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LR board to weigh chamber contract

Issue: Economicconsulting work by Joseph Flaherty | January 17, 2021 at 1:00 a.m.
FILE — Little Rock City Hall is shown in this 2019 file photo.

Little Rock city officials will consider renewing a $250,000 annual contract with the Little Rock Regional Chamber of Commerce for economic development consulting services, years after government payments to local chambers inspired a lawsuit and an amendment to the state Constitution.

Like last year, the amount of the contract for 2021 and beyond represents a reduction from years past, when Little Rock provided the chamber with $300,000 annually for economic development services. In Little Rock's budget that was approved for 2020, the annual rate of the contract with the chamber was reduced by $50,000.

The Little Rock Board of Directors is scheduled to consider the resolution during a meeting Tuesday.

According to the resolution before board, the chamber was the sole applicant to respond to a request for qualifications issued by the city for economic development consulting services intended to expand Little Rock's economic base.

If approved, the resolution would authorize City Manager Bruce Moore to enter into a contract with the chamber through the end of 2021, with the option to extend for three additional one-year terms in the future.

The city issued the request in the fall, Moore said during Tuesday's agenda meeting.

According to Little Rock finance director Sara Lenehan, the $250,000 for the proposed contract with the chamber was included in the 2021 city budget as part of the contract expenditure allocation within the Executive Administration Department. City board members approved the 2021 budget in late December.

During Tuesday's meeting, at-large City Director Antwan Phillips indicated that he did not take issue with the resolution from a budgetary standpoint, but questioned whether the chamber had parameters in terms of reporting on its use of those funds as well as its activities related to diversity and small-business development.

In response, Little Rock Mayor Frank Scott Jr. said the chamber has historically provided an annual report on economic development, although the mayor recalled that a report intended to take place during the first quarter of 2020 was delayed because of the covid-19 pandemic.

Scott added that the chamber has been "working hard" on diversity and inclusion efforts.

The president and chief executive of the Little Rock Regional Chamber of Commerce, Jay Chesshir, and his team are expected to present what they have done in 2020 at a coming meeting, Scott told Phillips.

If the board approves the resolution, the city will then enter into a contract with the chamber as the next step, Moore explained at the meeting.

"Just like any other organization, they do have to meet the parameters and the standards of the contract," Moore said. "Do we have an independent evaluation? We don't. We don't have independent evaluation of our other contracts. But, again, we know exactly what we're requesting."

Additionally, there are frequent meetings on a weekly or bi-weekly basis with the chamber regarding prospects, Moore said.

In a phone interview Thursday, Chesshir said money received from the city for economic development is managed separately from the chamber's operating funds.

In 2019, the chamber reported nearly $1,271,000 in revenue to the group's economic development fund, including $200,000 from the city of Little Rock, $48,000 from the Little Rock Port Authority and $15,000 from Central Arkansas Water, according to a financial statement.

As the rationale for keeping the fund separate, Chesshir said he felt it was important to be able to separate chamber money from economic development money because, on the economic development side, there are contract dollars from public entities that require a different level of transparency.

"We're just trying to be as transparent as we possibly can be in terms of all of the monies coming into the economic development fund, public and private, and then how those are spent in large categories," Chesshir said.

According to a signed copy of the 2017 contract between the city and the chamber provided by Chesshir, the scope of services provided by the chamber included providing strategic advice to the city on job development; maintaining an office for economic and industrial development and making the office available to the city; and providing a full-time senior manager and staff to carry out the work.

The chamber also agreed to field all appropriate inquiries from businesses seeking information about potentially locating operations in Little Rock.

The chamber sends quarterly economic development reports to each city director, Chesshir said.

Six years ago, payments to the Little Rock Regional Chamber of Commerce, as well as other chambers from their respective municipal governments, appeared to be in jeopardy for a period of time because of a judge's ruling.

City payments to the Little Rock and North Little Rock chambers for economic development work prompted a 2013 lawsuit from several local activists and led to a 2015 ruling from Pulaski County Circuit Judge Mackie Pierce.

The judge found that the financial arrangements in Little Rock and North Little Rock violated the Arkansas Constitution because the payments served as a payment from a municipality to a private corporation.

Pierce argued that the appropriation of money to the chambers served as a payment with no return because the chambers would pursue economic development regardless of the financial support from the cities.

"It's a contract in name only," he said, the Arkansas Democrat-Gazette reported in 2015.

A constitutional amendment approved by the state's voters in 2016 known as Issue 3 gave legal backing to the practice of local governments contracting with economic development organizations, such as chambers of commerce.

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