SPRINGDALE -- The city has a new tool for its tool box for economic development. The City Council recently approved guidelines detailing when incentives will be offered to businesses looking to move here.
The legislature in 2017 enacted a 2015 voter-approved constitutional amendment allowing municipalities to provide incentives to businesses.
Incentive categories
Springdale’s City Council recently approved guidelines for when it can offer incentives to businesses. Guidelines include benchmarks for eight areas of development.
Category^Total capital investment^Minimum facility size and value^Number of jobs^Average hourly wage^Total payroll
Manufacturing, production and industrial facilities^$25 million^100,000 square feet, $20 million^500 jobs^$22.50^$20 million
Research, technology and development facilities^$15 million^20,000 square feet, $10 million^10^$29 per hour^$6 million
Recycling facilities ^$20 million^150,000 square feet, $15 million^200^$22.50^$12 million. Distribution centers ^$15 million^400,000 square feet, $6 million^200^$22.50^$10 million. Call centers^$12 million^100,000 square feet, $18 million^500^$22.50^$20 million. Warehouse facilities^$1 million^400,000 square feet, $10 million^100^$22.50^$4 million. Job training facilities^$8 million^40,000 square feet, $6 million^25^$29 per hour^$3.5 million. Regional or national corporate headquarters^$2 million^20,000 square feet, $4 million^100^$22.50^$4 million. The facility also must provide training to a minimum of 300 people with an average hourly wage of $22.50. The $3.5 million total payroll includes both employees and trainees.
Source: City of Springdale
"We set the bar high, " said Perry Webb, president of the Springdale Chamber of Commerce. "And we might not ever use them."
Webb worked closely with Mayor Doug Sprouse and Ernest Cate, the city attorney, "to develop what we believed were good criteria," Sprouse said. The chamber has a contract with the city to provide economic development services.
No projects are planned and waiting for money, Webb said. None of the recent development in the city would have qualified, Webb and Sprouse agreed.
Sprouse said companies will have to make a major investment to meet the criteria.
"But we don't know what we don't know," he said. "We might have a business that meets the criteria. We want to be ready in case there is an opportunity."
HIGH EXPECTATIONS
Webb said Springdale's guidelines just start the discussion.
Guidelines include benchmarks for eight areas of development from industrial manufacturing to call centers.
For example, guidelines for research, technology and development facilities must include a total capital investment of $15 million, a building larger than 20,000 square feet at a value of $10 million and provide at least 100 jobs with an average hourly wage of $29 per hour and a total annual payroll of at least $6 million.
The company also must complete market, economic impact and feasibility analyses before approaching the city, Webb said.
Sprouse said if the proposal meets the criteria it's probably a good and safe investment for the city -- but that doesn't ensure public money, he added.
Mike Harvey, chief operating officer of the Northwest Arkansas Council, said proposals using taxpayer money need to be evaluated conservatively. The council is a nonprofit economic development group serving the region, which helps area chambers and governments help recruit businesses to Northwest Arkansas. The council doesn't offer incentives to businesses.
"Before you flip the switch on any of these, to ask companies to meet certain criteria is totally pragmatic. They need to get the best return on their investment," he said.
Not all projects pledged incentives come to fruition.
Wisconsin recently was bitten in what was called a "bait and switch" by Marc Levine, senior fellow and founding director of the University of Wisconsin-Madison, according to the Associated Press.
Foxconn, an electronics company based in Taiwan, announced plans to build a factory making liquid crystal display screens for televisions, self-driving cars, notebooks and more. State and local governments promised roughly $4 billion to the company, the richest incentive package in the history of the state and the biggest pledged to a foreign company in U.S. history.
Foxconn promised a $10 billion investment and 13,000 jobs. But instead of a factory and blue-collar jobs, Foxconn is building a research and development center for engineers and scientists with 178 full-time workers.
And just last week, Amazon jilted New York City by scrapping plans to build a massive headquarters campus in Queens amid fierce opposition from politicians angry about nearly $3 billion in tax breaks and the company's anti-union stance. The e-commerce giant walked away, taking with it 25,000 promised jobs.
LEG UP
Prior to 2015 vote, only the state and its economic development arm could offer a company any incentive to move to the state, but it isn't a new idea. Other states, such as Texas, have allowed municipalities to offer incentives for many years and have been successful, said Rep. Lance Eads, R-Springdale. Eads introduced and ran the bill through the House.
Working to develop an incentive package shows a potential business it's got a partner if city leaders are willing to help, said Bryan Scroggins, director of business finance for the Arkansas Economic Development Commission.
The state offers a variety of incentives including tax refunds and tax credits based on a company's plan. The commission looks at several things such as wages and how many jobs a proposal will create.
For example, American Tubing in Springdale qualifed for a sales and use tax refund when expanding operations in 2013. The manufacturer made copper assemblies and components for 43 years and added an aluminum division. The $3.2 million expansion project added 20,000 square feet of production space and 50 jobs.
The state also has a Quick Action Closing Fund allowig the governor to finalize an agreement with an employer to move to or expand in Arkansas.
Aerojet Rocketdyne in August announced a $50 million expansion of its plant in East Camden, which produces solid rocket motors for missiles for defense purposes. The company received a variety of tax incentives from the state and local governments, including $1.3 million from the governor's fund.
Eads said an increasing number of of businesses are looking for cities to "put some skin in the game.
"They're saying, 'We can do this. What can you do?'" he said.
DIFFERENT STROKES
Springdale is the region's first city to develop an incentive plan.
Fayetteville's Chamber of Commerce may develop its own document, but Steve Clark, president, said he's sure it'll look different than Springdale.
Fayetteville's guidelines might address entrepreneurs who are ready for next round of investment, he said. Most of the chamber's 3,900 business members employee 25 people or less, he said.
The chamber has Fayetteville's economic development contract.
"So if we start using what Springdale has, we'll never help anybody," Clark said. "This is just the kind of business we want. We'll never get an automotive manufacturing plant in Fayetteville, and that's OK with us."
Fayetteville is asking voters to approve a $3 million bond issue to support the city's economic development. The city intends to use the money for land acquisition, site development and infrastructure improvements to recruit businesses and enhance the city's incentive program.
Raymond Burns, president of the Rogers-Lowell Area Chamber of Commerce, said his group has no plans to set guidelines. The chamber is the city's economic development engine.
"We'll talk to anybody about anything," he said. "We work to take each individual project and evaluate its economic impact."
Round Rock, Texas, has used incentives to attract businesses to the community, with community members enjoying low property taxes as one reward, said Will Hampton, the city's director of communication and marketing.
"We've been really creative in using our tools to tailor each deal to their needs," he said. "We don't take a cookie-cutter approach."
In the 1990s, the town attracted Dell computer company to build its headquarters in Round Rock, rather than continuing to rent space 20 miles away in Austin. The city agreed to a 50-year sales tax deal 1993 with Dell and has used incentives to attract a Bass Pro Shop and a Kalahari Resort, Hampton said.
Most of the money from the convention center has paid for public infrastructure to the site -- to serve not just that project, but the entire area, Hampton said.
"Some people still feel like they're 'giveaways,' but look at how many tens of millions of dollars we have earned from Dell's expansion," he said.
NW News on 02/17/2019