InvestArk vies with roads in industrial-lure debate

A proposed constitutional amendment that expands the amount of money the state can spend on incentives for major companies and clarifies what local governments can do to help comes as Gov. Asa Hutchinson considers eliminating or changing InvestArk, one of the state's largest industrial incentives, to pay for highway improvements.


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InvestArk is a sales- and use-tax credit program available to businesses established in Arkansas for at least two years and that invest at least $5 million at a single location in plant or equipment for new construction, expansion or modernization, according to the Arkansas Economic Development Commission's website.

From 2011-14, InvestArk spread $110 million across 96 companies, according to data obtained under the Freedom of Information Act. The incentive offsets the cost of new construction but requires no job creation. Tyson Foods received $12.3 million through that program -- more than any other company.

Tyson came in No. 2 behind the $125 million spent under Amendment 82 on one company -- Big River Steel in Mississippi County.

State auditors have said the state doesn't get back in taxes what it spends on InvestArk.

Auditors said the state's other programs net more revenue than they cost -- though they assume no job would have been created without the state money. A January Arkansas Democrat-Gazette investigation found companies that said they would have created jobs even without the state investment.

J.R. Davis, a spokesman for the governor, said Hutchinson has not yet made a decision on the program. Scott Hardin, a spokesman for the Arkansas Economic Development Commission, said he didn't have an update.

"We are focused on getting through the fiscal session," Hardin said.

A Feb. 10 email from Michael Preston, executive director of the Arkansas Economic Development Commission, obtained under the Freedom of Information Act, lays out alternatives to ending the program.

It was sent to Randy Zook, chief executive of the Arkansas State Chamber of Commerce, and Larry Walther, director of the Department of Finance and Administration.

Options include raising the investment threshold from $5 million to $10 million, lowering the credit percentage from 7 percent to 5 percent, establishing a program cap, and implementing a reduced range of benefits based on project investment totals or local economic situation.

The program could also be changed to require a positive cost-benefit analysis.

"InvestArk projects without job creation will not yield a positive cost benefit result," the memo states. "However, our analysis shows that projects can attain a 1.0 [cost-benefit analysis] ratio with minimal job creation."

The commission has long argued that the program creates new jobs as the result of plant expansion without explicitly requiring new employment.

"Before they start taking money away from any of the programs, I would hope they start looking at the track record," said Jon Chadwell, director of the Newport Economic Development Commission. "If it hasn't been productive, maybe it needs to be tweaked, but if it has been, let's not get rid of something that's bringing investment and jobs to the area."

Lawmakers have said building highways can help local economies expand. Rural areas rarely become economic powerhouses, but Northwest Arkansas is an exception.

Economic incentives from the Arkansas Economic Development Commission played little to no role in the efforts to build a better highway there and a larger airport, improve the area's water systems and create cultural attractions that allowed the companies to grow and the broader economy to flourish.

Clif Chitwood, executive director of the Great River Economic Development Foundation, said he didn't have the expertise to know whether highway improvements justify giving up InvestArk.

"I know InvestArk does good," he said. "But you do have to have highways, so I guess that's why we elect a governor and a legislature."

Information for this article was contributed by Micheal R. Wickline of the Arkansas Democrat-Gazette

Metro on 04/30/2016

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