Officials across the state are unclear on the effect of a Pulaski County circuit judge’s ruling concerning the ways that at least two cities finance economic development.
“It’s just too premature to make any comments at all,” said Mark Hayes, the Arkansas Municipal League’s director of legal services. “We don’t even have a written order from the court.”
Judge Mackie Pierce ruled Monday that the cities of Little Rock and North Little Rock must stop paying their chambers of commerce and similar economic-development promoters because such payments violate the Arkansas Constitution.
Hayes said he could not yet say if the ruling would affect any other Arkansas cities and counties.
“There’s no way to know that” at this point, he said. “My office has not made any decisions about what we’re going to do or how we’re going to do it.”
City officials said the day of the ruling that they planned to appeal.
The league represents North Little Rock in the still-pending case. Little Rock City Attorney Thomas Carpenter represents that city.
Pierce ruled that the two cities’ contracts with the respective chambers and their associates are illegal under Article 12, Section 5 of the state constitution, which bars political subdivisions such as cities from becoming stockholders in, or lending credit to, private corporations.
“No county, city, town or other municipal corporation, shall become a stockholder in any company, association, or corporation; or obtain or appropriate money for, or loan its credit to any corporation, association, institution or individual,” the provision states.
Conway Mayor Tab Townsell said the Faulkner County seat does not fund the Conway Area Chamber of Commerce “in any fashion.”
Townsell said the city’s Advertising and Promotion Commission, which gets some city tax revenue, has a “direct contract for services with the chamber of commerce.”
“It’s set up to be arm’s length from us,” Townsell said. “But it’s a direct contract for services with the chamber of commerce. They actually pay them to staff certain initiatives.”
The commission would probably have to “prove that it is a service contract rather than just a grant of money, but we think that should be able to safely meet the test, in my opinion,” Townsell said.
In Pine Bluff, Lou Ann Nisbett, president and chief executive officer of the Economic Development Alliance of Jefferson County, said the alliance and the chamber of commerce do not receive any funding from the city or the county. The money those entities receive is through an economic-development sales tax and member dues.
In Fayetteville, the contract for economic-development services goes out for bids at least every six years, said Don Marr, chief of staff for Mayor Lioneld Jordan. It’s actually a two-year contract with the option to renew twice for a total of six years, he said.
The Fayetteville Chamber of Commerce has had the contract since 2009, when three entities bid for it, Marr said. The contract will go out for bid again between July and September. The contract is currently for $165,000 per year.
From 2000 to 2008, Fayetteville used internal staff for economic development in a joint partnership between the city, Chamber of Commerce and the University of Arkansas, Marr said.
Marr said he believes Fayetteville’s situation is different than those of Little Rock and North Little Rock because Fayetteville sends out a request for proposals, and there are monthly and quarterly “deliverables” that must be met.
“We have a very specific set of criteria in our contract that they must provide,” Marr said. “Until I see more from the lawsuit in Little Rock and North Little Rock where the facts align more with Fayetteville, we don’t anticipate a change in our current contract.”
A “deadline schedule for deliverables” for Fayetteville listed an economic-development website; support for existing businesses; recruitment of new businesses; strengthening relationships with state and regional economic development entities; and providing marketing materials, statistics and demographics.
In Rogers, the Chamber of Commerce has done economic development for the city for at least the past 25 years, Mayor Greg Hines said.
Hines said the annual contract doesn’t go out for bid because there’s no other entity that could do it and would have the credibility with the business community that the Rogers-Lowell Area Chamber of Commerce does.
“We don’t bid it, and one of the main reasons for that is there wouldn’t be anybody to bid it with,” Hines said.
Currently, the contract is for $300,000 per year. Of that amount, $200,000 goes to the Rogers Economic Development Corp., which is an entity of the chamber, the mayor said. The other $100,000 goes to advertising and promotions.
“There are measurable results attached to those contracts for economic development,” Hines said. “One would find it very difficult to scrutinize our contract with the chamber based on the deliverables provided. I feel very confident that we’re standing on solid ground.”
Springdale contracts its economic-development services through the city’s Chamber of Commerce, and the City Council approves the contract, said Wyman Morgan, Springdale’s administration and financial services director. The contracts are for either one or two years, he said.
Morgan said it’s been done that way for at least 14 years, the time he has worked for the city.
The present amount of the Springdale contract is $150,000 per year.
Much of what the chamber does for the city involves business recruitment, Morgan said. The chamber provides quarterly progress reports to the City Council.
Morgan said Springdale officials are waiting for Pierce’s written ruling before they decide if Springdale should change the way it does business with its chamber.
Fort Smith has no annual contract for economic development with its Chamber of Commerce or affiliated entities, said Tracy Winchell, a city spokesman. Winchell said the chamber and the city will work together on specific projects, but there’s no annual contract for economic-development services.
In Jonesboro, Regional Chamber of Commerce president Mark Young said the chamber doesn’t receive money directly from the city or Craighead County. Instead, the chamber oversees the Northeast Arkansas Industrial Development Commission, to which the city and the county both give money.
The 2015 Jonesboro city budget allocates $167,250 for economic development, while the county has budgeted $294,250, Young said.
“Often, communities are looked upon to provide support for the infrastructure,” Young said. “It is important, and it’s critical. Without it, there wouldn’t be that support for new businesses.”
Young said that because he had just learned of the Pulaski County Circuit Court’s ruling, he didn’t know the impact it could have on other counties yet.
“This is a case in Pulaski County,” he said. “We don’t know if the ruling is complete yet. Until then, all we can do is speculate.
“Obviously, economic entities across the state will be interested. This is an important issue.”
Information for this article was contributed by John Worthen and Kenneth Heard of the Arkansas Democrat-Gazette.