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HP set to hand over $459,000 for job shortfall

Company fails to meet terms of state’s $10 million incentive

By Jack Weatherly

This article was published January 22, 2014 at 3:43 a.m.

The Arkansas Economic Development Commission has negotiated an agreement with Hewlett-Packard in which the company will repay $459,000 of the $10 million it received from the Governor’s Quick Action Closing Fund in 2008, agency spokesman Scott Hardin said Tuesday.

The maker of computers and printers failed to fulfill the employment terms of its contract with the state for its customer-service center in Conway.

The agency sent that figure to Hewlett-Packard late last week and the company had “no issue” with it though the deal had not been finalized, Hardin said.

The center had employed 1,400 until the Palo Alto, Calif.-based Hewlett-Packard Co. cut 500 jobs in Conway in July, and continued to cut positions until employment fell to between 600 and 700 at the Conway site as the company sought to eliminate 30,000 jobs to reduce costs.

On Dec. 17, Hewlett-Packard and Gov. Mike Beebe announced that about 200 higher-paying jobs would be added to the center during 2014.

Sarah Pompei, global media relations director for Hewlett-Packard, had no comment Tuesday as to whether any of those hires have been made yet.

Pompei said in an email that “HP is deeply committed to our employees and the communities in which they live and work. We will continue to abide by the terms and obligations of the commitments we have with government agencies.”

The claw back of less than 5 percent was triggered by the company’s failure in December to have 1,000 full time employees after five years.

The jobs that had been eliminated were those fielding customer calls, whereas the jobs to be added this year - software engineers, business analysts and managers - are better-paid, according to statements in the Dec. 17 announcement at the state Capitol.

So the number of jobs would fall short of the 1,000 initially agreed to, but the overall payroll would approach the initial payroll, Hardin said.

The higher-paying jobs will service the growing health-care industry.

“We don’t view this as negative by any means,” Hardin said. “The agreement is set up to encourage the company to hire more employees.”

The Quick Action Closing Fund is used at the discretion of the governor and is often viewed as a “deal closer.”

Beebe succeeded in getting the Legislature to establish the fund in 2007. In an annual report for the fiscal year that ended June 30, the Arkansas Economic Development Commission said that $115.7 million had been authorized by the Legislature since the fund’s inception and $70.4 million had been spent to that date.

The agency said the Quick Action Closing Fund had been the key to addition or retention of 15,000 jobs in that period.

Numbers for total payroll and minimum average salary were blacked out in a copy of the original 14-page contract between the state and Hewlett-Packard provided to the Arkansas Democrat-Gazette. The terms of contract are exempt from the state’s Freedom of Information Act because the payroll information is considered proprietary.

The development commission offers statutory incentives, whereby companies qualify for tax breaks by meeting the terms spelled out in the laws.

Under those provisions,Hewlett-Packard qualified for a state income-tax credit of 1 percent of total payroll for five years, a 5 percent rebate of its total payroll for 10 years, and sales-tax refunds on taxable machinery and equipment associated with the project.

In addition to the state incentives, Conway’s government contributed $5.1 million for infrastructure, the Conway Development Corp. chipped in $1.25 million for land, and Hewlett-Packard is making payments on $20 million in industrial revenue bonds issued by the city. The company started moving into its 150,000-square-foot building in December of 2009.

Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas at Fayetteville, was asked for her views of the Quick Action Closing Fund and incentives in general.

Deck said that “economic-development officials everywhere feel that they need to negotiate out of the public view to make deals. I can’t say that’s true.

“It is always in the citizenry’s best interest to have as much daylight shed upon the working of its government as possible.”

Yet, “other states are able to negotiate in confidence, so the perception is that we wouldn’t be able to negotiate at all.”

Front Section, Pages 1 on 01/22/2014

Print Headline: HP set to hand over $459,000 for job shortfall

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sw847 says... January 22, 2014 at 8:18 a.m.

What about the rest of the $10,000 rapid response $. Rapidly taken?

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