The other side of corporate incentives — a decline in revenue for city services | Arkansas Blog

Thursday, May 17, 2018

The other side of corporate incentives — a decline in revenue for city services

Posted By on Thu, May 17, 2018 at 3:11 PM

click to enlarge PLUSES AND MINUSES: A plant expansion in Jonesboro hit city government books in a negative way this year. - JONESBORO CHAMBER OF COMMERCE
  • Jonesboro Chamber of Commerce
  • PLUSES AND MINUSES: A plant expansion in Jonesboro hit city government books in a negative way this year.
Keith Inman reported in the Jonesboro Sun today about a familiar civic problem — lagging city sales tax collections. It's a big deal because sales taxes are the main sources of city revenue.

Jonesboro, a growing city, experienced a drop in revenue for the first quarter of 1.53 percent, or about $160,000.

The decline was linked in part to a tax incentive granted to a major local industry, a Frito-Lay plant. It added 110 jobs in 2015 with a $45.7 million expansion. It thus qualified for refunds on sales taxes paid during construction. The city financial officer told the Sun Frito-Lay got a $160,000 refund recently for taxes paid in 2016 and 2017. He hastened to add that the new jobs were a net benefit to the city. Mayor Harold Perrin also was quoted as saying the city was suffering from the migration of retail business to on-line and some $118,000 in lost taxes on such sales.

"The only thing I'm saying here is if this continues with our sales tax going down, our state turnback is going down, then the end of June, I have no option but to look at that and work with our CFO and see, and we may have to cut projects, we may have to have ... layoffs, I don't know," Perrin warned. "We're going to have to have a balanced budget."
The municipal problem figures in the state legislature's look at taxes in hopes of finding a way to cut income tax rates for higher income earners. Shifting state responsibilities to the local level would not appear to be a good place to start. It's worth remembering that there's no free lunch on corporate welfare handouts of industrial expansions.. The balance sheets don't often bear out the premise that they trickle down into greater prosperity and greater support for government services.

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