouri and Louisiana.
The fact that the bypass would be part of I-49 should help with the grant application, Vozel said.
