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BENTONVILLE -- The Quorum Court may issue industrial revenue bonds to give Simmons Foods some property tax relief on a planned processing plant near Gentry.

Simmons Foods plans to build a 400,000-square-foot poultry processing facility at 9802 S. Arkansas 59, according to information submitted to Benton County. The building site would take up about 100 acres.

The Quorum Court did the first of three required readings of the ordinance authorizing the bonds Thursday. The county will hold a public hearing before its March 27 meeting when the second reading is scheduled. The third and final reading is set for the April 26 meeting.

The law allowing the bonds was enacted in 1960 and is commonly used across the state, according to economic development officials in Little Rock.

Bentley Story, director of business development with the Arkansas Economic Development Commission, said the Act 9 bonds, as they are known, are one of the programs the state uses to attract and retain industry and business.

"Across the entire state of Arkansas it is an extremely common practice," Storey said, adding the size of the Simmons project is larger than most.

David Jackson, Simmons president and chief operating officer for prepared foods, has said the company needs to move from its location in downtown Decatur because space there is limited and the company wants to expand the operation. Jackson said the company has about 700 employees at the Decatur location and will have about 900 at the new location when it opens. Over a period of three to four years, the company plans to expand up to 2,300 employees, he said.

Storey said Jonesboro had a similar project when FMH Conveyor did a $12.5 million project that added a 195,000-square-foot manufacturing facility and added 110 new jobs to the company's operations.

Arkansas competed with other states for the expansion," Storey said. "Jonesboro had 50 employees but if they didn't get the expansion, those were going to go away. This Simmons project, the capital investment is much higher and the number of jobs is greater."

The Simmons plant would operate 24 hours a day Sunday through Friday with three shifts each day -- two production shifts and one cleanup shift, Jackson said. He estimated the plant will have trucks driving on and off the site at a rate of about one truck every six minutes. Jackson said the company has asked for a traffic signal at the plant entrance and is awaiting the Arkansas Department of Transportation's decision on the request. Turn lanes will be added to Arkansas 59 for both northbound and southbound traffic, he said.

According to Jackson, the company hopes to begin construction on the plant early in 2018 and open in the fourth quarter of 2019. He said the operation would shift from the Decatur location to the new plant immediately.

HOW THE BONDS WORK

Industrial revenue bonds in Arkansas provide eligible companies with competitive financing options for property, plant and equipment expenses, according to information from the Arkansas Economic Development Commission. Cities and counties are authorized to issue bonds to benefit private companies under Act 9.

Because Act 9 industrial revenue bonds don't obligate cities or counties to make payment except from project income, the bonds must be underwritten on the financial strength of the company or guaranteed by the Arkansas Economic Development Commission and/or the Arkansas Development Finance Authority.

The primary goal of this financing is to enable manufacturers to purchase land, buildings and equipment to expand their operations. In addition to tax-exempt industrial revenue bonds, taxable industrial revenue bonds may be used for eligible businesses at long-term fixed rates and for manufacturing projects that exceed $20 million in capital costs or don't meet other federal guidelines relative to tax-exempt bond financing.

Tourism attractions and facilities may also qualify for taxable bonds.

Businesses using either tax-exempt or taxable industrial revenue bond financing can negotiate with the local community for property tax relief for eligible businesses in the form of Payment in Lieu of Tax, or PILOT, Agreement.

Benton County Judge Barry Moehring said the Simmons Foods plant in Decatur generates about $154,283 in property taxes. Under the PILOT program agreement, the company will pay $1,092,000 annually as a payment in lieu of taxes, increasing the property tax revenue by about $937,717. Moehring said the 870-acre parcel of land near Gentry where the company is building the new plant currently generates about $2,400 in property taxes.

In addition to the additional property tax revenue, Moehring said, the expansion will generate sales tax revenue and income tax revenue. Local businesses will benefit from employees spending.

"It's a great project," Moehring said, "$350 million economic development projects like this one don't just fall from the sky."

PAST BOND PROJECT

Benton County approved a similar bond issue in 2012 for improvements to the Flint Creek power plant near Gentry. Southwestern Electric Power Co. and the Arkansas Electrical Cooperative Corp. jointly own the plan. The county authorized the Arkansas Electric Cooperative Corp. to participate in the PILOT program and issue up to $205 million in Act 9 bonds to cover half the cost of the improvements, which were mandated by new regulations from the federal Environmental Protection Agency.

Michael Henderson, with the Electric Cooperative Corp., said improvements were necessary for the plant to continue operating. He said in 2012 the work would also create 500 construction jobs and 19 permanent jobs after the construction was completed.

Gentry Mayor Kevin Johnston saw how the Flint Creek project helped his city and the county and said he sees an even larger benefit to the Simmons project.

"Back in the 2015 time frame, when the power plant construction was going on, we had about a 35 percent jump in our sales tax revenue," Johnston said. "With Simmons construction going on in 2018 and 2019, I anticipate seeing another spike. With the power plant, there were a smaller number of permanent new jobs. With Simmons, they're talking about 1,500 new jobs. Those people have to live somewhere. They have to eat. They have to buy groceries and they have to buy gas."

FIGHTING THE PROJECT

County residents have opposed plans for the new facility throughout the planning process.

More than 50 people attended a Dec. 6 Planning Board meeting, with people sitting in the aisles and standing in the doorway throughout the public hearing about the Simmons plant proposal. Residents voiced concerns about increased traffic, adverse effect on property value, possible groundwater contamination and the potential leaks of hazardous chemicals used in the facility.

Jon Faulkenberry, who lives near Gentry, said the board needed to consider the current use of the area and how the plant is incompatible with residential and agricultural uses.

"This is a chicken processing plant where they kill chickens, gut chickens and process chickens," Faulkenberry said. "This type of process does not belong 2 miles from Gentry or 2 miles from Decatur."

Other residents made similar comments at the Planning Board hearing and at Thursday's Quorum Court meeting, where the bond issue ordinance was on its first reading.

Jim Gittlein, a nearby resident, said during the public comment portion of the Quorum Court meeting the plant, which he referred to as "a slaughterhouse," shouldn't be allowed in a residential and agricultural area.

"The Planning Commission opened a can of worms when they allowed this to move into a residential area," Gittlein said.

Teresa Lowry of Gentry said she and other residents feel they have been ignored by the company and the county.

"I think they did not consider the thoughts and feelings of people in the area," Lowry said. "They just steamrollered over the top of us."

Public hearing

The Benton County Quorum Court will hold a public hearing at 6 p.m. March 27 on a proposal to issue bonds and tax incentives to Simmons Foods as part of a plan for the company to build a $300 million poultry processing plant near Gentry. The hearing will be in the Quorum Courtroom in the County Administration Building, 215 E. Central Ave., in Bentonville.

Source: Staff report

General News on 02/28/2018

Print Headline: Bonds, tax incentives aim to boost economy, aid Simmons Foods

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