What happens to Highfill's airport-related sales tax and bond obligations if the airport detaches from the city?
Plain-English summary
State Representative Delia Haak (whose district includes the Northwest Arkansas Regional Airport area near Highfill) asked the AG three questions about how Act 769 of 2023 will apply if the airport authority detaches from the City of Highfill. Act 769 amended the Regional Airports Act (A.C.A. § 14-362-101 et seq.) to provide for detachment of airport authorities from cities.
Note: Act 769 lacked an emergency clause, so it took effect August 1, 2023.
Question 1: Sales tax and bond payments. Highfill has bond obligations whose repayment was predicated on sales tax revenue from airport-related operations. After the airport authority detaches, does the bond-repayment sales tax keep flowing?
The answer is yes, but the structure depends on agreement:
- The detachment proceeding includes notice to the county court, county assessor, and county clerk of any outstanding debt obligations (§ 14-362-305(b)(2)(H)(i)).
- During the proceeding, the city and airport have multiple opportunities to reach an agreement on debt repayment (§ 14-362-305(c)-(f)).
- Once detachment occurs, taxes and revenue from airport operations may be levied, collected, and remitted "in any manner agreed upon by the municipality and airport authority that does not violate Arkansas law" (§ 14-362-305(g)).
- If they cannot agree, the default rule kicks in: levy and remit "in the same manner and amounts as if the land had not been detached" (§ 14-362-306(c)(1)).
The detachment does not strand the bondholders. Either by agreement (preferred) or by statutory default, the cash flow continues until the bonds are paid.
Question 2: Automatic annexation when airport buys new land? If the airport authority later purchases land within Highfill's city limits, does the new land automatically become part of the airport authority?
The answer is no. Neither the Regional Airports Act nor Act 769 of 2023 contains an automatic-annexation rule. Annexation and detachment are governed by specific statutory procedures (§§ 14-362-304, 14-362-305, 14-40-609). A purchase of property is just a property transaction; if the airport authority wants the new land to be part of the authority's territorial scope, it must follow the annexation procedure.
This is a significant practical limit. After detachment, the airport authority cannot expand by simply buying land; expansion requires the formal annexation process, which involves city consent, public proceedings, and judicial action.
Question 3: Eminent domain. Can the airport authority take land by eminent domain?
Yes. A.C.A. § 14-362-120 grants airport authorities eminent-domain authority. The condemnation procedures are at A.C.A. §§ 14-358-101, 14-358-102, and 14-360-102. The authority must follow these procedures, which include notice, valuation, and judicial proceedings.
Eminent domain is the airport authority's tool for acquiring land it cannot acquire by purchase. After detachment, the eminent-domain authority is intact.
Practical interaction of the three answers. After detachment, the airport authority retains taxing-revenue obligations to support past city bonds (Q1), but its territorial scope does not expand automatically with property purchases (Q2). To expand, it can use either the formal annexation process or eminent domain (Q3).
The deeper takeaway: Act 769 of 2023 is a comprehensive scheme for detachment that protects bondholder interests, preserves Tribunal-like procedural protections, and aligns with the broader Arkansas framework for municipal annexation. Implementation will turn on careful coordination between the city, the airport authority, and bondholders.
What this means for you
Regional airport authority commissioners and staff
If detachment is being considered:
1. Audit existing debt obligations and revenue streams. The detachment notice must include outstanding debt details under § 14-362-305(b)(2)(H)(i).
2. Begin negotiation with the host city on debt-repayment terms during the detachment proceeding. An agreement is typically more favorable than the statutory default.
3. Plan for territorial scope. Detachment does not automatically include subsequent land purchases. If you anticipate growth, plan annexation procedures or eminent domain proceedings as needed.
For ongoing operations, the eminent domain authority (§ 14-362-120) and standard airport powers (§ 14-362-101 et seq.) continue. Detachment changes the political relationship with the host city but does not strip operational authority.
City council members and city attorneys (host city)
If your city's airport authority is considering detachment:
1. Identify your city's economic interests, particularly bond obligations supported by airport-related revenue.
2. Engage in the detachment proceeding actively. The agreement structure (§ 14-362-305(g)) allows you to negotiate; the default (§ 14-362-306(c)(1)) is acceptable but agreement may be more flexible.
3. Plan for the post-detachment relationship. The airport may continue to be a major economic driver even if no longer part of the city.
Bond counsel and bondholders
The Regional Airports Act framework protects bondholders. Detachment does not impair the obligation. The cash flows continue either by agreement or by statutory default. Practical implications:
- Confirm the bond documents anticipate this scenario or are otherwise compatible with detachment.
- Review the detachment agreement (if reached) for compliance with the bond covenants.
- Ensure the trustee receives notice of the proceeding.
Real estate attorneys advising on airport-area property
Buyers and sellers of land in airport-adjacent areas should understand:
- A purchase by the airport authority does not automatically change the property's annexation status.
- The airport authority can use eminent domain for properties it needs but cannot acquire by purchase.
- City vs. airport authority jurisdiction may affect zoning, taxation, and services.
For commercial property near a regional airport, the territorial framework matters. Confirm with city planning, the airport authority, and the assessor.
State legislators monitoring Act 769 implementation
This opinion is the AG's first formal interpretation of Act 769 in the detachment context. Implementation will produce additional questions:
- How are mid-detachment transactions handled?
- What if the city and authority cannot agree on the agreement structure?
- How do annexation procedures interact with airport operations on existing property?
If implementation produces ambiguity, statutory clarification may be appropriate.
Citizens in cities with regional airport authorities
Detachment is a major structural change. Public engagement during the detachment proceeding is appropriate. Records are typically subject to FOIA. The proceedings include opportunities for input.
Common questions
Why would an airport authority want to detach from a city?
Reasons may include: tax structure disagreements, regulatory friction, governance preferences, expansion plans incompatible with city limits, or political dynamics. Each detachment has specific drivers.
What happens to airport employees during detachment?
Employees of the airport authority remain employees of the authority. The authority is the employer regardless of detachment status. Employees of the city working on airport-related matters may transition or remain as the parties negotiate.
Does detachment mean the airport leaves the state's jurisdiction?
No. Detachment is from the city. The airport remains in the county and subject to state and federal aviation law.
How long does a detachment proceeding take?
The Regional Airports Act sets out the procedure but specific timelines depend on the steps (notice, hearings, agreements, approvals). A typical case may take several months to a year or more.
What if the airport authority and city dispute the debt allocation?
The default rule under § 14-362-306(c)(1) ("same manner and amounts as if the land had not been detached") provides a backstop. Disputes about specific applications can be brought to court for resolution.
Can a property owner inside the city's limits but adjacent to the airport be affected by detachment?
Yes, depending on the specific scenario. If your land is part of the airport authority's footprint, detachment changes the political jurisdiction. If your land is purchased by the airport later, it does not automatically become part of the authority.
Does eminent domain apply to all property types?
A.C.A. § 14-362-120 grants airport authorities eminent domain authority. The procedures at §§ 14-358-101, -102, and 14-360-102 apply to the exercise. Standard limitations (public-purpose requirement, just compensation, due process) apply.
Background and statutory framework
The Regional Airports Act (A.C.A. § 14-362-101 et seq.) authorizes regional airport authorities. Key provisions referenced in this opinion:
- § 14-362-101 et seq.: General organization and powers of regional airport authorities.
- § 14-362-120: Eminent domain authority.
- § 14-362-304: Annexation procedure.
- § 14-362-305: Detachment procedure (added/amended by Act 769 of 2023).
- § 14-362-305(b)(2)(H)(i): Notice of outstanding debt obligations.
- § 14-362-305(c)-(f): Multiple opportunities for agreement during proceeding.
- § 14-362-305(g): Post-detachment levy by agreement.
- § 14-362-306(c)(1): Default rule when no agreement (same manner and amounts).
- § 14-40-609: Procedure for airport authority to annex land.
Condemnation procedures referenced for eminent domain:
- § 14-358-101 and -102: Condemnation framework.
- § 14-360-102: Specific procedures.
Act 769 of 2023 added the detachment framework. Effective date: August 1, 2023 (no emergency clause; default 90-day window per Op. 2023-031).
Citations
- A.C.A. § 14-362-101 et seq. (Regional Airports Act)
- A.C.A. § 14-362-120 (eminent domain)
- A.C.A. § 14-362-304 (annexation)
- A.C.A. § 14-362-305 (detachment, including subsections (b)(2)(H)(i), (c)-(f), (g))
- A.C.A. § 14-362-306(c)(1) (default rule for tax levy after detachment)
- A.C.A. § 14-40-609 (airport annexation procedure)
- A.C.A. § 14-358-101, § 14-358-102 (condemnation framework)
- A.C.A. § 14-360-102 (condemnation procedures)
- Act 769 of 2023 (added detachment framework)
- Ark. Att'y Gen. Op. 2023-031 (effective date for non-emergency 94th GA acts)
Source
Original opinion text
Opinion No. 2023-019
May 1, 2023
The Honorable Delia Haak
State Representative
Post Office Box 10218
Centerton, Arkansas 72719-0479
Dear Representative Haak:
You have requested my opinion regarding how Act 769 of 2023 will apply if the airport authority detaches from the City of Highfill and is no longer within the city limits:
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How will sales tax be levied, collected and remitted to the City of Highfill to fulfill bond payments that were predicated on the sales tax revenue?
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Does the airport authority's later purchase of land within city limits automatically annex the newly purchased land to the airport authority?
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Can the airport authority take land by eminent domain and put [it] into the airport property?
RESPONSE
All the issues you raised are governed by the Regional Airports Act or its recent amendment, Act 769 of 2023.
Question 1: How will sales tax be levied, collected and remitted to the City of Highfill to fulfill bond payments that were predicated on the sales tax revenue?
After the airport authority detaches, taxes and other revenue from the airport authority's operations to pay bonds or other evidence of indebtedness may be levied, collected, and remitted in any manner agreed upon by the municipality and airport authority that does not violate Arkansas law. In petitioning for detachment, the airport authority must notify the county court, county assessor, and county clerk of any outstanding debt obligations to be considered during those proceedings. During the remainder of the detachment proceedings, the municipality and the airport authority have multiple opportunities to reach an agreement regarding debt repayment. But if they cannot agree, then taxes and other revenue from the airport authority's operations must be levied, collected, and remitted "in the same manner and amounts as if the land had not been detached."
Question 2: Does the airport authority's later purchase of land within city limits automatically annex the newly purchased land to the airport authority?
No, neither the Regional Airports Act nor Act 769 of 2023 contain any provisions that automatically annex or detach land between a municipality and airport authority. Annexation and detachment are governed by statutes, which prescribe specific procedures for the parties to follow.
Question 3: Can the airport authority take land by eminent domain and put [it] into the airport property?
Yes, airport authorities have the power to acquire land through eminent domain. But under A.C.A. § 14-362-120, the airport authority must follow the condemnation procedures under A.C.A. §§ 14-358-101, 14-358-102, and 14-360-102.
Assistant Attorney General Jodie Keener prepared this opinion, which I hereby approve.
Sincerely,
TIM GRIFFIN
Attorney General