Accountable USA - Arkansas

Given the limited cost information that is made public, it is difficult to assess the overall fiscal impact of economic development programs in Arkansas. Every few years the state’s Department of Finance and Administration publishes figures purporting to show the total spent on subsidies and the cumulative amounts received by individual companies. The report released in September 2008 stated that a total of $167 million was spent in 2005-2007, with the largest amount ($17 million) received by Wal-Mart. However, this tally appears to be incomplete, and the absence of annual cost data (and data on outcomes such as jobs and wages) limits meaningful analysis.

Most of the incentives the state offers take the form of sales or income tax credits. The Targeted Business Incentive program allows companies to keep a portion of the payroll taxes they withhold from their workers’ pay. One of the biggest subsidy recipients in recent years has been the Danish windmill blade company LM Wind Power (formerly LM Glasfiber), which hired aggressively at a plant in Little Rock but later laid off many of those workers (see below). 

According to the Center on Budget and Policy Priorities, Arkansas publishes one of the least useful tax expenditure budgets available – it omits major tax expenditures and isn’t even available online.  Only limited information on grant and training programs is available through Arkansas Transparency website.

Key Subsidy Programs

Subsidy Program Recent Annual
Cost
Online Recipient
Disclosure
Recipient Disclosure
Score
Job-Creation/
Job-Quality Score**
Monitoring/
Enforcement Score***

Arkansas Advantage Income Tax Credit

corporate income tax credit for job creation based on payroll

$2.2 million (CY2011)
0/100
48/100
57/100

ArkPlus Income Tax Credit

discretionary income tax credits for investment

$3 million (CY2011)
0/100
not included
not included

Business and Industry Training Program

workforce training grants for recruitment and pre-employment training

not available
20/100
10/100
5/100

Create Rebate Program

discretionary annual cash payments based on annual payroll

$9.9 million (CY2011)
20/100
not included
not included

InvestArk Sales and Use Tax Credits

credits relating to purchase of property and equipment by existing firms

$23.8 million (CY2011)
0/100
48/100
59/100

* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).

** The score is derived from the Good Jobs First report Money for Something (December 2011).

*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).

Major Subsidy Deals

LM Glasfiber (2007)

In July 2007, when the market was booming for renewable energy, the Danish company LM Glasfiber announced that it would locate its U.S. headquarters and a manufacturing facility for windmill blades in Little Rock. The $150 million investment was supposed to eventually create more than 1,000 jobs. The decision came after the state passed legislation exempting the company (without mentioning its name) from corporate income taxes for 25 years. As if that were not enough, the state put together a package of additional subsidies worth about $33 million, including $8 million in Economic Infrastructure Funds, $6.9 million from the Quick Action Closing Fund, free land worth about $5.4 million and $3,500 in training funds for each of its workers.

The city of Little Rock later agreed to issue $150 million in bonds to help the company pay for land and facilities. LM Glasfiber was responsible for paying the bonds, but the property was put in the name of the city, making it exempt from property tax. By October 2008 the company had hired 630 people. The following year, amid poor market conditions, it initiated layoffs and ended up reducing its workforce by about half. The company changed its name to LM Wind Power in 2010. (Key sources)

Welspun pipe plant (2007)

Welspun Group, a conglomerate based in India, chose Little Rock as the site for a $100 million plant to produce steel pipes mainly for offshore oil drilling. The facility, to be operated by the company’s Welspun Gujarat Stahl Rohren division, was projected to employ 300 workers. The state agreed to guarantee about $11 million in bonds issued by the company to help finance the project. The site, originally just outside city limits, was annexed by Little Rock in 2008. Annexation was planned from the start; postponing that step allowed Welspun to save on building permit costs. The plant, whose cost had risen to $150 million, opened in 2009.

The following year the company announced plans to add 230 new jobs. Although the loan guarantee was the only government assistance reported at the time the project was announced, a May 2010 article in the Arkansas Democrat-Gazette noted that the company received a $3.25 million economic infrastructure grant to help with building costs, as well as several performance-based subsidies, including payroll rebates, sales tax refunds, and a corporate income tax credit based on employment.

In February 2011 the U.S. Occupational Safety and Health Administration proposed to fine Welspun $88,000 for safety violations. The following June the company announced that it had completed a $30 million expansion in Little Rock and had raised its workforce to more than 600. (Key sources)

Walmart in Arkansas

  • At least 3 Wal-Mart locations have received subsidies worth about $1.4 million in Arkansas.
  • At least 4 Wal-Mart locations in Arkansas have challenged their property tax assessment, recouping about $422,000.
  • Wal-Mart was found to have more workers than any other employer in the state relying on publicly-funded health insurance. This shows how taxpayers end up subsidizing Wal-Mart’s policy of providing low wages and inadequate benefits.

For more information, see the Arkansas page of Wal-Mart Subsidy Watch.