Economic Development

Arkansas voters will decide Issue 3 this November.

Like many constitutional amendments, the language can sound more complicated than the basic policy question underneath it.

In plain English, that question is:

Should Arkansas update its Constitution so that communities can have additional tools to compete for private investment and economic development?

For Hot Springs, we do not need an imaginary example to understand why that question matters.

We can look at one of the most visible undeveloped properties in our city: the former Majestic Hotel site.

What Issue 3 Actually Does

Issue 3 would amend the Arkansas Constitution to authorize the General Assembly to establish economic development districts within cities, counties, or cooperative areas.

The amendment also allows the General Assembly to establish economic-development programs involving loans and grants of public money for purposes including economic diversification, reducing unemployment or underemployment, expanding transportation or commerce, and improving real estate that contributes to economic development.

Economic development districts could also be authorized to issue bonds to finance projects within those districts.

There are several important distinctions.

Issue 3 itself is not a new statewide tax.

It does not create an economic development district in Hot Springs.

It does not approve any specific development.

It does not give a developer a check.

And it certainly does not guarantee redevelopment of the Majestic site.

Instead, it creates constitutional authority and requires the General Assembly to write the laws implementing that authority.

That future legislation would determine how districts are formed, which projects qualify, what revenues can be used, what approval processes apply, and what safeguards are required.

Issue 3 is therefore best understood as changing Arkansas's economic-development toolbox, not approving one particular use of that toolbox.

There is an important second half to the tax discussion as well.

Saying Issue 3 is not a new statewide tax does not mean it has no tax implications.

The amendment would allow economic development districts to levy authorized taxes, assessments, or other charges. Its text also provides that property inside a district created by the General Assembly would generally be exempt from ordinary taxation except for taxes, assessments, or charges imposed by that district. Bonds or obligations supported by ad valorem property taxes in certain circumstances would require voter approval.

That is significant authority, and it is one reason I believe the implementing legislation must contain strong safeguards.

Why Is Arkansas Considering This?

Economic development is competitive.

A developer considering an investment in Hot Springs is not necessarily choosing between Hot Springs and Little Rock.

They may be choosing between Hot Springs and Tennessee.

Or Texas.

Or Missouri.

Or Oklahoma.

Or another community anywhere in the country.

Those decisions involve far more than the headline tax rate.

Developers evaluate land costs, construction costs, roads and infrastructure, water and sewer, parking, financing, property taxes, sales taxes, permitting, workforce, customer demand, time to market, and available development incentives.

Arkansas already has meaningful economic-development programs, particularly for industrial projects and major job creators.

Local officials supporting Issue 3 argue that an important gap remains for other types of development.

During legislative discussions, officials told Arkansas lawmakers that 48 states provide local sales-tax rebate or tax-abatement mechanisms used to encourage private investment and help finance infrastructure. They identified Arkansas and Arizona as the two exceptions.

Those officials specifically pointed to areas such as retail, office development, housing, and recreation where Arkansas communities can be at a competitive disadvantage.

That matters for a city like Hot Springs.

Our economy is not built around one type of project.

Our opportunities include tourism, hospitality, healthcare, housing, recreation, entertainment, small business, downtown redevelopment, restaurants, retail, and mixed-use development.

Our economic-development tools should be capable of addressing that reality.

The Majestic Site Makes This Real

The former Majestic Hotel site provides perhaps the clearest local example.

The Majestic was destroyed by fire in February 2014.

Between 2014 and 2018, the City of Hot Springs acquired the property, demolished what remained, and remediated the site.

The city sought redevelopment proposals between 2019 and 2022, but those efforts did not produce a completed development. The Hot Springs Metro Partnership began marketing the property in 2023 and assembled local business leaders to help pursue a transformational project.

Our own Forward Hot Springs comprehensive plan specifically identifies completion of a Majestic Site redevelopment plan as an economic-development objective.

In other words, this is not a property nobody cares about.

Hot Springs has spent more than a decade trying to get this right.

That illustrates an important reality about economic development:

Wanting a project and having an attractive site do not necessarily make the financial numbers work.

Imagine a private developer proposing a major Majestic redevelopment incorporating a hotel, housing, restaurants, retail, entertainment, public space, and parking.

Suppose that represents $150 million or $200 million in private investment.

Such a development could create construction activity, permanent employment, visitor spending, new taxable sales, hotel activity, and a substantial long-term increase in the economic productivity of the property.

But perhaps the project also requires millions of dollars in parking, utilities, streets, drainage, pedestrian improvements, or other infrastructure before private financing works.

That gap can determine whether a project gets built.

And that is exactly where communities elsewhere use economic-development tools that Arkansas communities do not always have available.

What Could Those Tools Look Like?

Issue 3 does not prescribe one specific incentive model.

But we can look at what other communities actually do.

Performance-Based Sales-Tax Rebates

One model is straightforward:

Build the project first. Generate new economic activity. Then receive an agreed portion of the revenue the project actually creates.

That is substantially different from handing someone public money upfront and hoping they perform.

Texas provides numerous examples through its Chapter 380 economic-development agreements.

In Paris, Texas, a developer agreed to invest $12 million in a dual-branded Marriott hotel. The city's agreement provided five annual grants based on incremental city property taxes and three annual grants equal to 50% of applicable sales-tax receipts. The developer had investment and opening requirements attached to those incentives.

That is a useful model because the public benefit is connected to actual private investment.

Hotel-Tax Incentives

For Hot Springs, hotel development is particularly relevant.

El Campo, Texas, entered into an agreement providing a hotel developer with a rebate of hotel/motel taxes for a defined period, while also waiving certain initial building and utility-related fees subject to a cap.

Lancaster, Texas, has used another approach. In agreements involving new hotels with minimum investment and room requirements, the city offered percentage-based tax rebates, with additional benefits available if the projects met further development criteria.

Waco has similarly entered into agreements refunding a portion of hotel-occupancy taxes for new hotels that met minimum investment and employment requirements.

The common concept is not simply "give away hotel taxes."

It is:

No hotel means no hotel-tax revenue. If a qualifying hotel is built because a limited incentive helps make the project feasible, the community can temporarily share some of the newly created revenue while retaining the long-term economic asset.

Property-Tax Incentives

El Paso provides another example.

A developer proposed a new downtown Courtyard Marriott with a parking garage and a minimum contractual investment of $8 million.

The city's agreement provided a 100% city property-tax rebate for up to 13 years, but with a maximum dollar amount.

That last part matters.

A responsible incentive should have limits.

It should not become an unlimited taxpayer obligation simply because a project performs better than expected.

Infrastructure and Tax-Increment Financing

Infrastructure is another major tool.

In Abilene, Texas, a 2025 agreement associated with a 70,000-square-foot Bass Pro development combined several mechanisms: a capped sales-tax rebate, payments from a Tax Increment Reinvestment Zone, a capped property-tax rebate, and development-related fee waivers.

The incentives were attached to development requirements and completion deadlines.

Again, I am not suggesting Hot Springs copy that agreement.

I am suggesting we understand what communities competing for investment are capable of putting on the table.

A Large-Scale Pay-for-Performance Example

Allen, Texas, offers an especially interesting example through its 2025 agreement with Kalahari.

The Texas Comptroller describes the agreement explicitly as "pay for performance."

The arrangement provides rebates based on property, hotel-occupancy, and sales-and-use taxes actually generated by the project.

That is an important distinction.

The incentive depends on economic activity occurring.

If the project generates less, the financial outcome changes.

It aligns at least part of the public contribution with actual project performance.

For a community such as Hot Springs, that philosophy deserves serious consideration.

How Could This Apply to the Majestic?

Imagine a developer approaches Hot Springs with a credible proposal for the Majestic.

Instead of beginning the conversation with:

"How much money do you want from the city?"

I believe the questions should be:

• How much private capital are you investing?
• Would this project happen here without public participation?
• How much new economic activity will the project generate?
• What infrastructure is necessary?
• What revenue is actually new rather than revenue shifted from somewhere else in Hot Springs?
• What return will residents receive for the public participation?
• How long will any incentive last?
• What is the maximum public exposure?
• What happens if you fail to build what you promised?

A future agreement could theoretically require a minimum private investment before any incentive becomes available.

It could require completion of the development.

It could structure payments around new revenues actually generated.

It could establish a maximum incentive.

It could terminate after a defined number of years.

It could require public reporting.

And it could contain clawbacks or termination provisions if contractual requirements are not met.

That is the model I find far more compelling than simply subsidizing private development.

The Fiscal Concern Is Legitimate

Supporting additional economic-development tools should not require pretending there are no risks.

The property-tax language in Issue 3 deserves serious attention. The amendment says property within a district created by the General Assembly would generally be exempt from ordinary taxation except for taxes, assessments, or other charges imposed by that district.

Depending on how implementing legislation is written and how a district is structured, that could affect property-tax collections for local taxing entities.

Schools, cities, counties, and other public entities depend on property-tax revenue.

There is also always the risk that government subsidizes a project that would have happened anyway.

A poorly designed incentive can merely transfer public revenue to a private investor without producing enough additional economic activity to justify the cost.

That is bad policy.

So the standard should not be:

Can we provide an incentive?

It should be:

Can we demonstrate that the public receives a greater benefit than the public cost?

That requires serious financial analysis.

What I Would Want From the Implementing Legislation

My background in public administration and software development has taught me to think about government as a system.

Good intentions are not enough.

The rules matter.

The controls matter.

The data matter.

And outcomes should be measurable.

If Arkansas voters approve Issue 3, I believe the General Assembly should build the implementation around several principles:

• Transparency. Development agreements and financial obligations should be publicly accessible.
• A "but-for" analysis. Policymakers should ask whether the project would occur at substantially the same scale, location, and timetable without the incentive.
• Minimum private investment. Public participation should accompany meaningful private capital at risk.
• Performance-based payments. Whenever practical, incentives should follow actual investment and economic activity rather than precede them.
• Caps and expiration dates. Government should know its maximum financial exposure.
• Clawbacks and enforcement. If a developer promises investment, jobs, or improvements and fails to deliver, the agreement should provide a remedy.
• Return-on-investment analysis. Officials should be able to explain the expected public return in understandable terms.
• Protection of core public services. Economic development should grow the long-term tax base, not undermine the ability to provide essential services.

This Is About Giving Communities Options

Issue 3 will not redevelop the Majestic Hotel site.

It will not tell Hot Springs what belongs there.

It will not guarantee that every economic-development deal made under the new framework will be a good one.

Those decisions will still require judgment, transparency, negotiation, and accountability.

But tools matter.

Arkansas communities are competing for investment against communities that local officials say have access to economic-development mechanisms available in 48 states.

We should not give away public money simply because another city is willing to do so.

We should not enter into bad deals just to announce a development.

And we should never mistake the size of an incentive for economic success.

But neither should Arkansas unnecessarily prevent its communities from considering responsible, performance-based tools that competitors already use.

The Majestic site is a reminder that sometimes the difference between a vision and a completed project is whether the financial structure can actually work.

Hot Springs should have the opportunity to compete.

And when we use public economic-development tools, residents should be able to see exactly what we are receiving in return.

For these reasons, I support Issue 3 because I believe it would give Hot Springs more opportunities to pursue economic development, compete for private investment, and responsibly grow our city with tools that communities in most other states already have available.