Arkansas Economic Development Commission director Grant Tennille told state lawmakers that “cash is king” over any other economic incentive or tax policy.
Tennille was giving a review of state economic recruiting policies to the Joint Revenue and Tax Committee, which is studying potential changes to the Arkansas tax code.
“Very simply put, when we're talking to companies, cash is king,” Tennille said, primarily in reference to the Governor's $50 million Quick Action Closing Fund. “Because cash is the motivator, you've got to leave us with a bucket of cash to play with. Otherwise, we're out of the game.”
Currently, AEDC has about 60 projects in the pipeline with 15-20 prospects in the “hard core, back-and-forth” negotiation stage, he said.
Tennille also said that many of the state's existing tax incentives are corporate income tax-based. He said that economic recruiters have become much more sophisticated in efforts to work the best deal for companies looking to locate in Arkansas and other states.
“As the economy changes and as our work continues to shift from landing the mega-project… cash has become the currency they're the most interested in.”
Tennille added that other advantages that draw prospects to the state are not necessarily in state policymakers' control.
“The Chinese companies are interested in Arkansas because of our geographic position in the U.S. and our geographic position in the western hemisphere,” he said.
“Most of the people we talk to and work with are looking here because they see something about our resources – and lately it's been logistics, logistics, logistics – that they like,
” Tennille told the tax panel.
Tennille said the “right to work” status and small union presence in Arkansas is also a driver.
Another big recruiting advantage, particularly with foreign firms, is proximity to Wal-Mart's corporate headquarters in Bentonville.
As the Joint Tax committee reviews potential changes to the Arkansas tax code, Tennille said that in nearly 5 years of sitting at the table closing economic deals, the subject of taxes has never been a deterrent.
“I have yet to hear a company tell us, 'We're not coming to Arkansas because of the tax treatment our company would be subjected to,'” said Tennille. “They say, 'Tell us what the rules are and don't change the rules.' Stability is worth infinitely more.”
Tennille also discussed with legislators a number of other economic development factors:
- Workforce – Tennille said it is becoming a bigger issue as companies need better worker training to meet needs.
- Helping existing businesses – Tennille said it is easier and cheaper to help existing Arkansas-based operations rather than recruit new businesses.
- Sales Tax For Reinvestment – Tennille said that a complicated tax issue could be changed to allow for a clearer treatment of companies that add new product lines and expand their businesses with capital investments.
- Business regulation – Tennille said that there are a number of regulations on the books that companies abide by, but regulators don't even care about because the requirement is no longer applicable. He added that some of those regulations could probably be abolished with little controversy.