Between the lines: Money for nothing?

Chamber funding litigation prompts adjustments

A recent court decision in Pulaski County could impact public funding for local chambers of commerce.

Pulaski County Circuit Judge Mackie Pierce last week issued a written decision that the cities of Little Rock and North Little Rock are making illegal "donations" to their local chambers of commerce and other private economic development promoters.

The case will likely be appealed to the Arkansas Supreme Court, where a ruling might impact funding arrangements between municipalities statewide and their respective chambers or economic development arms.

The practice is common and has been for decades. Cities have long provided taxpayer dollars to chambers for such services as economic development, leaving them to recruit business and industry and jobs to a community.

Much of the early reasoning came from the idea that the chambers, as private entities, could negotiate quietly with prospective business and industry while cities would have to do such business in public, subject to the Arkansas Freedom of Information Act.

That's still a big part of the reasoning, although it also makes sense for communities to avoid duplicating what they spend toward economic development.

The core question is about the public's right to know how tax dollars are spent; but the chambers' collective concern seems more about the money that helps support their operation.

The issue is perhaps all the more significant these days, with the continuing growth of cities and chambers and the sizable taxpayer spending involved.

What has happened with the Pulaski County case is that some community activists challenged the legality of Little Rock and North Little Rock's financial relationship with their chambers and with a couple of other economic development groups.

Judge Pierce agreed and said the arrangements violate Article 12 of the state Constitution. The specific provision forbids appropriating money to private entities, either by investment, contribution or by lending them credit.

The problem with the deals struck between the Central Arkansas cities and their chambers, according to the judge's ruling, is that the cities don't get anything specific in return for the money they give their chambers.

And, for the record, they give plenty. Little Rock has paid out something like $3.9 million over the last couple of decades, sometimes with a contract, sometimes without one. North Little Rock has paid less, never with a contract for chamber services.

Obviously, tangled up in the litigation is what, if any, written contracts the cities have with these outside entities and what the entities promise, if anything, to provide in return for public dollars.

Such contracts vary both in amounts and in detail -- when they exist -- but more formal agreements, with promised results, are more common than in the past.

In Northwest Arkansas, five of the larger cities all have some sort of contract with their respective chambers now. The annual amounts range widely. Rogers will pay out $200,000 in 2015; Fayetteville, $165,000; Springdale, $150,000; Bentonville, $100,000 and Bella Vista, $25,000.

The cities and chambers defend the agreements.

Steve Clark, president and CEO of the Fayetteville Chamber of Commerce, is also a former Arkansas attorney general.

Reacting to the Pulaski County judge's ruling recently, he emphasized that it applies just to Little Rock and North Little. He's right. It does -- until it doesn't, which is if and when the Supreme Court makes it apply elsewhere.

More importantly, as Clark noted, "The judge did not say they couldn't have a contract. He just said those contracts are not sufficient to support payment."

The Supreme Court could put the onus on individual cities and chambers to have constitutional contracts, with the Pulaski County case setting the criteria.

Clark maintains the contracts between area cities and their chambers are sufficiently specific, outlining services and results the chambers will provide.

All of the chamber executives are watching the litigation closely and in some instances have changed their contracts to improve their chances of surviving similar challenge.

In Springdale, Perry Webb, who heads the local chamber, even asked the City Council to hold off for a time on paying its contract this year until after Judge Pierce issued a written decision.

The funding has since been resumed under a modified, most detailed contract, he explained.

"We can point and say here is where the money is being spent," Webb told a reporter.

It may take a while for the litigation to impact any of the local organizations, but they're clearly getting ready for that possibility.

Commentary on 06/14/2015

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