Which Arkansas statute controls how an Arkansas county uses sales-tax proceeds to fund a public economic-development corporation?
Plain-English summary
State Representative Richard Womack asked whether the 2017 Economic Development Act or the Public Corporations for Economic Development Act controlled a Clark County sales tax. Voters had approved the tax in June 2021 to back bonds for capital improvements and economic-development projects. The Clark County Quorum Court wanted to channel the net proceeds to the Economic Development Corporation of Clark County, a public corporation organized to promote economic development.
The AG could not give a definitive answer because the request did not specify which statute the county used when it levied the tax. Counties cannot levy a sales tax just on their own authority; they need a state enabling statute (Ark. Code Ann. § 14-14-806(1)). Two candidate frameworks were in play.
The first framework, Ark. Code Ann. § 14-174-101 et seq., authorizes counties (and cities) to fund economic-development programs through a voter-approved sales tax. The subchapter does not itself authorize the levy; it lets a county direct the proceeds to economic-development purposes if the levy was authorized under "any other currently existing statutory authority." One of the authorized purposes is funding a corporation organized under the Public Corporations for Economic Development Act (Ark. Code Ann. § 14-175-101 et seq.). If Clark County's tax was levied under § 14-174-101 et seq., the Economic Development Corporation could receive the proceeds, and the Public Corporations Act would control how the corporation used them.
The second framework, the Local Job Creation, Job Expansion, and Economic Development Act of 2017 (Ark. Code Ann. § 14-176-101 et seq.), is different. It lets a city or county appropriate money to a corporation, association, institution, political subdivision, the federal government, or an individual for economic-development financing or services. The 2017 Act imposes its own controls and restrictions, which is what prompted the legislator's question. The AG noted that the 2017 Act does not govern a public corporation's use of sales-tax proceeds collected under § 14-174-101 et seq.
Bottom line: the answer depends on the underlying enabling statute that backed the tax. If the tax was levied under § 14-174-101 et seq., the Public Corporations Act controls and the 2017 Act's restrictions do not apply.
What this means for you
County quorum courts and county attorneys
Before answering "what restrictions apply," go back to the ballot question and the levy ordinance to confirm which enabling statute the county invoked. The classification has practical consequences: the 2017 Act imposes specific controls (Ark. Code Ann. §§ 14-176-104, -105, -108) that do not apply to proceeds channeled through a public corporation under §§ 14-174-101 et seq. and 14-175-101 et seq. If the levy ordinance is silent or ambiguous, AG opinions like this one suggest you should resolve that question first, possibly through clarifying action of the quorum court before disbursement begins.
Public economic development corporations
If your funding stream is a county sales tax under § 14-174-101 et seq., the Public Corporations for Economic Development Act (§ 14-175-101 et seq.) is the operating statute. § 14-175-111 grants you the power to receive sales-and-use taxes levied under § 14-174-101 et seq., to undertake projects, and to contract with private enterprises to create or retain jobs. Your bylaws and governance practices should track the Public Corporations Act, not the 2017 Act.
Bond counsel and municipal finance attorneys
Identify the enabling statute behind the tax in the bond documents. The legal opinion required for the bonds will likely turn on whether the proceeds flow through a public corporation under § 14-175-101 et seq. or come under the 2017 Act framework. Disclose the relevant subchapter clearly so future officials and lenders do not have to reverse-engineer the answer.
Voters and citizens
Sales-tax levies for economic development can flow into different statutory regimes depending on which enabling law the county used. If you want to understand what controls or oversight apply to a tax-funded economic-development corporation, the answer starts with the levy ordinance, not the corporation's bylaws.
Common questions
Q: Why couldn't the AG just answer the question outright?
A: The AG could not identify the controlling statute without knowing which enabling subchapter the county invoked when it adopted the tax. The opinion is explicit that the subchapter under which a county levies a tax determines the legal framework for how the proceeds may be used.
Q: What is a "public corporation" under § 14-175-101?
A: A public corporation under the Public Corporations for Economic Development Act is a separate entity organized by a city or county to undertake or finance projects designed to create or retain jobs (Ark. Code Ann. §§ 14-175-103(9)(A), -111). The county can vest the corporation with project authority and authorize it to receive certain tax proceeds.
Q: Why would a county route sales-tax proceeds through a public corporation rather than spending the money directly?
A: The Public Corporations Act lets counties partner with private enterprises and finance specific projects through a separate legal entity, which can be useful for accounting, project finance, and liability isolation. The framework long predates the 2017 Act.
Q: What does the 2017 Economic Development Act do?
A: It lets cities and counties appropriate funds to corporations, associations, political subdivisions, the federal government, or even individuals for economic development financing or services (Ark. Code Ann. § 14-176-103(a)). The Act imposes specific controls on the use of those funds (§§ 14-176-104, -105, -108). The opinion implies that those restrictions, not anything in the older Public Corporations Act, are what prompted the legislator's question.
Q: Could the same tax be governed by both Acts?
A: The opinion treated them as alternatives, with the controlling statute determined by which enabling authority the county used. If the tax was levied under § 14-174-101 et seq. and channeled to a public corporation under § 14-175-101 et seq., the 2017 Act does not govern.
Q: What if the county wanted to switch frameworks?
A: The opinion does not address that question directly. A county that wanted to subject existing economic-development spending to the 2017 Act's controls would need to consider whether the levy ordinance, the bond covenants, and any contracts with the public corporation permit the change. New legislative or quorum-court action might be required.
Q: Is this the kind of question a court would resolve?
A: An AG opinion is persuasive but not binding. A definitive answer would come from a court interpreting the levy ordinance and the relevant statutes, or from the legislature clarifying the relationship between the two Acts.
Background and statutory framework
Arkansas counties cannot levy local sales taxes on their own authority. The power to tax requires state delegation (Ark. Code Ann. § 14-14-806(1)). A county that wants to fund economic-development activity through a sales tax must rely on a specific enabling statute.
The older framework, codified at Ark. Code Ann. § 14-174-101 et seq., authorizes counties to fund "economic development programs, projects, and services" through a voter-approved sales-and-use tax (§§ 14-174-103, -104, -105). The subchapter does not itself authorize the levy. Instead, it lets a county "levy a sales or use tax pursuant to any other currently existing statutory authority" and direct the proceeds to economic-development purposes (§ 14-174-104). One specifically authorized use is funding a corporation organized under the Public Corporations for Economic Development Act (§ 14-174-109(a)).
The Public Corporations for Economic Development Act, codified at § 14-175-101 et seq., authorizes cities and counties to organize a separate public corporation that may undertake projects or contract with private enterprises to create or retain jobs (§§ 14-175-103(9)(A), -111(b)(2), (7)). § 14-175-111(b)(1) explicitly grants such a corporation the power to receive sales-and-use taxes levied under § 14-174-101 et seq.
The newer Local Job Creation, Job Expansion, and Economic Development Act of 2017, at § 14-176-101 et seq., is a parallel framework. It authorizes a city or county to appropriate funds to a wide range of recipients (including individuals) for economic-development financing or services (§ 14-176-103(a)) and imposes controls on those appropriations (§§ 14-176-104, -105, -108). The 2017 Act does not govern proceeds collected under § 14-174-101 et seq. that flow to a public corporation under § 14-175-101 et seq.
Citations
- Ark. Code Ann. § 14-14-806(1) (delegation of county taxing authority)
- Ark. Code Ann. § 14-174-101 et seq. (county economic-development sales tax)
- Ark. Code Ann. § 14-175-101 et seq. (Public Corporations for Economic Development Act)
- Ark. Code Ann. § 14-176-101 et seq. (Local Job Creation, Job Expansion, and Economic Development Act of 2017)
- Op. Att'y Gen. 2006-056 (cited for proposition that § 14-174-101 et seq. does not itself authorize a sales-tax levy)
Source
Original opinion text
Best-effort transcription from a scanned PDF. Minor errors may remain; the linked official source is authoritative.
STATE OF ARKANSAS
ATTORNEY GENERAL
LESLIE RUTLEDGE
Opinion No. 2022-001
April 8, 2022
The Honorable Richard Womack
State Representative
866 North 12th Street
Arkadelphia, AR 71923
Dear Representative Womack:
This is in response to your request for my opinion on state law as it pertains to a particular sales and use tax in Clark County. You have provided the following information as background for your question:
On June 8, 2021, the citizens of Clark County approved the levy of a sales tax with the related funds to be used to pay and secure the repayment of certain bonds approved by the voters and issued by the county from time to time to finance capital improvements or economic development projects activities to stimulate the economy and promote new job opportunities. The Clark County Quorum Court desires that the net proceeds from this tax be transferred to the Economic Development Corporation of Clark County, a public corporation that promotes economic development in Clark County, to be used for economic development purposes that are consistent with the applicable Arkansas law. Presently, there is confusion regarding the appropriate Arkansas law which actually governs the levy, collection and utilization of the collected sales tax funds.
Against this background, you ask the following question:
Does the Economic Development Act of 2017 or the Public Corporations for Economic Development Act govern the levy, collection, and utilization of the funds from the aforementioned sales tax?
RESPONSE
I cannot definitively opine on the application of either of these acts in connection with the tax you mention. You have not indicated under which statutory subchapter(s) the tax in question was levied, and without that information it is difficult to draw any meaningful conclusions concerning the applicability of either act. Consequently, I can only discuss the relevant framework that is likely to apply.
DISCUSSION
The levy of any county sales tax must be in accordance with state enabling legislation. The background information you have provided refers to a sales tax for, inter alia, "economic development," and Ark. Code Ann. § 14-174-101 et seq. (Repl. 1998 and Supp. 2021) authorizes counties (and cities) to fund economic development programs, projects, and services through a voter-approved levy of a sales and use tax. The subchapter authorizes a county to "levy a sales or use tax pursuant to any other currently existing statutory authority" and direct the proceeds to "any purpose authorized by this subchapter."
One of those specifically authorized purposes is the financing of a corporation organized under one of the laws you have asked about, the Public Corporations for Economic Development Act. I gather that the Economic Development Corporation of Clark County was formed pursuant to that Act. If the sales and use tax you mention was levied under section 14-174-101 et seq., then this corporation may receive proceeds from the tax. The Public Corporations Act also expressly empowers a public corporation to receive sales and use taxes levied under the latter subchapter.
If the Economic Development Corporation of Clark County is, in fact, the proper recipient of a sales and use tax levied under section 14-174-101 et seq., then the Public Corporations Act governs its use of the tax proceeds. The Public Corporations Act authorizes cities and counties to vest a "public corporation" with the power to undertake projects or contract with private enterprises to carry out projects designed to create or retain jobs.
The other act you have asked about, the Local Job Creation, Job Expansion, and Economic Development Act of 2017, does not govern a public corporation's use of sales tax proceeds collected under section 14-174-101 et seq. The Economic Development Act authorizes a city or county to "obtain or appropriate money for a corporation, association, institution, political subdivision of the state, the United States Government, or an individual to . . . (1) [f]inance economic development projects; or (2) [p]rovide economic development services." The Economic Development Act imposes various controls and restrictions in connection with a city or county governing body's use of such funds.
I gather that these restrictions have given rise to your question. But, as noted above, if the sales tax was levied under section 14-174-101 et seq., then projects undertaken by a public corporation formed pursuant to the Public Corporations Act may be financed through that tax.
Sincerely,
LESLIE RUTLEDGE
Attorney General