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Amendment to airport detachment law fails in committee after heated debate over escrow, bonds
Summary
Senate Bill 96, which would have altered the 2023 law allowing regional airports to detach from cities, failed after a contentious hearing focused on an escrow provision that would freeze city sales tax revenues on filing a detachment petition.
Senators debated and ultimately rejected Senate Bill 96 after a lengthy hearing that centered on an escrow provision affecting sales tax revenue during airport detachment proceedings.
Under existing law passed in 2023, a filing to detach a regional airport from a city can trigger an automatic escrow of sales tax revenues to preserve bondholder payments. Counsel for the City of Highfill said the escrow provision effectively freezes every dollar of city sales tax upon the filing of a detachment petition and described the effect as crippling for a small city that depends on those revenues for operations. Counsel and the city mayor said a proposed amendment would remove the escrow trigger so the city could operate while the detachment process proceeds.
Opponents, including Northwest Arkansas Regional Airport (XNA) officials and counsel, said removing the escrow provision would allow a municipality to continue issuing debt and effectively extend the sales tax indefinitely, calling the 2023 change necessary to protect bondholders. XNA argued the 2023 act was intended to avoid impairing bond issues and that the escrow language preserved the status quo required by bond documents.
Municipal officials, airport representatives and municipal finance counsel provided competing financial descriptions: Highfill officials said the city historically relied on both water revenues and sales tax to cover bond debt service and that the practical outcome of the proposed written agreement shifted the city’s contemplated $900,000 annual receipt into a construction that would leave the city with only about $250,000 for municipal purposes, while the airport disputed that interpretation and described prior offers and counteroffers.
Municipal finance counsel and an attorney for XNA disagreed on legal and factual points. XNA counsel said trial and appellate courts have rejected the city’s constitutional challenge and that the Legislature should not overturn the statute on those grounds. Municipal representatives warned that the escrow effect would threaten local operations and asked the committee to strike the escrow trigger so the detachment could proceed as a business‑as‑usual process.
After debate and numerous witnesses on both sides, the committee voted. The chair announced the senator’s bill failed on the motion to pass. The transcript records no roll‑call tally.
Votes at a glance: SB 96 — Motion to adopt amendment passed; final motion to report do pass failed (outcome: failed).
