Issue 3 of 2016: Job Creation, Job Expansion, and Economic Development
Issue 3 of 2016 is the third of 3 ballot questions the Arkansas Legislature is lawfully allowed to submit to the voters each election cycle. Another constitutional amendment, this measure would allow the State of Arkansas to borrow unlimited sums of money for “industrial development purposes,” and significantly alters Amendments 62 and 82 that deal with the ability of municipal and county governments to borrow money.
Specifically, this measure would
♦ Eliminate the constitutional cap on bonds (“Super Project Obligation Bonds”) the State of Arkansas can issue to a corporation, association, institution or individual to help finance economic development projects and services — by totally removing the dollar limit currently set at 5% of state general revenues (around $310 million this year)
♦ Allow city and county governments to borrow money (issue bonds) to pay private entities for economic development projects and to provide economic development services. (Currently the Constitution prohibits city and county governments from this type of bond project. The Constitution currently specifies “industrial development purposes.”)
♦ Allow the Arkansas Legislature or local legislative bodies (city councils, quorum courts) to levy other taxes beyond special taxes to retire bonds
♦ Eliminate a constitutional requirement that bonds be sold only at public sale
♦ Authorize cities, towns, school districts, and counties to form compacts for economic development projects
Issue 3 changes the Constitution’s existing Article 12, Section 5; Amendment 62, Sections 1(b), 2, 5, 9; and Amendment 82. It eliminates Amendment 62, Section 3. The Legislature could make further changes with a 3/4 vote in each chamber. Amendment 62, approved by the voters in 1984, currently allows cities and counties the authority to pay for “facilities for the securing and developing of industry,” but the term “industry” is not defined in the amendment. Issue 3 would replace the term “industry” with “economic development projects” and define what is included under that term. The measure would also define what is meant by “infrastructure.”
House & Senate Votes on SJR16
Sponsored by Republican Senator Jon Woods as SJR16 in last April’s General Session, the measure passed the Arkansas Senate with 20 “yes” votes, 5 “no” votes (L Chesterfield, Elliot, Hester, Irvin, D Johnson), 7 “non-voting” (A Clark, Collins-Smith, B King, Rapert, Rice, D Sanders) and 2 “present” (J Dismang, S Flowers).
The next day it passed the Arkansas House with 77 “yes” votes, 22 “no” votes (Linck, C Armstrong, Ballinger, Bell, Bentley, Davis, Della Rosa, Farrer, C Fite, V Flowers, Hammer, K Hendren, G Hodges, House, Love, G McGill, D Meeks, S Meeks, Payton, Speaks, Walker, D Whitaker), 7 “non-voting” (Collins, Dotson, C Douglas, Gillam (Speaker, Gonzales, Neal, Petty) and 1 “present” (Gates).
In 2004, Arkansas voters approved Amendment 82 that authorized the Legislature to issue bonds (borrow money) to pay for “Super Projects” — infrastructure designed to “sweeten the pot” to attract specific large businesses to the state. Amendment 82 currently limits the dollar amount of those bonds to 5% of the state’s general revenue.
In 2014, Arkansas issued $125 million in bonds for Big River Steel in Osceola, and in 2015, the state approved $124 million for an (unsuccessful) expansion of a Lockheed Martin manufacturing facility in East Camden.
“If that deal had gone through, you’re looking at about $250 million in bonds, with about $20 million leftover,” Sen. Woods said. “If a Honda, BMW, Apple or whoever wanted to come to Arkansas, then we’d be out, we’d have to fold. This at least lets us sit down with the company and talk about the possibilities.”
Randy Zook, president of the Associated Industries of Arkansas and President/CEO of the Arkansas Chamber of Commerce, says current legislation dealing with economic development is inconsistent, a “patchwork of legislation and rules [that] needs cleaning up.” He added the state’s net general revenue is about $5.3 billion, meaning the existing cap is about $265 million. Arkansas “has already issued $125 million in bonds to finance the Big River Steel Mill in northeast Arkansas, and has made an additional $50 million loan, leaving about $140 million currently available. We are the only state in the region with a cap,” Zook said. “We are not competitive.”
“Say, for example, if Hyundai decided they wanted to build another automobile plant, major auto industries generally want about a $300 million investment, so we couldn’t even get to the second round,” Zook said.
Some info sourced from the UofA Division of Agriculture’s 2016 Ballot Issues Guide, the state repository of Arkansas Supreme Court rulings, Ballotpedia, and the Arkansas Legislature website.