Arkansas amendment would allow local economic development districts

Lawmakers can approve legislation outlining the program if voters approve Issue 3

Arkansas voters in November will consider a proposed constitutional amendment that would allow the creation of local economic development districts, a move supporters say will make the state competitive but opponents have derided as unnecessarily growing government.

Issue 3 would permit lawmakers to create programs, loans and grants using public money for the purpose of economic development.

The Legislature would have the authority to pass laws allowing local governments to create economic development districts where incentives like tax rebates could be negotiated to attract new business to a designated area.

Supporters of the proposal say it’s needed to make Arkansas more competitive with other states that offer these incentives and spark economic growth in smaller communities. Opponents argue it will grow government and could harm Arkansans who are being asked to approve a program whose rules have yet to be outlined.

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The proposed constitutional amendment, one of four measures on the Nov. 3 ballot, was referred to voters by the Legislature through a resolution sponsored by Republicans Sen. Jonathan Dismang and Rep. Howard Beaty. Dismang resigned in September to take a job at Arkansas Electric Cooperatives.

Issue 3 is backed by Arkansans For Strong Communities, a ballot question committee chaired by Randy Zook, president and CEO of the Arkansas State Chamber of Commerce and the Associated Industries of Arkansas.

The group has raised more than $2.2 million, the majority of which has been spent on advertising, according to an October finance report. The largest donors have been Walmart heirs Jim Walton and his sons, Tom and Stueart, who’ve each donated $125,000.

While there are economic incentives at the state level that have been successful at attracting industrial projects, Issue 3 would give that tool to cities, counties and regions to attract retail developments like shopping centers and grocery stores, Zook said.

“We have a lot of communities that really, really need that kind of tool, especially in the eastern third of the state where we’ve been losing population and losing retail providers,” he said.

The proposal faces resistance from some on the right, including Brenda Vassaur Taylor, cofounder of the Conduit for Action and Conduit for Commerce conservative advocacy groups. Vassaur Taylor is also president of Conduit News and treasurer for Truth in Politics Against Issue 3, a ballot question committee that formed last week in opposition to the measure.

Vassaur Taylor said she lived in the Arkansas Delta for 44 years and was repeatedly shown how “government is never the solution.”

“Government needs to get out of the business of ‘economic development’ and leave that to those who know how to do business in Arkansas,” Taylor said in an email. “Economic development should be encouraged by supporting the businesses already in our state, not by taking their tax dollars to subsidize their competition.”

Zook said the amendment would allow a district to use economic incentives, which often look like rebates where a certain percentage of taxes are returned to developers over a specified period of time in exchange for them investing in the area.

The tax status of current businesses located within the economic development district would not change, and incentives would only apply to newly generated taxes resulting from the new business, he said.

Issue 3 would allow the issuance of bonds to help fund projects, and developers — not cities or counties — would be on the hook for the debt, Zook said.

The amendment, which would be effective Jan. 1, 2027, allows provisions in the Arkansas constitution that conflict with it to be repealed. The proposed amendment also “supersedes all previous constitutional provisions, amendments, laws or judicial interpretations” that conflict with it.

Vassaur Taylor said her group opposes Issue 3 because it grows government, reduces individual freedoms, benefits a select few with taxpayer dollars, and includes “vague language that will give power over the above-mentioned problems to people yet to be decided.”

“The fact that this vast and vague power grab by a few is asked to be placed in our state constitution is alarming and proves the need for its defeat,” she said.

Zook said the Arkansas constitution does not currently allow for the creation of economic development districts, so it must be amended to allow the enabling legislation to put specific guidelines in place.

“You have to trust the process,” he said.

The measure is going before voters months after the Legislature set aside up to $300 million from the state’s surplus for incentives aimed at attracting a new manufacturing facility to West Memphis. It also comes as several communities have clashed with local economic development officials over the rapid growth of data centers.

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Arkansans have not voted on the creation of economic development districts previously, but they have considered proposed amendments to create other tools intended to attract businesses, according to the Public Policy Center at the University of Arkansas Division of Agriculture.

In 2000, voters approved Amendment 78, which allowed the creation of Tax Increment Financing — also known as TIF — districts in which the growth of tax revenue from a project could be used to pay off the bond that financed it.

In 2007, a state Supreme Court ruling prevented TIF districts from using personal and real property tax revenue generated by the minimum 25-mill tax collected for maintaining and operating public schools. A mill is equal to $1 of property tax for each $1,000 of assessed value.

The court ruled voters were unaware that Amendment 78 would repeal a constitutional amendment approved in 1996 requiring the 25-mill tax to ensure public schools were adequately funded.

TIF districts still exist, but their popularity declined after the court’s decision reduced the amount of tax revenue that could be used to support them, according to the Public Policy Center.

Republican Senate President Bart Hester and Democratic state Sen. Clarke Tucker shared their bipartisan support for Issue 3 in a video this week.

Meanwhile, the League of Women of Arkansas, a nonpartisan organization focused on protecting and expanding voting rights, opposes the proposal.

Executive Director Kristin Foster said the league supports economic development, but has concerns about the amendment’s “broad new taxing and bonding authority” that would be created and decided by the Legislature.

“Our opposition really is not about the economic development itself, but about granting this breadth of constitutional authority without some clear safeguards and protections for public revenue,” Foster said.

Dismang filed a bill late in the 2025 legislation session outlining what the economic development district program would look like, but it was never voted on.

Additional concerns from Issue 3 opponents include giving the government the power to pick which businesses receive advantages, and that finance plans of bonds and ad valorem taxes will lead to the transfer of public funding to private businesses, according to the Public Policy Center.

Using public funds to fund private business through bonds already happens with the state’s economic incentives for industrial developments, Zook said.

He said Arkansas will continue to be uncompetitive if the measure fails, and he urged voters to approve Issue 3.

“In our view, it’s local choice, local control and no new taxes,” Zook said.

You can read the proposed constitutional amendment in its entirety here.