Cities Contract Chambers For Economic Development

Cities Use Chambers For Economic Development

STAFF PHOTO BEN GOFF • @NWABenGoff Allison Osburn, from left, takes orders from Margie Johns and Pam Henderson at the TrickDilly food truck on North Main Street in Bentonville.
STAFF PHOTO BEN GOFF • @NWABenGoff Allison Osburn, from left, takes orders from Margie Johns and Pam Henderson at the TrickDilly food truck on North Main Street in Bentonville.

Area cities are prepared to hand $740,000 to Northwest Arkansas chambers of commerce next year in contracts designed to spark economic development outside of public view.

The area's five largest cities have contracts with their respective chambers, and Siloam Springs is discussing the idea. People associated with the contracts don't expect them to garner much debate during the cities' budget discussions this year. Most of the contracts are written so they automatically roll over year-to-year unless someone raises concerns.

By The Numbers

Economic Development

Northwest Arkansas cities contract with chambers of commerce for economic development services. Below are contract amounts for 2014, proposed 2015 amounts and lengths of contracts.

City*2014*2015*Length

Bentonville*$87,500*$100,000*1 year

Fayetteville*$165,000*$165,000*2 years

Rogers*$300,000*$200,000*1 year

Springdale*$150,000*$150,000*2 years

Source: City documents

Web Watch

Chamber Contracts

To see contracts Bentonville, Fayetteville, Rogers and Springdale have with local chambers, go to www.nwaonline.com/d…

The contract amounts and duration vary from city to city, but the underlying goal is the same: improve economic conditions by attracting companies and retaining and expanding businesses.

Supporters said chambers are equipped to recruit and retain businesses and the influx of public money accelerates the process.

"Everything the chamber does, we think about how it impacts economic development," said Steve Clark, president and chief executive officer of the Fayetteville Chamber of Commerce.

The arrangements also have prompted calls for more transparency and accountability, attorney general opinions and private lawsuits from detractors.

Local contracts between the cities and chambers range from two pages in Bentonville to eight pages in Rogers. All five contracts direct the chambers to act as the marketing arm of the city's economic development. The Fayetteville contract outlines the most specific requirements such as hosting visits by business site selection professionals three times a year and identifying up to two trade shows or similar events to attend each year.

"There is not a one-size-fits-all model that we recommend to cities across the state," said Scott Hardin, spokesman for the Arkansas Economic Development Commission. "If the chamber-city relationship does exist, it has to be something that very clearly sets out expectations and boundaries."

The contracts also outline how often the chambers must report to the city councils. Most cities require quarterly reports, but chamber leaders said they are in constant contact with city officials.

"I think it is a smart, efficient way to do economic development," said Mike Harvey, chief operating officer of the Northwest Arkansas Council. "Cities get more bang for their buck."

City Benefits

"There are certain tasks private organizations are just better suited to handle," said Troy Galloway, Bentonville community and economic development director.

He said business retention and expansion are cornerstones of most economic development organizations, and, if the city collected that information, it would be open to the public.

That's not necessarily true, said Tres Williams, communications director for the Arkansas Press Association. The state's open record law allows public entities to keep records private that would create an unfair competitive advantage, including access to proprietary information.

"I don't think the law automatically shields them," he said of chambers, "and I don't think that's necessarily a good tactic."

The Arkansas Attorney General's Office has stated private entities are subject to the Freedom of Information Act only in connection with the particular task for which they receive public money. The office released an opinion in December 2001 saying chambers must provide budget information on the city money to anyone requesting to see it and open committee meetings dealing with economic development.

The chamber can, however, hold business discussions privately as part of its separate mission of helping members and potential members grow.

John Tull, a Little Rock attorney who specializes in Freedom on Information cases, said that line can be hazy. For example, is the chamber meeting with a business looking to move to a town as part of its contract with the city or as part of its mission to expand its membership base?

"You are entitled to the budget, but are you entitled to be at a meeting?" he said. "There is no precedent to that."

Dana Davis, president and chief executive officer of the Bentonville/Bella Vista Chamber of Commerce, said if some information about a deal gets out to the public, it can jeopardize an opportunity.

"I've seen deals go sour because information is released before the company is ready," he said, not wanting to point to any specific companies.

Wayne Mays, president and chief executive officer of the Siloam Springs Chamber of Commerce, said the contracts also create a single-point-of-contact for interested businesses or the Arkansas Economic Development Commission to reach for more information.

"Right now, we don't have that and potential businesses don't know who to contact," he said. "We also don't have the ability to negotiate land or money."

Perry Webb, Springdale chamber president and chief executive officer, said the biggest advantage a chamber brings to the contract is shear size.

"We have connections. We can bring in companies that have been successful and can sell," he said. "The deals can be separated and can be done confidentially. It's the nature of the business, and it just works better."

Accountable, Transparent

The words confidential and secrecy have raised questions about the use of public dollars by the private organizations.

Kathy Jaycox, a Springdale alderwoman, has been vocal in past contract renewals about holding the chamber accountable for its spending.

"This is taxpayer money, and we need to make sure all contracts are held to a higher level, no matter who the contract is with," she said. "There's a fiduciary responsibility as we move through the budget process."

She said the chamber has become more transparent about where taxpayer money goes since establishing a separate bank account for the money in 2010. A Springdale resident accused the chamber of misspending tax dollars in 2009 after obtaining all the chamber's financial records under the Arkansas Freedom on Information Act.

"We co-mingled the money, and it was what it was," Webb said. "It became a witch hunt, and we were forced to protect our volunteers and workers by creating the holding account."

Springdale's Mayor Doug Sprouse said bridges needed to be built.

"I think the chamber has worked hard to earn the trust of the council," he said. "We are seeing people work together better than in the past."

Creating a separate bank account for the city tax dollars allows chambers to keep the rest of their spending private.

Raymond Burns, president and CEO of the Rogers-Lowell Area Chamber of Commerce, said the chamber formed another organization, the Rogers-Lowell Economic Development Corp., to handle the contract and keep money separate.

Fayetteville also has a separate bank account for city contract money.

Bentonville's chamber doesn't have an independent account, but keeps a separate line item, Davis said.

The Arkansas Public Law Center filed a lawsuit in Pulaski County Circuit Court last year in an attempt to stop Little Rock and North Little Rock from giving money to each cities' chambers. The suit claims Little Rock unlawfully gave in excess of $3.9 million to the Little Rock Regional Chamber of Commerce since 1993. It also states the money cannot be tracked because the chamber isn't subject to open records law and may be placing all the money in the private corporation's general fund.

"This has resulted in a lack of accountability and transparency to discover how the funds expended are being used and if the appropriation benefits the city of Little Rock and its citizens," according to the lawsuit. The lawsuit is ongoing.

The Contracts

Cities have used the practice on-and-off for years. Rogers' chamber contract is more than 30 years old, and Springdale's just turned 20.

Bentonville and Fayetteville each had breaks in their chamber contracts. Bentonville went a couple of years without a chamber contract during Mayor Terry Coberly's run between 1995 and 2006. Fayetteville had a contract with its chamber for nine years before ending it in 2000; the agreement started again in 2010.

Even in Siloam Springs it's not a new idea. Cameron said the city paid the chamber for economic development services in the past before breaking off the arrangement about 14 years ago. He was unsure what led to the decision to stop.

Bentonville's annual chamber contract is for $87,500; the Bentonville chamber also receives $25,000 from Bella Vista. The chamber reduced the amount to help the city pay for the Bentonville Blueprint -- an economic development plan created by Boyette Strategic Advisors. Davis said they hope to return the amount to $100,000 next year. The city also employs an economic development manager, Brian Bahr, whose annual salary is $63,856.

Springdale's contract is $150,000, Fayetteville's is $165,000 and Rogers' is $300,000.

Burns said this year's contract included an extra $100,000 to hire Market Street to do a strategic plan; he said the contract reverts to $200,000 next year.

The Duties

Burns said big companies moving into an area create headlines, but at least 70 percent of job creation comes from existing businesses.

"If there is a problem, we are going to solve it. If they want to expand, we will help them," he said. "We are going to guide those businesses and hook them up with the right people."

Tom Ginn, Bentonville's chamber vice president of economic development, said in addition to promoting the city to large corporations outside the area, it's important to be a small-business resource.

"We have some people walk in off the street asking questions about starting a business," he said.

Troy and Rebecca Walker went to the chamber to get ideas on starting a restaurant in Bentonville. The husband-wife team were moving from Texas and wanted to run their own business. Rebecca Walker was born in Little Rock and she said she wanted to raise their 2-year-old daughter closer to home.

The Walkers opened their specialty taco food truck, TrickDilly, about four months ago at 501 S.W. A St. They hope to open a brick-and-mortar site within the year.

"The chamber showed us the guidelines we needed to follow and business-wise, working with the chamber was invaluable," she said.

Helping businesses secure grants and incentives is also a vital part of what they do, Burns said. He used the Walmart Arkansas Music Pavilion's decision to move to Rogers as an example. He said the chamber was able to help the music venue get some state incentives.

"The incentives were just one part of that move and it took the actions of a lot of people," he said. "Our job is to give credit to the people making the jobs."

State incentives also helped Springdale manufacturer American Tubing embark last year on a $3.2 million expansion that added 20,000 square feet and 50 jobs. The incentives provide a 1 percent state income tax credit and a sales and use tax refund for purchasing at least $100,000 in equipment and construction costs.

"Almost everything a chamber does is economic development," Webb said.

NW News on 11/09/2014

Upcoming Events