LITTLE ROCK -- A bill that would make possible the deannexation of the Northwest Arkansas National Airport from Highfill was passed by a state legislative committee Tuesday after several hours of spirited discussion.
Senate Bill 414 was approved by the Senate Committee on City, County and Local Affairs by a 5-2 vote.
If passed into law, the measure would amend the state's Regional Airport Authority Act to allow regional airport authorities to deannex from a city, levy taxes on airport property, and create an infrastructure and development commission to then spend the tax proceeds on operating and improving the airport.
The measure would allow the board of Northwest Arkansas National Airport to leave Highfill by a two-thirds vote of the board.
Brian Burke, the board's lawyer and a former board member, said there was a misconception the bill would take away Highfill's money.
"We're not taking away anybody's money; this bill would not do anything to take anybody's money away," Burke told the committee. "It sets the table for conversations to be had between a city and a quasi-municipal entity to figure out whether they can continue to coexist or whether some other alternative is needed, such as detachment. The effect of that, if you were to play it out, is nothing immediate."
Officials said annexation of Northwest Arkansas National Airport into a city was never envisioned when the airport was being planned and the Airport Authority was created.
"XNA is a well-run business created by the state of Arkansas through an Authority Act," Tom Lundstrum, an airport board member, told the committee. "That authority was never intended to be in an incorporated entity such as the city of Highfill. In fact, all went to great lengths to keep it out of an incorporated entity so that it could be located basically in a cow pasture in the middle of nowhere."
A major point of contention is that Highfill issued water and sewer bonds backed in large part by a sales tax levied on businesses operating at the airport after annexing the airport into the city.
Highfill gets sales tax money from seven or eight food vendors at the airport, six car rental companies and other various retailers.
The city has two bond issues totaling about $7 million. It collects about $600,000 from its 2% sales tax on businesses at the airport used pay for those bonds, which aren't slated to be paid off until 2037.
Airport officials contend the bill provides for a time frame for the airport to pay the city for lost revenue that would have gone to repaying those bonds as part of any deannexation. The Arkansas Constitution also prohibits any law that impairs the obligations of contracts.
Airport officials have argued sales tax revenue would continue to go to Highfill until all the debts are paid off.
Airport officials also argued Highfill would have time to find ways to replace that revenue stream and the region's explosive growth, including a new highway to the airport, will provide the city with future opportunities to do that.
Burke, the lawyer, said Highfill would lose nothing on the front end and they'd have an eight- to 14-year planning horizon to figure out if they needed to take steps to accommodate the loss of that sales tax money.
Airport officials don't like losing a big chunk of revenue to the city when they provide most of their own services, including police and fire and maintain their own roads. They say the money should instead be spent on the airport for the benefit of all Northwest Arkansas residents.
Highfill Mayor Chris Holland spoke in opposition, saying he opposes the bill because it would hurt Highfill by taking away a big portion of the revenue the city depends on.
Rep. Delia Haak, who represents House District 17 which includes a portion of Benton County, also spoke in opposition, saying 60% of Highfill's income comes from the airport, which is also the biggest employer in town. She also said there would be no financial oversight of the authority by the state.
Another issue the committee batted around was whether allowing an airport authority to levy taxes and set up a commission to spend the proceeds would amount to taxation without representation. Holland, Haak and others said it would.
Airport officials dispute that, saying the authority's board is regularly audited and the board is appointed by elected city and county governments and that they report to those entities that appointed them. The authority is composed of five cities and two counties, and each appoint two board members.
The bill also clarifies regional airport authorities are entitled to statutory immunity from being sued and establishes a conflict of interest policy for regional airport authority board members similar to cities, counties, and other state boards and authorities.
A deannexation would also have to be approved by state and county officials.
Senate Bill 414
The bill is described as an act to amend the Regional Airport Authority Act; to create a procedure for annexation and detachment; to levy tax on retail sales on property of an Authority; to create a Regional Airport Infrastructure and Development Commission; and for other purposes.
Here's a link to SB414: https:// www.arkleg.state.ar.us/Bills/FT PDocument?path=%2FBil ls%2F2023R%2FPublic%2F SB414.pdf
Source: Northwest National Regional Airport