Little Rock is asking for board approval for payments to the Little Rock Regional Chamber of Commerce after taking a two-year hiatus while the constitutionality of such payments was questioned.
On the Board of Directors’ agenda for a vote next week is a $300,000 contract with the chamber. In previous years, the city gave $350,000 annually to the chamber and its subsidiary, the Metro Little Rock Alliance, but that stopped in 2015 because of a court order.
Pulaski County Circuit Judge Mackie Pierce ruled in 2015 that Little Rock and North Little Rock could not legally pay their respective chambers for economic development, saying the practice was “clearly and totally” a violation of the Arkansas Constitution.
He said the payments were a way to get around the constitutional provision that barred municipalities from giving money to private businesses without getting something in return.
The cities argued they had contracts with the chambers, but the judge said they were contracts “in name only” and that there was no proof or itemization of services where the chambers could show what was provided to the cities. Pierce said the chambers would have performed the same duties without city contributions.
A voter-approved constitutional amendment has since made it legal for municipalities to give money to chambers.
Issue 3 on last year’s November election ballot in part changed the law to make it so that a city or county can provide money to entities to support economic development projects or services. Cities across Arkansas have been renewing relationships with their respective chambers since the amendment went into effect.
In January, the El Dorado City Council voted unanimously to enter into a $45,000 contract with the El Dorado-Union County Chamber of Commerce. The city had stopped the payments after hearing about the 2015 ruling in Pulaski County.
North Little Rock plans to contract for economic development services sometime this year, spokesman Nathan Hamilton said. First, the city must issue a request for qualifications. It then will select a provider.
Little Rock is proposing a $300,000 contract that would cover a one-year term with the Little Rock Regional Chamber of Commerce, with the possibility of renewing the contract for three additional one-year terms.
The chamber would be required to make written quarterly reports to the city that detail compliance with each item listed in the contract.
Opponents of cities’ payments to chambers call the funding a “subsidy” with no real accounting of how the money is spent.
“The money helps pay the salary of chamber executives for work they already do for its members, as well as essentially subsidize their political activities (opposing workers’ rights legislation; working for the state takeover of the Little Rock School District, for example),” Arkansas Times editor Max Brantley wrote in an opinion piece Tuesday on the Times’ Arkansas Blog.
According to the chamber’s proposal in response to the city’s bid for “economic development consulting services,” none of the funding would go toward chamber salaries.
Ward 3 City Director Kathy Webb said some of her constituents had concerns similar to Brantley’s.
“There’s ongoing concern that a lot of folks have about our funding [being used for] lobbying activities for bills of that nature,” she said, referring to reducing workers’ compensation and unemployment benefits, which she called “unfriendly and punitive to workers.”
City Manager Bruce Moore said the chamber’s staff said it wasn’t engaged in lobbying for such bills.
“They didn’t even know about it when I called them about it,” Moore said.
Little Rock Mayor Mark Stodola said he assumed the lobbying on those matters came from the Arkansas State Chamber of Commerce. There is a “clear distinction” between the state organization and local chambers, he said.
The city solicited proposals for a 20-day period in February. The chamber was the only entity to respond, according to a memo to the city Board of Directors.
The chamber proposed $105,000 in expenses for internal marketing, including payments to its existing industry programs, public relations services, entrepreneurial development and events. It proposed another $195,000 in external marketing, including events, the cost to host business prospects, a contribution to the aviation air show, consultant branding costs, website marketing costs, “talent programming” and a subcontract with the Metro Little Rock Alliance.
Jay Chesshir, president and chief executive of the Little Rock regional chamber, said the chamber had to “significantly” cut its economic development activities in the past two years after payments from Little Rock ceased.
Chesshir said cities and counties nationwide have been paying chambers for economic development services for decades.
Little Rock’s renewed funding “will now allow us to further staff economic development efforts while regaining a robust marketing program to market this community across the country and the world,” Chesshir said.
The chamber’s economic development budget will be $1.1 million this year, if the contract with Little Rock is approved by the city board. That is in addition to the chamber’s operating budget of about $2 million.
Aside from the city’s contribution of public dollars, the economic development budget is made up of private funding from the chamber’s member companies beyond their chamber dues. Since the budget includes public and private dollars, it is separated from the operating fund and is audited.
Chesshir said Oklahoma City is Little Rock’s biggest competitor when it comes to economic development projects. That chamber’s economic development budget is close to $6 million, and Oklahoma City contributes about $1 million of that, Chesshir said.
“To put this in perspective, the Tulsa chamber’s economic development budget is $4 million a year. The Memphis chamber’s is $3.3 million annually. The Northwest Arkansas Council’s budget is $3.1 million. Baton Rouge is $1.6 million a year. Jackson, Miss., is $600,000,” Chesshir said.
Little Rock wrote in its bid request that it is seeking to expand its economic base and wants to ensure the city is competitive locally, nationally and internationally in attracting companies.
The chamber would be required to maintain a website advertising Little Rock, produce marketing materials, support existing and prospective businesses, and have a business retention and expansion program.
The city advertised the bid in multiple places, including the Arkansas Democrat-Gazette, the city’s website and TV channel, the Arkansas-Mississippi Minority Supplier Development Council and the Southern Regional Minority Supplier Development Council, officials said.
The Little Rock Regional Chamber of Commerce was directly invited to submit a proposal for the contract. That’s not uncommon. When the city solicits bids, it sends email invitations to any business in the city that holds a license for the relevant subject. The city sent this bid to 322 license holders.
“Obviously there’s not a lot of organizations in the business that the chamber is in,” Moore said.
Little Rock paid the Regional Chamber of Commerce more than $3.9 million from 1993 through 2014.