Senate Majority Leader Jim Hendren told city and county officials on Friday (June 16) he hopes a voter-approved ballot item to remove the state’s cap on economic development projects will help local communities across the state recruit more jobs to Arkansas.
Hendren, a Republican from Gravette, was a guest panelist at the Arkansas Municipal League’s 83nd annual convention at Little Rock’s Statehouse Convention Center. Hendren, along with Springdale Mayor Doug Sprouse, Arkansas Municipal League lobbyist Mark Hayes, and Shepherd Russell, a bond lawyer with Friday, Eldredge and Clark law firm, participated in a panel on recent legislation passed during the 2017 session to promote local economic development projects.
Much of the discussion centered around Amendment 97 (Issue 3), the 2016 ballot item that removed the cap on the amount of bonds the state can issue to help finance economic development projects and services. Hendren was one of the key sponsors of Act 685, which promulgated the rules for Issue 3 that are now part of state law.
During the panel discussion, Hendren said negotiations on Act 685 nearly came to halt toward the end of the 2017 over key “due diligence” provisions to protect Arkansas taxpayers from too much debt on bond-financed economic development projects.
“So, we had a sit down and got everybody in the same room and we worked through those things and produced a piece of legislation that I think will serve you well,” Hendren told Municipal League members. “What I was concerned with, particularly since my name was on the bill, was that we did not pass … legislation that would embarrass us later because we had a bunch of cities get into financial distress and have to be bailed out by the state and the taxpayers in their local (communities).”
Sprouse, vice chairman of the state Municipal League, said he was proud the State Chamber of Commerce and Municipal League were able to work together with lawmakers to come up with legislation top help all Arkansas communities recruit more and better jobs.
Before Act 685 was passed during the 2017 session, Sprouse said many Arkansas communities were at a disadvantage when competing with surrounded states. In fact, the Springdale mayor said a Northwest Arkansas technology firm was almost lured to Texas with better economic development incentives.
“They would get calls weekly from Rick Perry, the governor of Texas at that time, trying to recruit them to Texas,” Sprouse said of the unnamed company. “We really didn’t have much to offer and AEDC (Arkansas Department of Economic Development) was doing all they could to help and had it not been just for this company’s loyalty to Arkansas, they be in Texas right now because we couldn’t compete with the public incentives that Texas was throwing at them.”
Sprouse said even if Springdale never uses bond financing to recruit a large employer to Northwest Arkansas, city officials and economic developers in Arkansas can at least be more competitive with other states that offer better bond financing deals.
“(This) is giving us a tool that we didn’t have before,” he said.
Under Amendment 82 that was approved in 2010, also known as the “super project” amendment, the state was allowed to issue bonds to pay for infrastructure improvements on projects that exceed $500 million in investment and create at least 500 jobs. However, it limited the issuance of general obligation bonds to an amount equal to 5% of state general revenues, which was about $260 million in fiscal year 2016.
Under Issue 3, approved by voters in the November 2016 election, that 5% cap was removed and it broadened the definition of economic development projects. Hayes, director of legal services for the Municipal League, told members that economic development projects are now defined as “the land, buildings, furnishings, equipment, facilities, infrastructure and improvements that are required or suitable for the development, retention or expansion of jobs.”
In addition, Hayes said, the type of economic development projects communities can now invest in was expanded to include eight specific industries. Besides manufacturing operations, the list was expanded to include research, technology, and development facilities; recycling businesses, distribution and call centers; warehouse operation, job training and regional or national corporate headquarters facilities.
Act 685 also removes the requirement to sell bonds at public sales, meaning bonds could be sold privately to investors. Counties, cities, town, and school districts can also now come together to issue bonds jointly for economic development projects. Hayes said after the panel discussion that several cities across the state have expressed interest in using the new bond financing rules to recruit large employers to Arkansas, although no projects are in the pipeline.