A Wrestle With Reluctance (Hunter Field Editor’s Note)

Arkansas State Capitol (Shutterstock)

I’d be frustrated — no, livid — if the state and the city of Little Rock decided to help an out-of-state chain fund the construction and opening of a new business journal downtown, exempting it from state and local taxes.

What an unfair playing field this would create for Arkansas Business, which has served the state for more than 40 years.

This unrealistic scenario illustrates one of my main qualms about the Arkansas Legislature’s proposed constitutional amendment to allow the creation of economic development districts. The government picks which businesses receive advantages, usually big, out-of-state corporations. What message does this send to longstanding local companies that have faithfully served their communities for decades?

While I have other concerns, including a general distaste for corporate welfare of all types, I think I plan to vote for the amendment as it stands today, but I’ve had to wrestle with myself to get there.

There are individuals I respect in economic development who insist that Arkansas loses projects to states with more tailored incentives. That others are doing it is never a good reason to do anything, but the pitch is straightforward: Give communities a new tool to recruit jobs, develop stalled sites and build infrastructure.

It is that prospect, that Arkansas might be able to attract just one more course-altering project — think Big River Steel or Amazon’s growing fulfillment centers — that pulls me in the direction of reluctant support.

The amendment sets some rough frameworks, but the proposal leaves many details to be sorted by the Legislature afterward.

I hope, perhaps foolishly, that lawmakers will keep transparency front and center, and I hope this tool and the individual agreements include clawback provisions when companies break their promises.

Fairness to incumbent businesses should also be a priority. A district that exempts property from normal taxation can tilt the field in favor of newcomers or particular developments. If you opened a plant without subsidies, you now may compete against a taxpayer-assisted rival down the street. Even where districts “work,” they sometimes shift activity from one part of town to another or poach workers from existing businesses rather than creating new growth.

I’m not completely convinced these incentive districts move the needle. The savings they offer companies generally are very small percentages of a firm’s overall expenses, and they’ll still need qualified workers, outside infrastructure and more that can’t be controlled by an incentive district.

So is it worth a try? If the districts are managed with discipline and transparency, I’m going to go with yes. Arkansas needs every responsible tool to compete for private investment. But one caveat should guide every decision: “Other states do it” is not a strategy. It’s a warning to proceed carefully, measure relentlessly and be ready to say no when the math doesn’t add up.

Email Hunter Field, editor of Arkansas Business, at hfield@abpg.com