Arkansas tax incentives may be historic for new Wal-Mart headquarters

by Wesley Brown (wesbrocomm@gmail.com) 1,288 views 

Wal-Mart's corporate headquarters in Bentonville, Arkansas.

Wal-Mart Stores recently announced plans to build a new headquarters in Bentonville, meaning the world’s largest retailer will likely receive the largest tax incentive package in Arkansas history.

Although no price tag has been set for the project by Wal-Mart officials, state economic development officials and site consultant experts agree the amount of tax incentives will largely depend on the total cost of such a development.

AEDC spokesman Jeff Moore would not comment specifically on possible tax breaks the state may offer Wal-Mart, but did say “any and all” incentives are available to expanding or relocating companies, granted they meet the qualifications.

“Projects of this sort might include performance-based incentives that offer sales and use tax refunds on capital investments through Tax Back, income tax credit for new job creation via Advantage Arkansas, or infrastructure grants like the Governor’s Quick Action Closing Fund and CDBG, just to name a few,” Moore said. “Again, the utilization of any and all of these depend on the project and, as mentioned above, the company’s ability to meet the qualifications specific to the incentive.”

According to Wal-Mart, the new home offices will be located in Bentonville on a large tract of land on the east side of J Street, between Central Avenue and Highway 102.

In a recent white paper on considerations that large companies make when relocating corporate headquarters, Dean Uminski, principal at accounting and consulting firm Crowe Horvath, said even with the economy on the upswing, competitive pressures are forcing companies to continue their quests to increase efficiencies and synergies within their operations.

“Relocating corporate headquarters is one option for doing so, as evidenced by the recent exodus of companies from their previous locations,” Uminski said. “Those making the decision about where to relocate need to consider several critical factors, whether moving headquarters within the current state or across state lines.”

According to Uminski, several well-known corporations completed or announced notable corporate headquarters relocations in 2016, including General Electric, Boeing Company, Marriott International, North American Roofing, Arctic Cat and ConAgra Brands. Many of those companies, Uminski said, have shifted from sprawling suburban campuses that employees drove to every day to more compact urban spaces near public transportation.

“The renewed interest in urban environments reflects some of the more important factors that can influence the decision of companies anticipating a relocation,” he said.

Wal-Mart’s home office is now at the corner of Eighth and Walton, and has grown considerably since first established by Sam Walton in the 1970s. Company spokesman Randy Hargrove said the new project will be built in phases, with the construction taking place between five and seven years.

Uminski said the availability of financial incentives from state and local governments can play a substantial role in the relocation decision.

“Many jurisdictions are willing to extend such breaks for relocating headquarters in recognition of the ripple effect these moves can have on the economy in the surrounding area, as well as the potential benefits of corporate philanthropic efforts,” he said.

According to data compiled by Washington, D.C.-based Good Jobs First, a national watchdog agency on corporate subsidies, Arkansas has handed out more than 1,438 awards in state and local incentives and tax subsidies totaling more than $700 million since 2009, the earliest year for available data. Big River Steel received the largest single award totaling $139.5 million, while Lockheed Martin is second on the list, receiving 16 awards totaling $89.1 million.

APPLE, AMAZON COMPARISONS
Two Silicon Valley giants comparable in size to Wal-Mart recently completed or announced new campus headquarters that will cost more than $5 billion. In April, Apple employees began moving into the company’s new 175-acre Apple Park Way headquarters in Cupertino, Calif., although construction on the sprawling circular “spaceship” facility is not expected to be finished until late 2017 or early 2018. Once completed, Apple Park is expected to house more than 12,000 employees at that campus, whose total project costs have ballooned from under $3 billion to well over $5 billion.

Wal-Mart’s online rival Amazon Corp. also recently announced plans for its so-called “HQ2” project, the Seattle tech giant’s $5 billion “second headquarters” that is expected to house 50,000 employees. More than 100 U.S. cities, including Little Rock, plan to submit bids before that project’s proposal deadline on Oct. 18. Amazon said it plans to make a total investment of $5 billion over the first 15 to 17 years of the project, increasing spending in three separate phases until the publicly-traded tech giant has acquired up to 8 million square feet of office space to house its corporate campus and surrounding infrastructure.

Given Wal-Mart’s size and reported annual revenue of $486 billion in fiscal 2016, there has been no comparable in-state corporate headquarters new-build or expansion in the state’s history. Likewise, no major Fortune 500 companies have ever announced plans to relocate to Arkansas from out of the state.

OTHER ARKANSAS HEADQUARTER EXPANSIONS
One of the more notable expansions occurred in 2010, when Windstream Corp. recouped more than $1 million in incentives from the governor’s Quick Action Closing Funds for building and training and additional benefits tied to performance, and another $4.5 million in additional performance-based state incentives.

Also, Bank of the Ozarks in September announced plans to begin construction on a new 247,000-square-foot headquarters by the end of 2017. The fast-growing Little Rock-based regional banking group, which now has assets exceeding $20 billion, acquired a 44-acre site in west Little Rock to support initial development and future expansion for its new corporate headquarters. That campus, located at The Ranch development on Arkansas Highway 10, will replace three local offices the company has outgrown over the past 21 years.

Like Windstream, Bank of the Ozarks officials said other locations out-of-state were vying for the company’s new headquarters. Approximately 500 employees are expected to move into the building when construction is completed in late 2019 or early 2020, with capacity to accommodate 800 to 900 employees.

AEDC Executive Director Mike Preston said the recently-announced Wal-Mart and Bank of the Ozarks expansions are good for the state’s economy. In Northwest Arkansas, Preston said having the presence of one of the nation’s most dynamic companies aids continued regional growth, and insulates Bentonville and the surrounding communities from significant downturns.

“Corporate headquarters are a great example of how we can do that,” Preston said. “Having the existing presence of a Wal-Mart and their commitment to their long-term sustained future to be right there in Bentonville goes a long way.”

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