Fort Smith board approves Mitsubishi incentives; overrides tax credit veto

From wind energy to tax credits, economic development was the theme of a Fort Smith board of directors meeting (June 15) that ranged in tone from broad compliments to pointed conflict.

The first order of business was to consider four items related to the city’s approval of an incentive package with Mitsubishi Power Systems. The company announced on Oct. 16 plans to build a $100 million, 200,000-square foot wind turbine manufacturing plant on 90 acres at Fort Chaffee. The plant could employ up to 400 once fully operational. Company officials said construction will start in the fourth quarter of 2010 and be complete by the fourth quarter of 2011. Mitsubishi officials expect full production and 400 jobs in place by the first quarter of 2012.

The city’s portion of the incentive package includes about $1.626 million in road and water/sewer infrastructure support for the plant, and the issuance of $75 million in Industrial Revenue Bonds. Mitsubishi is wholly responsible for repayment of the bond proceeds.

There has been some concern about the project. Mitsubishi officials said May 20 that the plant may sit idle if the company is unable to seek legal relief from an alleged General Electric “scheme” to monopolize a portion of the U.S. wind turbine market. Mitsubishi filed a lawsuit May 20 against GE in the U.S. District Court for the Western District of Arkansas.

“If GE’s unlawful conduct continues, the plant will have to sit idle, as there may be no U.S. demand for Mitsubishi turbines at a time when America is moving forward with an energy strategy that seeks to harness the power of the wind,” Sonia Williams, Mitsubishi Power Systems spokeswoman, noted in the May 20 statement.

Williams changed course at the Tuesday board meeting, saying the company is moving forward with the project and will begin to operate the plant once production can commence.

“It’s not going to sit idle,” Williams told the board.

She also cited the “effective public-private partnership” between Mitsubishi, Arkansas officials, the city of Fort Smith, Sebastian County, Fort Chaffee Redevelopment Authority, and the Fort Smith Regional Chamber of Commerce as the key reason for locating in Fort Smith.

The board unanimously approved all four items, which was followed by applause from the audience.

NEW MARKETS FIGHT
And then the conflict began.

Fort Smith Mayor Ray Baker on June 4 vetoed a resolution by the board to endorse the Fort Smith Housing Authority’s pursuit of administering a federal tax credit program.

The Fort Smith Housing Authority is preparing to establish itself as a Community Development Entity (CDE) to bring the development potential of New Markets Tax Credits to the region. New Markets Tax Credits were created by Congress in December 2000 for the purpose of funding commercial, retail and residential projects in low-income regions. (Link here for a more detailed explanation of the program.)

“I am very disappointed that the City Administrator or his staff did not bring this item to the attention of the Board of Directors,” Baker noted in his veto statement. “We have a paid Administrator and staff whose responsibility it is to be up on such programs.”

The housing authority’s purpose in seeking the resolution is to show the U.S. Treasury that it will use the credits to pursue a collaborative development plan with the city of Fort Smith. Pyle said CDE’s with a municipal or other local governing entity have a greater chance of being approved. Pyle said the tentative schedule is to be back to the board in mid-August with a redevelopment plan. However, the housing authority will seek Treasury approval even if the city does not endorse the plan.

City Director Steve Tyler grilled Fort Smith Housing Authority Director Ken Pyle on the need for creating a CDE. He said the Heartland Renaissance Fund — managed by Little Rock-based Arkansas Capital Corp. — has received more than $75 million in tax credits to use in Arkansas. He said that should be enough for the state. Tyler also questioned Pyle as to how much time the CDE program would take away from the housing authority’s primary purpose.

Pyle responded by saying Heartland managers have helped the housing authority in the effort, adding that they believe the more groups seeking tax credits, the better it will be for the state. Pyle also said he thinks a Fort Smith group managing tax credits will be more sensitive to the region’s development needs than a Little Rock-based group.

“We’re going to do this thing. … We’d love to have you “ (the city) on board, Pyle said to Tyler.

But Mayor Baker was not appeased. He said he is not against the program, just against the housing authority having control of it.

“I do no believe the housing authority has any business in doing this,” Baker said to Pyle.

Pyle quickly retorted: “I believe we’re in a better position to judge that than you.”

City Director Kevin Settle, who earlier reminded the other board members that the city can always back out of the deal if they don’t like the plan the housing authority presents, moved to override Baker’s veto. City Director Andre Good seconded, and the motion carried with Tyler being the only dissenting vote.