Big incentives necessary says Fort Smith chamber president

Paul Harvel says the leadership of Fort Smith Regional Chamber of Commerce is not concerned about any precedents — future expectations — the $585,000 incentive package to Mitsubishi may set for future economic development prospects.

What’s more, Harvel, president of the Fort Smith chamber, announced during the chamber’s Thursday (June 17) board meeting that the new economic development campaign has about $600,000 in pledges. The fundraiser is set to end Oct. 31.

MITSUBISHI INCENTIVES
Mitsubishi Power Systems Americas announced Oct. 16 plans to build a $100 million, 200,000-square foot wind turbine manufacturing plant at Fort Chaffee. The plant could employ around 335 once fully operational. Company officials said construction will start in October, be complete by the fourth quarter of 2011, with production of the first turbine nacelle by January 2012.

The chamber’s portion of an incentive package to recruit Mitsubishi totals $585,000, with most or all of those funds coming from a 2005 economic development campaign that raised $4 million in cash and in-kind donations.

The chamber incentives have four components. They are:
• Mitsubishi is paid $166,667 upon groundbreaking;
• Mitsubishi is paid $166,667 when the plant opens;
• Mitsubishi is paid $166,666 upon hiring 300 employees; and,
• Mitsubishi will receive $85,000 for support of temporary office space for “key employees to begin typical start-up activities,” temporary housing for key employees for re-location and a corporate Hardscrabble County Club membership for one year.

Non-chamber incentives included about $1.626 million in road and water/sewer infrastructure support for the plant from the city of Fort Smith, and an undisclosed amount from Arkansas economic development funds.

NO SECOND-GUESSING
“Absolutely not, and I’ll tell you why,” Harvel said when asked by The City Wire about any concerns over setting an incentive precedent when working with companies interested in moving to or expanding in the Fort Smith area. “This is not a normal time for economic development. These things like this (Mitsubishi) are really hard to come by … so you better step up and do everything you can.”

Harvel said major donors to the 2005 campaign were “OK” with the Mitsubishi incentive.

Public and private economic development incentives have often been criticized as give-away programs, or as a form of “corporate welfare” in which the benefits are hard to analyze or never considered.

An August 1999 report from the Economic Development Administration of the U.S. Department of Commerce noted: “Political imperatives require state and local officials to aggressively pursue and retain businesses and jobs, but policy makers and practitioners alike are becoming more mindful of the dangers of overbidding. Assessments of past efforts can be useful in avoiding the pitfalls associated with blindly offering incentives, while providing valuable insights in how to efficiently use public resources to encourage business investment decisions that effect the creation of jobs and the generation of new tax revenues.”

During the recession that has seen shortfalls in many state budgets, incentives have come under greater scrutiny. A recent Wall Street Journal article noted that the pressures are causing some states to require more or better reporting from incentive recipients as to jobs created and the wage levels of the jobs.

“We give out between $800 million and $1.2 billion annually in corporate incentives with virtually no data on which of these are successful at creating jobs and which are failures," Colorado Democratic Rep. Sal Pace, said in the WSJ story about a bill he sponsored to track incentive benefits.

FUTURE INCENTIVE SUPPORT
Harvel said chamber leaders and fund donors who approved the Mitsubishi incentives “think that’s ($585,000) a pretty good investment” for a $100 million plant, more than 300 jobs, “plus everything Mitsubishi will buy in this community going forward.”

In addition to the direct economic benefits, Harvel says the marketing aspect of the world knowing Mitsubishi selected Fort Smith among more than 60 sites is priceless.

“If you were to come to me and say, ‘Do you want to spend $500,000 on a marketing campaign or to get Mitsubishi?’ I’d say, ‘Give me the big Mitsubishi sign,’” Harvel explained. “So, I’m telling you that we thought this thing out over many weeks. We didn’t just wake up one morning and decide to do this.”

During the chamber board meeting, Harvel stressed to the gathered board members that they are needed to help the chamber’s new economic development campaign — which has raised about $600,000 in pledges — continue to grow until the campaign ends Oct. 31.

“If we don’t do this folks, we’re out of the economic development business,” he warned.