If data is the new gold, Little Rock and Conway city leaders have seized their opportunities to participate in the gold rush, seemingly vying for a $1 billion data center that is being marketed as one of the largest economic development initiatives in Arkansas history.
For the next 30 years, the two cities have even pledged to waive two-thirds of the project’s property taxes.
Even though this massive project has major financial and environmental ramifications, the negotiations to secure the data center are being conducted in secret. In fact, Little Rock authorized the annexation and rezoning required for the project under the code name Project Boar.
Jimmy Brown, the Little Rock Planning Commissioner, was not blind to the ridiculousness.We need to know what’s actually going to happen because we have to consider the people of Little Rock during a hearing in June where the mysterious data center encountered a whirlpool of criticism. Guys, just let us know what’s happening.
Naturally, secrecy is incompatible with democracy. Additionally, it runs counter to sound public policy. However, politicians with dollar signs in their eyes frequently overlook the fact that the main beneficiaries are big, profitable corporations that end up avoiding taxes they could easily afford to pay in the fierce competition between localities to secure economic development projects.
This is industrial-scale corporate welfare. Additionally, counties and cities around Arkansas and the country are racing to join the game in order to avoid being left out, frequently ignoring valid concerns about whether this competition is prudent or appropriate or whether the economic advantages outweigh the tax subsidies being given out.
A memorandum of understanding with Willowbend Capital, a company that represents a secret data center owner, was approved by Little Rock city directors in a special session in late April. The agreement would allow for the construction of a 300,000-square-foot data center along the Arkansas River at the Port of Little Rock, requiring a $1 billion investment that would create 50 jobs.
The Conway City Council convened in special session earlier in April to approve a memorandum of understanding with Forgelight Ventures, who represent a secret data center owner. This agreement would allow for the construction of a 300,000-square-foot data center along the Arkansas River on Lollie Road, which would create 50 jobs and require a $1 billion investment.
We are unable to confirm that this is the same project due to the secrecy. However, the language used in the two memoranda is similar, and documents from the secretary of state’s office reveal that Michael Montfort, the same guy who established Willowbend and Forgelight, also used the same Little Rock address.
Little Rock and Conway are likely vying for this project, along with an unknown number of other jurisdictions, which will undoubtedly thrill the unidentified owner pulling the strings.
Both communities pledged to forgo 65% of the property taxes that would be earned on the data center for 30 years in exchange for the creation of only 50 jobs in their haste to win this contest. Additionally, they committed to extending this exemption to expansions in the future, which might prolong these tax benefits past the 2050s.
Entergy Arkansas and Conway’s city-owned utility, Conway Corporation, would also profit from a franchise tax on the enormous amounts of electricity used by the data center, which would help the cities recover some of the lost cash. However, that brings up a different set of concerns regarding the possible environmental effects of higher electricity use.
Economic development is now a self-sustaining sector, and proponents contend that the financial gains from projects more than balance the incentives used to acquire them. To put it simply, 35% of a loaf is better than none at all in the context of the Little Rock and Conway data center projects.
However, 35% of the bread is not superior than the entire loaf. The idea behind this merry-go-round is that incentives are the main factor influencing where facilities are located, and communities that don’t provide them would lose out. However, researchers who examined the data discovered that, in 75% of cases, the business would have chosen the same course of action in the absence of the incentives.
More significant determinants of these choices include things like geography, property values, and the accessibility of infrastructure and labor. Although incentives cannot change any of those elements, they can be enhanced over time to increase a community’s competitiveness.
The tax advantages may prove to be an unneeded giveaway if Little Rock or Conway has the qualities the data center owner is seeking; if not, they will be of no use.
Businesses that have already chosen a location for their facility are also perversely motivated to incite competition in order to gain additional concessions from the area they have already selected. And this cannot be detected because of the privacy they require.
The question of whether the long-term economic advantages of these additional facilities offset the price of the services they need and the incentives offered to entice them is also raised.Because corporations that receive incentives often fail to fulfill their commitments, researchers who have analyzed the data have come to the conclusion that they don’t.
Planning commissioners in Little Rock were promised that even with the property tax relief, the project would still bring in millions of dollars in taxes when they pressed for more information about the potential financial impact of the data center.
However, officials involved in the recruitment effort told commissioners that those details were unavailable for a project that is still theoretical when they pressed for information on the costs the city might incur for infrastructure and services needed for the data center. This caught commissioners off guard and illustrates why it is so problematic for public entities to negotiate deals in secret.
Give us the data and knowledge we need to make an informed choice, not just a “oh, well, maybe someone might do something cool here someday.” “This shouldn’t be that way,” Commissioner Jeremiah Russell stated.
Meaningful public input on the data center project is difficult until a contract is signed and announced by politicians, who will undoubtedly boast about all the employment and economic wealth they have produced. This is because the mystery firm insisted that its identity be kept secret.
If the public then expresses valid doubts about the project’s wisdom or the deal’s fairness, how likely are those same lawmakers to voluntarily change their minds?
Local governments have a right to engage in economic development and the hiring of new companies to boost the economy. However, the question is whether that actually necessitates secretly negotiating tax incentives and tying a jurisdiction to a corporate assistance program that lasts longer than the lives of all parties. Or, simply because everyone else is, starting a candy store to compete for these projects.
It’s important to keep in mind that prospectors who havetily entered the goldfields frequently ended up with more regrets than gold.
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