Leaders of the area's largest chambers of commerce don't expect a Pulaski County court ruling to stop their economic development contracts with cities, but it has prompted changes.
Tuesday's written decision formerly clarifies Circuit Judge Mackie Pierce's ruling that city payments to the chambers of commerce and other private economic development promoters in Little Rock and North Little Rock are illegal "donations" barred by the Arkansas Constitution.
Economic development
Northwest Arkansas cities contract with chambers of commerce for economic development services. Below are 2015 contract amounts.
• Bella Vista: $25,000
• Bentonville: $100,000
• Springdale: $150,000
• Fayetteville: $165,000
• Rogers: $200,000
Source: Staff report
"That applies just to Little Rock and North Little Rock," said Steve Clark, president and CEO of the Fayetteville Chamber of Commerce. "The judge did not say they couldn't have a contract, he just said those contracts are not sufficient to support payment."
Clark is also a former Arkansas attorney general.
Pierce ruled twice earlier this year the contracts or financial arrangements the cities have with their respective chambers and other economic development boosters -- the Metro Little Rock Alliance and the North Little Rock Economic Development Corp. -- violate Article 12 of the state constitution.
Section 5 of the article bars municipalities from appropriating money to private entities, either by investment, contribution or by lending their credit. Pierce's ruling is in response to a 2013 lawsuit filed by community activists Jim Lynch, Tony Orr and Glen Miller disputing the legality of the cities' financial relationship with chambers.
What makes the cities' financial relationships with the chambers and development groups illegal is the municipalities don't get anything in return for the money they give out, the judge ruled. The cities don't have anything concrete to show for the money they've spent and mostly cannot account for how their money is used, Pierce ruled.
Little Rock has paid at least $3.9 million to the chamber since 1993, although a written contract has been in place only since 2008. The city has given about $300,000 to the Metro Little Rock Alliance since 2012. The city didn't have a contract with the alliance until after the lawsuit was filed in 2013.
North Little Rock never has had a written agreement with its chamber, but annually provides as much as $16,000, according to the judge's findings. The city has given the North Little Rock Economic Development Corp. $250,000 annually since 2009 and is responsible for 77 percent of its funding with much of that money passing through the corporation and to the Metro Little Rock Alliance.
Clark said contracts between area cities and chambers outline specific services and results the chambers will provide. Fayetteville pays its chamber $165,000 a year for economic development services.
Some Northwest Arkansas city-chamber contracts received wording changes and delayed approval this year in anticipation of a written decision following Pierce's January ruling. The judge reaffirmed his decision June 1.
Perry Webb, president and CEO of the Springdale Chamber of Commerce, said he asked the City Council to delay paying for the chamber's economic development contract until after the judge's written decision was released, but after 90 days decided it was time to move forward. Springdale's contract with the chamber is $150,000 annually.
The chamber was able to use money from it's Ignite Springdale! fundraising campaign to pay economic development staff until it was reimbursed by the city.
"We just got back up to speed last month," Webb said.
The Springdale economic development contract was modified and now goes into more detail, he said. The contract went from three to 11 pages.
"We provide a professional service. We have an economic development department, and we can point and say here is where the money is being spent," Webb said.
Raymond Burns, president and CEO of the Rogers-Lowell Area Chamber of Commerce, said the chamber changed the way it receives payment for its $200,000 economic development contract with the city to help show what the money is paying for. The city started paying quarterly this year, and the chamber received its first payment in March.
"We went back and looked and decided it would be more prudent to pay for the services throughout the year rather than on the front side," he said.
The Rogers-Lowell chamber has a separate organization, the Rogers-Lowell Economic Development Corp., that handles its contract with the city.
Fayetteville and Springdale chambers also receive quarterly payments and the Bentonville/Bella Vista Chamber of Commerce receives its $100,000 contract with Bentonville on a monthly basis. Bella Vista pays the chamber $25,000 at the beginning of the year.
The judge's written decision, reflecting his previous rulings, is required so the cities can appeal. If the judge's order is upheld by the Supreme Court, chambers across the state could be affected.
"Once it hits the Supreme Court it will apply to all organizations," Webb said.
The process of going through the Supreme Court could take several years, and Webb said it could be a moot point if voters pass a constitutional amendment on the ballot in November 2016. The amendment includes language allowing a municipality to pay for economic development services.
Wayne Mays, president and CEO of the Siloam Springs Chamber of Commerce, has been working with city officials on drafting the chamber's first economic development contract. He said negotiation is ongoing.
"We are trying to arrive at a point that we are all comfortable with," he said. "We've been working on it quite a while and that's OK. We want to make sure we get it right."
Christie Swanson can be reached at cswanson@nwadg.com or on Twitter @NWAChristie.
A Section on 06/12/2015