Mayor proposes creating new economic development fund
A portion of the $100,000 the city budgeted for its 2018 contract with the Hot Springs Metro Partnership for economic development services may be used to incentivize job creation.
Hot Springs Mayor Pat McCabe first suggested diverting money from the partnership’s contract to an economic development fund during the Hot Springs Board of Directors’ budget meeting in October. A nonprofit corporation supported by public and private contributions, the partnership shares staff, office space and a chief executive officer with The Greater Hot Springs Chamber of Commerce and reimburses it for administrative expenses.
In addition to the $100,000 it receives
from the city, the partnership has a $75,000 contract for services with Garland County.
McCabe reiterated the idea Tuesday, telling the board a fund is needed to encourage investment in area job growth.
“We’re contracting $100,000 for economic development services, but at the end of the day, if the entity we’re working with doesn’t have some extra resources to offer as incentives, from a local standpoint we’re really challenged,” he said. “My thought was to hold back a portion of that each year to create a pool.
“I don’t want to call it incentive money, but some kind of seed money that could be administered through the Metro Partnership or some other group.”
McCabe said the idea occurred to him after a company that considered moving to Mid-America Industrial Park last year chose northeast Arkansas instead, a decision the state’s Economic Development Commission said was driven by a publicly funded incentive package.
“They had funds available to entice that company to come,” McCabe told The Sentinel-Record Wednesday. “We don’t have those funds available, yet we provide funding for the Metro Partnership. That money pays for expenses that are appropriate, but there’s nothing remaining to incentivize a business concern to locate here.”
McCabe acknowledged that directing a portion of the city’s economic development budget to an incentive fund puts it at a disadvantage compared to areas that have a dedicated economic development sales tax, but he said levying a similar tax in Hot Springs is problematic.
“It’s a long approach,” he said. “It’s something we could do over time, but we wouldn’t be able to build a war chest similar to what other areas have. We don’t have the funding mechanism.
“Citizens in the community are tapped out. An additional sales tax on top of everything else is a heavy burden for our local citizens to carry. I’d be hard-pressed to think that would be a viable option given the current sales tax we collect at this time.”
The board asked that more measurable goals be added to the contract, which lists a scope of services related to business recruitment, retention and expansion but doesn’t stipulate a specific number of new jobs or the amount of capital investment the partnership is required to facilitate.
“Maybe we want to know how many jobs were actually created,” City Manager David Frasher suggested, explaining to the directors that the contract needs to clearly express their expectations. “And maybe we want to know how many jobs you actually worked on that were created by your organization as opposed to those that would’ve just ordinarily happened.”
Frasher told the board he and McCabe plan to meet with the partnership’s executive leadership to discuss changes to the contract. He noted economic activity that’s occurring without public subsidies, specifically the new restaurant, 501 PRIME, being built at 215 E. Grand Ave.
“One of the things that’s inspiring to me is when I see a private sector person move forward on their own volition,” he told the board. “(501 PRIME) is an incredibly courageous investment in a place that needs it.
“Let’s face it, we’re trying to encourage urban renewal. The building there wasn’t worth very much. It wasn’t contributing jobs, and it’s happening right there. And to my knowledge, there isn’t any assistance from any government unit making that happen.”