The $500 Million Question: Even Sales Tax Opponents Agree LR Needs Revenue

by Gwen Moritz  on Monday, Aug. 22, 2011 12:00 am  

(Painting by John Kushmaul)

Economic Development Taxes
Voters in three counties and 17 cities in Arkansas have elected to pay sales taxes specifically to be used to attract or retain industry, according to information compiled by the Arkansas Economic Development Commission.

In June, Paragould voters added 0.25 percent to the city's existing 1 percent sales tax for economic development: for "spec buildings" and infrastructure. Jefferson County voters, by a wide margin, added 0.375 percent to the existing 1.25 percent countywide sales tax in February, with the proceeds dedicated to things like industrial site preparation, job-training programs and direct economic incentives.

But taxes dedicated to wooing industry have thus far been limited to much smaller cities - Russellville, with 28,000 residents, is the largest - and counties with much higher unemployment rates.

Chesshir, however, argues that having industrial sites ready and waiting and cash available to close the deal are as vital to Little Rock's future development as parks and streets.

"Incentives can't make a bad site good," Chesshir said. "Incentives are just the final piece of a deal" that helps a company limit the risk of expansion or relocation. "Incentives, unfortunately, are a necessary evil in the economic development workplace."

The Port of Little Rock has been a three-decade investment for the city that is now almost full due to the arrival of more than 2,000 jobs in the past four years, Stodola said. With about $7 million in new tax money, the city hopes to add more than 700 acres and then to put in about $3 million worth of streets and sewer and water lines to ready the site for additional industrial occupants.

"For a lot of people, the Little Rock Port Authority has been a wonderful, overnight, 30-year success," Chesshir said. But Little Rock also needs "a place to invest for the future," he said, which the tax proposal envisions as a research and technology park developed in partnership with UAMS and UALR.

"The likelihood of attracting early-state research companies from some other place is not near as high as keeping companies coming out of our own research facilities and institutions," Chesshir said.

The 'Slush Fund'
Although it represents little more than 1 percent of the total tax proposal, the establishment of a $6 million incentive fund has proven to be the most contentious part of the proposal. Jim Lynch referred to it at the Downtown Neighborhood Association debate as a "slush fund," and Arkansas Times blogger Max Brantley has repeatedly used the same description.

In a letter to Brantley, Mayor Stodola called that description "unfair and abusive."

The city board's resolution calls it the Jobs Recruitment & Economic Development Infrastructure Fund and says it will be used only with approval from the city board. Eligible projects will have to be inside the city limits, and the money will be used either in conjunction with the Governor's Quick Action Closing Fund "or by using guidelines tied directly to capital investments and jobs created."

Before the governor's office opens up its Quick Action Closing Fund to recruit industry, Chesshir said, it expects the local community to make a matching investment.

"People can say they don't trust city government," Chesshir said, "but we have these needs today."



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