Amid anti-tax mood, Ark. cities raising taxes

October 6, 2011 - 3:45 PM

CARLISLE, Ark. (AP) — Like many residents in the central Arkansas town of Carlisle, James Dowdy doesn't like taxes. The 70-year-old retired farm equipment salesman complains about "tax and spend" government and said he vowed to never vote for a local tax increase after the last one he supported more than 25 years ago. But that was before cracks and potholes started eating away the town's streets and mold evicted the police from their station downtown.

So he grudgingly voted yes this month to raise local sales taxes to pay for improvements. "We need a jail, and we need good roads," he said, with resignation.

A funny thing is happening in the midst of the most powerful anti-tax climate in years: towns are raising taxes. In Arkansas, 16 communities have brought sales tax proposals to their voters so far this year, and 14 have passed. Several other cities have tax hikes in the works. That's more proposals and a better success rate and anyone can remember in a long time.

The hikes have been approved in rural towns like Carlisle, population 2,300. They've been approved in traditionally Democratic areas such as Wynne and Republican strongholds like Berryville. One just passed in Little Rock, the state's capital and biggest city, the first increase there since 1994. The measures have gone to pay for police salaries, a new fire station, parks and community centers. Little Rock city leaders even sold the idea of a new $6 million fund to recruit businesses.

Some local officials are almost surprised by the overwhelming response. "It's a real anti-tax environment," said Carlisle Mayor Ray Glover, who won 58 percent approval for a 7/8 percent sales tax increase. "It's the worst time I've seen in my lifetime."

Voters, regardless of their politics, seem to have accepted the basic deal in most communities, said Arkansas Municipal League Executive Director Don Zimmerman. "If they're going to have those services, then they're going to have to find a way to pay for them," he said.

Whether voters elsewhere are as accommodating isn't known. The National League of Cities reported last week that more than half of cities surveyed reported being less able to meet fiscal needs now than in 2010. It wasn't known how many would try to hike taxes to make up the difference.

But the trend here appears to send a message to state officials who are encountering strong opposition to tax measures for their services. At very least, states have to do a better job of showing voters exactly what they will get for their money, according to some tax experts. And, beyond that, officials may have to get creative about funding, including perhaps paying for more at the local level where voters are more accepting.

"If you inform the people and they decide this is a benefit they want, they understand they have to pay for it," said Arkansas House Speaker Robert Moore. "I think that's what the cities have done essentially, and they've done a good job of it."

Several states, including Virginia, are now moving to pay more of their highway costs with novel kinds of road tolls. Also sales taxes, especially temporary ones, may now be less objectionable to voters than income and property taxes, although that method has its flaws.

But right now, the gap in voter attitudes is clear.

While voting for local increases, Arkansas residents showed a strong antipathy to state taxes, and politicians responded. Gov. Mike Beebe signed a $35 million tax cut package that included another reduction in the state's sales tax on groceries. Since he took office in 2007, that tax has been cut from 6 percent to 1.5 percent.

Though cities could upgrade streets, a proposed state diesel tax hike to fix deteriorating highways was scrapped after polling showed how unpopular it was. In the Legislature, both Republicans and Democrats tried to outdo each other with anti-tax rhetoric and proposals.

In towns suffering from the sour economy, residents heard a different message from their local officials. Little Rock Mayor Mark Stodola declared that higher taxes were needed to deal with an expected budget shortfall of $8 million. Without the money, he said, "It's going to be a much different city that what you envision today," with options including closing parks, cutting bus lines, losing 40 police officers and allowing longer response times to crimes.

Residents agreed to pay. Proposals to raise an estimated $50 million a year won with 54 percent of the vote.

"I'd rather give a few cents to help bring up the infrastructure and other services than see what happens if we don't," said Jack Privitt, 67, who voted for the increase.

Part of the money will go into a fund to help the city attract businesses, an ambitious new enterprise.

In Carlisle, Glover said he didn't like asking people to pay more when times are so tough. The state's unemployment rate of 8.3 percent is the highest in 24 years. But the town needed the tax revenue.

Since mold forced the closing of the city's police station in 2009, some officers have been working out of an old bank vault in town. With no jail to operate, layoffs were likely. "If you don't have a jail, you don't need certain people," Glover said.

The tax measure, which should raise about $200,000 a year, takes effect in January. But Dowdy says he hopes he never has to vote yes again.

"I'm a tough sell because I don't like taxes at my age," he said.


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