Nevada County Picayune and Gurdon Times Newspaper Archive

Voters asked for 1 3/8 cent sales tax to improve all city streets at once

Voters in Prescott will likely be asked to pass a 1 3/8 cent sales tax to overlay all 30 miles of streets in the city.

This decision was made at the regular monthly meeting of the Prescott City Council, Monday, Sept. 15.

A public meeting on this issue will be held Thursday, Sept. 25, at 6 p.m., at City Hall, with a special council meeting to follow at 6:30.

Jon Chadwell, executive director of the Prescott-Nevada County Economic Development Office, presented the proposition, saying this tax will replace the sales tax the city removed in April or May.

He consulted with Stephens, Inc., and talked with the Friday Law Firm of Little Rock, along with both local banks about how the city could proceed in trying to get the tax and how much would be needed.

Because of Amendment 62 of the Arkansas State Constitution, no city can have more than twice the prime lending rate in interest owed. This is where the 1 3/8 cent tax came in.

Originally, the idea was to try and get a one-cent sales tax and extend the payoff date. But, after getting estimates on what it would cost to resurface the streets, it was learned this would put the city in excess of 4 percent interest.

The current prime lending rate is 2 percent, but, as Cary Smith of Stephens said, this could change by the time an election is held.

Chadwell said a two-inch overlay could be put on all of the city's streets for about $90,000 per mile. There are, though, other costs involved in the construction process, including the fees and taxes, along with the city doing some of the work.

The city's part of the work would be to smooth out some of the rougher streets so the overlay would set properly and there wouldn't be any potholes.

The sales tax, Chadwell said, would have a sunset of nine years and bring in about $3 million. The ordinance is being written to where the tax will expire as soon as the bond issue is paid off.

In previous council meetings there had been discussion of trying to get a sales tax specifically to repair and rebuild the streets, doing them a few at a time as the money came in. However, under this proposal all the streets will be done at once.

Chadwell said there won't be an equal number of miles done in each city ward, but this is because there isn't an equal number of miles in each ward. However, all streets in the Prescott city limits will be overlaid.

This overlay project, though, does not include work on the state highways. These roads are maintained by the state.

Chadwell has contacted different contractors, with one saying the work could be guaranteed for 12 years using a performance grade asphalt.

The figures for the overlay, Chadwell said, were based on streets being 24-feet wide. In Prescott, the streets range from 18-24 feet in width.

City Attorney Glenn Vasser said he thought the project could have been done for less tax, but the way the usury cap falls caused a problem, forcing the city to look at a higher tax rate.

"I think we'll be OK," Vasser said, "if we provide for street improvement with a sunset clause. People would have to vote on it and it needs to be clearly defined."

He said the voters should know it is a general tax to be used for nothing but improving the city's streets.

According to Vasser, with the public hearing scheduled for Sept. 25, the election could be held the second week in November.

Smith said when one cent was examined as the tax rate, it was found the money generated would only be $2.3-$2.4 million, which wouldn't be enough to get the work done and sunset the tax in 10 years. But, if the tax were extended beyond 10 years, he added, the city would be in violation of Amendment 62 by being over the rate cap.

The 1 3/8 cent tax, he said, keeps the city under the rate cap and will provide the funds needed to do the work.

Chadwell informed the council by doing all the streets at once the city will save money in the long run as it's cheaper for the contractor to do a big job than a small one, which would be the case if the project were done piecemeal.

There is a chance the bond issue could be retired early and the tax removed before its nine-year sunset clause could take effect. Smith said his figures showed it may be possible to retire the bonds two to four years early.

Vasser said he could tailor the ordinance to kill the tax when the bonds are paid off.

According to Chadwell, the bonds could possibly be paid off in seven years, saving the city money on interest.

He said a check of where the tax money in Prescott comes from shows 45 percent is paid by people who don't live in Nevada County, but travel along Interstate-30.