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A menu of incentives.

Tucker's Economic Development Package Could Prove Historic

THE GOLDEN YEARS OF job growth in Arkansas could be just ahead, thanks to a spate of pro-business legislation produced by the recent general session of the state Legislature.

"We probably have as strong an economic development program that has been passed in the U.S.," says Dave Harrington, executive director of the Arkansas Industrial Development Commission.

"I've been here 11 years, and this is by far the strongest set of tools the AIDC has had."

Although Harrington was a force behind the crucial jobs package that was passed, he gives all the credit to the support of Gov. Jim Guy Tucker.

"He's put the initiative and the power back into the local communities," Harrington says. "I think that Gov. Tucker's absolute No. 1 priority is economic development. |Former Governor~ Clinton was very supportive of us, but he didn't put quite the emphasis or the resources into it."

In public, Tucker has attempted to contain expectations for the jobs package.

"It's going to take work, all day, every day to be sure that the economic development package presents jobs," he said in a weekly radio address. "I can't promise you job results, but I'll promise you that I'll concentrate on it."

Here are key elements of the job incentive plan:

* Enterprise zones have been reworked to stress job creation and eligibility requirements.

Currently in Arkansas there are 300 enterprise zones, industrial recruitment vehicles that give special tax credits to certain companies locating within the zones.

Only specific types of plants qualified for the tax credits, and the enterprise zones could only be in certain places. With the new rules, an enterprise zone can be anywhere.

Changes in how the tax credits are calculated seem to stress quality, high-paying jobs. The incentives will now be calculated based on the average wage of the workers rather than the number of employees. No longer must a company purposefully hire unskilled or poor workers in order to qualify for zone benefits.

"We've converted it to a job tax credit," says Harrington. "The benefit goes to the people who pay more."

Rules simplifications should bring more small companies into the fold. For the first time, corporate headquarters with 15 or more employees and distribution centers with 25 will be included. Back-office operations in the service sector also will benefit if more than 100 employees are involved.

* Day-care incentives have been passed, offering sales and use-tax exemptions to companies for all the materials and furnishings used to build, equip and operate a day-care center.

It's a law intended to lower worker absenteeism and increase productivity so women and men both can work without worrying unduly about their children. The new law might even benefit employees of small companies in large office buildings.

* For the first time, local governments will be allowed to raise revenues to finance their own economic development programs and build infrastructure needed for industry. "They have no excuse now," Harrington says. "One of the biggest statements we get |from cities and counties~ is, 'You have to help us.'"

* Another act will allow local governments to finance facility construction for major plants by issuing revenue or general obligation bonds.

Cities could levy any kind of tax for economic development, as long as it is approved by voters.

* To level the playing field between Arkansas and its neighboring states, the Legislature passed an economic development incentive bill allowing Arkansas to offer additional tax credits of up to 3.9 percent of the company's annual payroll, or 5 percent if the company locates in the Delta.

"That's sort of a bill of last resort," says Harrington, but the measure could become handy if such incentives are the only decisive factor between Arkansas and a competitive state like Louisiana or Kentucky.

The state will receive tax revenues from all companies involved, and the companies will get back credits based on the true amount of income tax withheld from the new company's employees. The incentives don't kick in until the workforce is actually employed and paying taxes.

* The Arkansas Capital Corp. was authorized to borrow up to $30 million under the auspices of the state Board of Finance, making loans to companies that will create jobs. According to Tucker, in 1992 the Arkansas Capital Corp. helped create or retain 825 jobs with more than $9.7 million in loans to 30 companies.

Rave Reviews

The package is getting rave reviews in business circles.

"It's probably the best legislation that's been passed for the business community ever in a single session," says Ron Russell of the State Chamber of Commerce.

"This is going to have far-reaching effects on attracting new jobs to Arkansas. More importantly, it provides the opportunity to let our existing industry expand."

Outside the jobs plan and changes made in the workers compensation insurance system, there is at least one other business development worth noting.

The small business capital access program sponsored by Sen. Jim Keet and Rep. John Miller will facilitate about $20 million in loans to small businesses, targeting people who have the hardest time getting a business loan.

The Arkansas Development Finance Authority is making available $1 million in matching funds toward the loan loss reserve fund for the program. That money, combined with a contribution from the borrower and the lender, serves to secure the loans, which would normally be considered too risky by banks.

"We're only the fifth state to have a program like this," Keet says. "We're projecting the average loan size in Arkansas will probably be about $25,000."

Already the first three loans have been made under the program. Although the program was expected to cater mostly to retail borrowers, all three loans have been agricultural, ranging in value from $34,000-$94,000.

The state may have traveled a long way in creating business incentives this year, but Harrington still can see room for improvement.

For starters, the combination of ADFA, AIDC and the Arkansas Capital Corp. can only finance a $5 million project under state law, while the average cost of a new plant is $15 million-$25 million.

Well, something has to be left for next session.
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Title Annotation:Arkansas Gov. Jim Guy Tucker's economic development plan
Author:Haman, John
Publication:Arkansas Business
Date:Apr 26, 1993
Previous Article:Commercial comeback.
Next Article:Horne Heads lobbyists.

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