Republican gubernatorial candidate Asa Hutchinson has been touting his jobs plan for Arkansas, which includes tax competitiveness, workforce education, health care and regulatory reform, education choice and computer science expansion.

In a Talk Business & Politics interview, Hutchinson spelled out aspects of his plan and how to pay for it, while noting his interest in reforming the state’s regulatory agencies, including a push back on the federal government.

“Whenever you look at our regulatory environment, the big problem is we’re not processing our permits for air quality, for manufacturing facilities quick enough,” Hutchinson said.

He noted that states like Louisiana and Texas fast-track regulatory permits and it makes them more business-friendly in reputation.

“This is what industry wants you to be responsive to. They want to protect the environment, let’s just move it through very quickly,” Hutchinson said. He expounded on these regulatory comments, which you can read deeper in this post.  His full interview can also be viewed at the bottom of this report.

Hutchinson faces Democrat Mike Ross, who appeared on Talk Business & Politics last week, as well as Libertarian Frank Gilbert and Green Party nominee Joshua Drake in the general election this fall.

TAX REFORM
The crux of Hutchinson’s tax reform plan includes cuts to those making roughly between $20,000 and $75,000 annually. He wants to lower the individual income tax rate for those in this income range by a full percentage point — a plan that comes with an estimated $100 million price tag.

“It’s not a complicated plan,” Hutchinson said, noting that surrounding states are lowering their rates or don’t have individual income taxes. “We are an island of high tax rates in Arkansas for individuals.”

Hutchinson said in calculating his tax cuts, he aimed to help what he feels is the segment of society needing the most relief. Higher income individuals are not in as dire a situation, and Hutchinson said there are other programs in existence to help those with income levels lower than $20,000.

“We’ve created a lot of programs for those in the lower income categories,” he said. “It’s the middle income that’s hurting.”

Hutchinson’s tax plan is predicated on growth revenue in future years and he contends that the current two-year budget surplus of $174 million can be the springboard to start his tax cut offerings.

“We have that amount in surplus so it gets you through the point you can grow into the next phase, so I think it’s a very prudent approach,” he said.

If revenue growth in future years were to taper or not meet expectations to sustain or grow tax cuts, Hutchinson said he’d have to calculate trimming or not trimming cuts based on the overall budget picture.

“You always put together the budget as a whole… I don’t believe there’s any doubt we can do what I outlined,” Hutchinson said. “If our growth does not materialize as expected, you’ve got to make tough decisions. We’ll wait and see when we get there.”

EDUCATION, COMPUTER SCIENCE
In his jobs plan, Hutchinson refers to providing more “education choice” for Arkansans, but there are few details attached. His web site offers more commentary on the subject, including charter schools, Common Core, and pre-K education.

He notes that his kids attended public schools, private schools, parochial schools and were home-schooled.

“We have to recognize that parents may make different choices in education for their children. Some parents will choose home school, private school or public charter schools as an alternative to the traditional public school setting. It is important that these options are available even though our tax-payer resources go to the public school system including public charter schools,” Hutchinson says on his web site.

Hutchinson’s Democratic opponent, Mike Ross, has advocated a significant expansion of pre-K opportunity in Arkansas including eventual inclusion for families making up to 400% of the federal poverty level (FPL). Hutchinson has limited his campaign promise to funding pre-K education for families under 200% of FPL.

A big component of Hutchinson’s education plan centers on computer science at the K-12 level. He has proposed ensuring class credits for computer science courses as well as making those courses available in every high school across the state. He contends the price tag would be less than a half million dollars to implement.

“The hardware and software is already being put in to the schools, so let’s double-utilize it for the purpose of teaching computer science,” said Hutchinson. “It doesn’t cost anything to change the law to give credit for computer science for math or science graduation credit.”

He says there will be some costs associated with retraining math or science teachers in order to have one computer science teacher in every high school across the state. His projections suggest a minimal financial impact on the state budget to achieve that.

“We’ve looked at the training costs there. You could probably do it pro bono because there are so many groups that want to teach coding for computers in high school to develop the curriculum, but the training costs would probably be a half million dollars. It’s a very modest investment for an incredible return,” Hutchinson said.

He added that an annual 5% boost in computer science coders would add 1,500 potential new trained workers into Arkansas’ labor force and would, in time, “change the economy.”

WORKFORCE EDUCATION, HEALTH CARE
Hutchinson has advocated for the creation of eight workforce councils across the state to regionally develop job plans between educational institutions, employers and workers.

To some, the plan is redundant to existing efforts but Hutchinson sees unique opportunities in different areas of the state. For instance, he said a workforce plan in Mena should look different than a strategy in Mountain Home despite both areas attempting to recruit tourism.

“[Mountain Home] has a focus on the retirement community. They have manufacturing. So their economic plan in that region will say, ‘These are the jobs that we want to prioritize for the next decade,’” he said. “If that’s your economic plan, then let’s do our workforce education to train towards the jobs.”

Hutchinson has deployed an acronym – “P.R.E.P.A.R.E.” – to summarize his workforce education goals. In his plan, “P.R.E.P.A.R.E.” suggests providing resources, producing students with skills in demand, and retaining and growing jobs in Arkansas.

Sunday’s interview did not focus on health care reform, but Hutchinson has previously outlined several positions on the subject. He’s opposed to the Affordable Care Act, calling it a “job killer” that is “fatally flawed.” Hutchinson advocates continued Medicaid reform and includes the “taxpayer funded private option” as one of those components.
Hutchinson has called the private option “a pilot program.” He’s stopped short of calling for its cancellation, but he’s also not rallied for its continuance.

“The current private option is an innovative approach to expanding health care in Arkansas, but we must measure its effectiveness and costs,” Hutchinson says in his jobs plan. “If it is not affordable for Arkansas, or it does not accomplish our goals, then we will need to end or change the program.”

REGULATORY REFORM
While Hutchinson wants to expedite permitting processes for businesses needing regulatory approval as was noted earlier, he provided an example of a permit issued with too little public notice.

He said he supports efforts to protect Arkansas’ natural streams and has concerns about how a controversial large-scale hog farm permit was issued in north Arkansas near the Buffalo River. Hutchinson said he wouldn’t push to shut down the current hog farm operation that was approved in the area, but he wants to see the permitting process “tightened up” in the future.

“Obviously, it is a regulation that is important to protect our streams and our water quality that we value in our state. I grew up on the Spavinaw Creek drinking out of the stream,” he said. “But the farmers didn’t do anything wrong. The farmers went through the permit process, so don’t penalize the farmer. But first of all, my commitment is to protect the [Buffalo] river, and then secondly, you’ve got to make sure you tighten up the permitting process so that everyone has the notice – all the stakeholders, which they seemed not to have the last time, not adequate notice out there. So the farmers did absolutely nothing wrong. They followed the rules, so don’t penalize them. But let’s protect the Buffalo River and the quality of life that we so value in this state.”

Hutchinson said he planned to push back against “overreaching regulations from the federal level” saying there is a state role to play. Citing new EPA regulations regarding carbon emissions, He said he would organize industry and state regulators to coordinate public comment in opposition to the rules. When asked if organizing public comment would be adequate to halt implementation, Hutchinson said it should have some impact.

“I would like to think the administration is very sincere about inviting public comment. Why do you have public comments? It’s because you want to take those into consideration as to how you move forward,” he said.

However, Hutchinson also advocates a more aggressive state approach to federal regulatory policy.

“I think there is some question as to the legal authority for those regulations and the state should consider challenging those regulations. This is a different approach to a regulatory environment,” said Hutchinson.

On the state level, Hutchinson wants to start with a moratorium on new regulations.

“The second thing I would do is put in a moratorium immediately as I become Governor so that we would stop the new regulations coming into place without a cost-benefit analysis going into place,” he said.

Link here for the full video interview with Hutchinson.

Armed with $250 billion to spend on U.S. made products through 2023, Wal-Mart Stores is holding its first “Open Call” for suppliers on Tuesday (July 8). The day full of more than 500 meetings at Wal-Mart’s home office in Bentonville between prospective suppliers and Wal-Mart could mean more business for manufacturers in the Northwest Arkansas and Fort Smith areas.

Gov. Mike Beebe is scheduled to attend the opening session at 8:45 Tuesday morning along with Walmart U.S. CEO Bill Simon. The general session will set the tone for the event and several other informational sessions that will be held throughout the day for prospective suppliers.

“Monday’s educational series will include sessions on product compliance protocol, supplier diversity, labeling and knowing the Walmart customer,” said Kayla Whaling, Wal-Mart spokeswoman.

SELLING U.S. MADE
Cindi Marsiglio, vice president of U.S. sourcing and manufacturing for Walmart U.S., told The City Wire that two-thirds of the products already sold by Wal-Mart are made in America. Wal-Mart announced in early 2013 a plan to increase its purchase of American made products to $50 billion by 2023.

“We remain focused on expanding that by $250 billion in U.S. made products. We are doing that in three ways: working with current suppliers, working with current supplier who want to reshore some operations and finding more new U.S. suppliers,” Marsiglio said.

She said Wal-Mart has 150 projects in the pipeline now looking at reshoring operations. 

“There is no category we aren’t considering. We work as the facilitator between state economic development teams and businesses seeking onshoring opportunities. We are holding our second annual Manufacturing Summit in Denver August 14-15, between all the stakeholders — local and state government economic teams and suppliers,” Marsiglio said.

OPEN CALL
She said there are roughly 900 suppliers — not quite one half of those already do business with Wal-Mart — slated to meet with buyers at Tuesday’s first ever Open Call for U.S. products.

The Open Call meeting was announced earlier this year by Michelle Gloeckler, executive vice president of consumables and U.S. manufacturing at Walmart. One item she called to attention was patio furniture, saying the retailer is looking for U.S. made or assembled units to stock for next season to cut down on the shipping time and carbon footprint of the seasonal items.

Bill Simon, CEO of Walmart U.S., said the retailer is eager to see what new products may be presented at Open Call. He said coolers, textiles, televisions and even pink flamingo yard ornaments, once only made in China are now made in the U.S. and sold at Wal-Mart.

LOCAL PITCH
Hugh Jarratt, owner of Jarratt Industries in Fayetteville, will be among the prospective suppliers vying for shelf space at Wal-Mart Stores at Tuesday’s Open Call.

“I signed up through the Open Call submission form online. Around June 17 or 18  I got notified of a meeting with buyers at the July 8 Open Call,” Jarratt told The City Wire.

A lawyer by trade, Jarratt invented a taco plate about four and a half years ago and sold them at the War Eagle Craft fair. He slowly got the plates and two more products into retail stores, Amazon.com and specialty catalogs. Most recently his taco plate, double dip bowl and patio plates were picked up by Harp’s Food Stores. The products are manufactured in Prairie Grove by Polytech Molding.

“I thought about the design for a taco plate that would keep three tacos standing upright, with two other compartments for beans, rice or salsa. I went to Toys R Us and bought some Floam that I used to mold the shape I wanted,” Jarratt said.

Jarratt searched Google for injection molding manufacturers in Arkansas and Polytech Molding in nearby Praire Grove popped up.

“I worked with Polytech to develop the prototype and we added the bright colors a little later with the help of Mesa Industries in Fort Smith,” Jarratt said. “I added the double-dip bowl and patio or tailgate plates and secured collegiate licensing for personalization of teams for tailgaters.”

Working with a local manufacturer, Jarratt said he is able to get a very quick turnaround on orders and he keeps several thousand units in stock for wholesale reorders.

“I don’t think I could be in business without Polytech Molding. They handle my shipping and fulfillment since I am just a two-person corporation — my wife and I, who are both practicing attorneys,” Jarratt said.

In preparation for this meeting with Wal-Mart buyers on Tuesday, Jarratt said he has done his homework, pulling all his sales numbers and presenting his ideas for pricing and display methods.

“If this product is priced right and properly displayed, then it sells. I have the track record to prove it.”

The outlook for the pork sector has been tempered by the continued threat of PEDv, — Porcine Epidemic Diarrhea virus — which has affected more than 7 million pigs in 30 states over the past year. To date, Arkansas is one of the few agricultural states without a confirmed case.

There was an Arkansas case recently reported in error, but that was corrected in the national data base.

Analysts said the impact of the wide spread disease will likely be felt in late summer and and early fall as pork prices continue to rise. Profit margins for U.S. hog producers were at high levels in May and June as the threat of PEDv pushed hog prices to historic highs, aided by more favorable feed prices. (Link here for a PDF explainer from the U.S. Department of Agriculture about the virus.)

Hog producer margins averaged $65 per head in May and $73 per head in June. Margins are significantly higher than last year, when they were at break-even levels, according to a recent Rabobank report. Analysts expect 2014 margins to average $60 per head.

While there are fewer pigs going to market, the weights are up by about 10%. Tyson Foods, one of the largest pork processors in the U.S., said in May that it planned to reduce production more this summer as it copes with a drop in pig supplies as a result of PEDv. Tyson expects pork supplies to be down as much as 4.5% this year due to the deadly piglet virus.

CASE TRACKING
The American Association of Swine Veterinarians reported 105 new positive cases of PEDV last week out of 773 tests conducted at nine diagnostic centers across the U.S.

Iowa, a large swine production state has seen the biggest impact with more than 2,100 confirmed cases, nearly twice the number in the next most active state for PEDV — Minnesota has reported more than 1,230 cases since testing began in November 2013.

Last week the National Pork Board reviewed the most recent breeding numbers and said that despite active PEDv in many states, the breeding herd is relatively stable, with the March to May pig crop being closely watched, given the disease strikes piglets. The report indicates there are 26.371 million piglets in the U.S. being finished out. That number is down sharply from 2.979 million a year ago.

Farmers are working to lower the mortality rate with 9.78 pigs per litter saved in the March to May pig crop. The mortality rate is up 5% in the past year.

“We really saw profitability begin to pick up in (September) 2013,” noted Dr. Chris Hurt, professor at Purdue University. “We thought we’d see some expansion showing up, but this report says, no, that is not the case.”

He said the other surprise is in the March to May farrowings where there were expectations for up to 2% gains. Instead they were down fractionally. Hurt said warm months have reduced PEDv losses, but they aren’t under control yet.

The majority of cases have occurred in large commercial farms where animal concentration is dense. Several large grow-out farms for commercial processors have made the commitment to switch to modified housing options and as a result, their gestation barns hold fewer breeding animals.

Local suppliers like Mason Creek Farms, and others in the Boston Mountain Breeder Association said their pasture raised hog herds looks healthy and they continue to guard against the virus being tracked onto their farms from officials who visit larger commercial operations.

FEDERAL AID
On June 5 the U.S. Department of Agriculture announced $26.2 million in funding to combat the diseases wreaking havoc on the U.S. pork industry. USDA issued a federal order requiring the reporting of new detections of these viruses to its Animal and Plant Health Inspection Service (APHIS) or State animal health officials.

"In the last year, industry has estimated PEDv has killed some 7 million piglets and caused tremendous hardship for many American pork producers," said Agriculture Secretary Vilsack. "The number of market-ready hogs this summer could fall by more than 10% relative to 2013 because of PEDv. Together with industry and our state partners, the steps we will take through the federal order will strengthen the response to PEDv and these other viruses and help us lessen the impact to producers, which ultimately benefit the consumers who have seen store pork prices rise by almost 10% in the past year."

The $26.2 million will be used for a variety of activities to support producers and combat these diseases, including:
• $3.9 million to support the development of vaccines
• $2.4 million to support management and control activities
• $500,000 to herd veterinarians on monitoring of herd management plans and sample collection
• $11.1 million in cost-share funding for producers of infected herds for biosecurity practices.
• $2.4 million for diagnostic testing
• $1.5 million for genomic sequencing for newly positive herds

A Rogers startup is looking to turn the restaurant supply industry on its head and a group of MBA students from Columbia University in New York have been on hand for the last week, helping Recycled Hydro Solutions develop strategies to turn its concept into a must-have piece of equipment.

RHS President and Founder Chris Gilreath's product that he believes could be a game changer in the restaurant industry is the RinseWell, which he said is an alternative to the decades-long standard drip well seen in many ice cream and coffee shops.

According to the company's website, its technology "is a plug and play on demand rinse and sanitize station used primarily in ice cream shop settings." In short, it eliminates the continuous flow of water that can often be among a restaurant's highest bills outside of food and beverages.

Gilreath said real-world testing at some Shake's locations in Northwest Arkansas have shown promising results.

"Average dipper wells (use) about a quarter-million gallons of water per year. So our aim was to try to reduce that substantially. Our approach and design was to do a plug and play system so that the true total cost was just in the unit itself. No retraining, no retrofitting, no electrical. So we were able to achieve that. Shake's was our beta tester and we reduced water consumption by 80%."

With such a high reduction in the amount of water used, it is easy to see how the units could be easily marketable to restaurants and small shops across the country.

KEEPING IT CLEAN
But the unanswered question for Gilreath was how clean are the utensils using the RinseWells versus traditional dripper wells. E. coli (escherichia coli) is a form of bacteria that lives in the intestines of people and animals, but can become toxic outside of the intestinal tract. The Centers of Disease Control estimates that 48 million Americans a year get sick from foodborne illnesses, with about 3,000 illnesses resulting in death each year.

Gilreath got his answer after testing was done at the University of Arkansas and the results for the elimination of E. coli were equally as stunning as what the beta tests showed in terms of water usage.

"They did it in different intervals and so like at 5 seconds, RinseWell eliminated 99.64% of the E. coli as compared to 8% of the traditional dipper well," he said, adding that the tests "proved to be really efficient at sanitizing, too, and those numbers really kind of surprised m that they were that good."

The results of the testing will be published in the International Food Control Journal, which is likely to bring attention to a company that has been Gilreath's side passion during the last three years.

COLUMBIA BUSINESS SCHOOL SUPPORT
But this year, Gilreath left his corporate job and has poured himself full-time into the hobby that has been fully funded out of pocket. In that time, his company has gained traction and was been chosen to participate in the MBAs Across America program.

The team, which consists of four Columbia Business School MBA students, has been in Rogers for the last week as it travels across the country, using expertise gained in the classroom and the real world to help businesses like RHS reach their full potential.

Columbia student Jasmine Ainetchian said the program is a non-traditional internship program in its inaugural year, where eight teams of four MBAs from five different business schools embark on a six-week journey to help "small businesses and entrepreneurs who are in areas outside of the typical big, coastal cities and more in areas where they're really helping to revitalize their hometowns and their home communities."

Another member of Ainetchian's team, Elizabeth Pfeiffer, said working with RHS allowed the group to partner with a company working in the "environmental space."

As for what the team can do during a one-week visit to Northwest Arkansas, Pfeiffer said it was working with Gilreath to think through how to take RinseWell from concept and beta testing to the market.

"What we've been helping Chris do is think through commercialization of the product," she said. "So he's had the RinseWell technology at Shake's and we've been thinking through how to take (the product) into production and how to get a prototype into more stores to kind of measure that impact of the machine beyond just one store."

‘COMMUNITY OF ENTREPRENEURS’
The team's goal in its week with Gilreath and RHS is to leave him with the tools he needs to make the startup a success, student Guillaume Cazalaa said.

"Really, the idea is to leave every entrepreneur, especially Chris, with a roadmap essentially of what to do starting Monday. So whether that is a six-week plan, a six month plan, a six year plan," he said. "It's really just trying to put ourselves in his shoes and either help him understand the decisions he has to make starting next week or start to give him some of the resources or tools that he needs to make those decisions."

Pfeiffer said part of the long-term goal of MBAs Across America is to bring individuals like Gilreath into the larger entrepreneurial community where he can take advantage of some of the best business minds in the world.

"MBAs for America, as a program … Chris will become part of that community of other entrepreneurs. It's one week where we're on the ground, but it's also bringing Chris into the fold of these other entrepreneurs and he'll have our contact information and he'll be part of this and if he has questions or wants to throw (out some questions), it's a community of people because it's going to be eight teams working with six different entrepreneurs across the country and entrepreneurs in different places can learn from each other and that's kind of what we want this cross-market to be."

‘DISRUPT THE INDUSTRY’
As for what the Ivy League-educated business students think of Gilreath's concept, they said the potential is there for RinseWell to "disrupt the industry."

"There's this movement to think about water and the environment," Pfeiffer said.

"There are countless, countless industries that were launched that are kind of getting disrupted by the smaller companies just because of resource allocation and time. And that's not uncommon at all," student Atif Qadir added.

Gilreath, who did not want to disclose product prices before a formal launch, said while the future looks bright, it is hard to know a timetable for when RinseWells may start showing up in restaurants across the region, much less across the country.

"A lot of it sort of depends on that road map and the approach. We've got a pretty good idea, but until … once we gather later on and get that definite roadmap, it could be pretty quick. The importance is getting to the market. It's not going to be a long process. So much work has already been done, design's been done. There's a little bit of redesign to do, but it's (a) pretty nominal time investment on the redesign."

And while Gilreath admits that his invention is far from a "sexy" product, it is getting interest from not only the Columbia students, but also from Silicon Valley. Gilreath was in San Francisco in late June to compete in the Clean Tech Open, where he's a semi-finalist.

"It's an international incubator for clean tech companies," he explained of the competition that began in 2006 by a group of Silicon Valley executives. "Sixty percent of the companies get third-party funding at an average of $2 million. They've had outside funding since 2006 of $950 million. So the success rate is pretty good."

Depending on the outcome, Gilreath may get to production faster than anticipated. But he said being flexible is all part of being an entrepreneur.

"It's very possible as I go through this process, I may have some pivots, you know? So to answer your prior question, it's unknown the timeframe (for production launch) because I may pivot into something else and have a different scheme."

Signature Bank’s holding company White River Bancshares was among six remaining  TARP participants to see their shares auctioned by the U.S. Treasury Department last month.

The Treasury has been trying to unwind its $205 billion investment over the past few years now that the banking crisis is over and profits are returning to financial institutions helping them shore up their own capital levels.

The Troubled Asset Relief Program (TARP) was an effort to stabilize the wobbly economy, shore up bank balance sheets and spur lending. Between October 2008 and December 2009 the Treasury invested roughly $205 billion into 707 banking institutions that met the program criteria. As of July 3, the U.S. Treasury has collected $225.84 billion from its $204.9 billion Capital Purchase Program. There were still 56 banks left in the program as of the last report to Congress dated June 10. 

The Treasury since priced the auctions of six more banks, including Fayetteville-based Signature Bank (White River Bancshares). The June 20 auction was completed netting the Treasury aggregate gross proceeds of $64.3 million. The lot of preferred shares in the recent auction were discounted 0.11% in aggregate.

Signature Bank and its holding company have missed 14 quarterly payments totaling $3.2 million in uncollected proceeds for the Treasury. However, that did not deter investors from paying a premium for the shares.

White River Bancshares Series A Cumulative Perpetual Preferred stock with a face value of $16.8 million was priced at a $1,063.21 per $1,000. The premium paid for the preferred shares reflects a 6.32% reduction in yield for the new investors, according to the government report. The new yield for investors at the higher price is still 8.4%.

A smaller issue of Series B Cumulative Perpetual Preferred Stock with a face value of $840,000 was priced at $1,205.55 per $1,000 reducing the 9% yield to 7.4%.  Among the six banks in the recent auction roughly half of the shares were sold at a discount and half at a premium.

Gary Head, CEO of Signature Bank, said in December the bank agreed to the terms of the auction.

“They recently notified us and we agreed to be part of the June auction. Three different investment houses bought our shares. We were told that these are active investors in the TARP auctions,” Head said. “They have no voting rights and we have not heard anything from them yet. For us it’s business as usual.”

Jacob Asset Management acquired 12,500 shares, OSK LLC purchased 3,000 shares and Hildene Capital bought 1,300 shares of the Series A preferred stock. OSK LLC also purchased the entire lot of 840 shares of the Series B Preferred issue. The dividend yield on these preferred shares started out at 5%, but was increased to 9% in the fall of 2013. The new investors in Signature Bank will likely have to be patient for their dividends as the bank’s enforcement order does not allow it make dividend payments. They also will collect lower yields because of the premiums paid.

That said, many investors are chasing higher yields in this nearly 0% interest rate climate that is expected to continue for two more years. The dividends in preferred stock accrue even when they are not being paid. Community banks are also generally deemed lower risk investments relative to other high yield choices like sub-prime auto loans or non-rated corporate bonds.

Michael Nichol, a portfolio manager at Hildene Capital, recently told SNL Financial that pricing has become competitive in the auctions as more investors are looking for higher yielding opportunities. He said investors don’t mind paying a premium for the preferred shares even though there are missed dividend payments because with the improving economic climate they believe the back interest could trickle through in the next year or so, after which they hope the issuer will redeem at par.

The only area bank that remains in the Treasury’s TARP program is Chambers Bank, with $19.817 million still outstanding as of the June report.

The Treasury Department reports a $25 million loss on its investment in Metropolitan Bank, which has now been merged into Simmons First National. First Community Bank of Harrison also had its preferred shares auctioned by the Treasury Department earlier this year.

Banking professor and analyst John Dominick said the public perception about TARP is negative, but in reality it is one of the few government bailout programs to ever turn a profit. Dominick is a board member at Signature Bank.

Building permits in Fort Smith, Greenwood and Van Buren were a combined $15.69 million in June, up 32.3% from the same month last year when permits only totaled $11.859 million in the three cities.

Building permits for all three cities are up 45.68% percent for the first half of the year compared to the same period last year. Total permits across the cities was $96.985 million from January through June this year, while the same period in 2013 saw only $66.573 million in permits issued.

Much of the activity has focused in Fort Smith, which has had $77.315 million in building permits. Several large development projects, including the $2 million renovation of the OTASCO building in downtown, a $3 million renovation of six buildings along Garrison Avenue into a mixed-use property and several wastewater projects by the city of Fort Smith, have lead to Fort Smith's high totals this year.

FORT SMITH
During June, 207 permits were issued in the city at a value of $11.069 million. Of the permits issued last month, 137 were residential permits valued at $4.667 million, and an additional 33 were commercial building permits valued at $4.53 million.

New commercial construction was soft during the month, with only three permits issued for a total value of $631,321. The action in commercial building was on the renovation side, where 12 permits worth $2.464 million were issued.

Driving a lot of permits is the construction of new homes at Chaffee Crossing and other new developments on the east side of town. Nineteen new residential building permits resulted in $3.996 million in construction last month.

Comparing this year's totals to last year, Fort Smith saw a rise in permits issued and total values. In terms of value, the city saw an overall increase of 49.08% from $7.425 million in June 2013 to $11.069 million this year.

GREENWOOD, VAN BUREN PERMITS
Greenwood issued four building permits last month for a total value of $518,950. The total represents a decline of 52.99% from last year's total of five permits for $1.104 million.

Of the four permits issued, three were for new residential construction valued at $509,200.

Van Buren's 37.87% rise in building permits from last year's total of $2.975 million to this year's total of $4.102 million is largely driven by construction tied to a sales tax vote in November 2012.

The vote approved a one cent sales tax to construction a new fire station, police department, expand parks and build a new senior center.

A building permit valued at $3.127 million was issued for the new senior center to be built at 607 Knox St. Mayor Bob Freeman said the city is seeking LEED certification for the building, one of very few in Van Buren to carry such a designation for energy efficiency.
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In addition to the senior center, another 12 single family residential permits were issued at a value of $891,000.

2013 RECAP
Combined values in the three cities during 2013 were $203.037 million, compared to $157.32 million during 2012. The 2013 value is above the $201.079 million in 2011.

Fort Smith closed 2013 with the largest share of valuations, logging $177.687 million (a one-year increase of about 30.24% from $136.428 million in 2012), while Van Buren was the next largest with $17.067 million (a one-year increase of 38.96% from $12.282 million in 2012). Greenwood posted an additional $8.283 million, the only city to show a decrease from the previous year's total of $8.609 million (a decrease of 3.79%).

The gains in the Fort Smith market were largely from industrial construction projects at Chaffee Crossing, the construction of Mercy's new orthopedic hospital along Phoenix Avenue and various municipal construction projects across the city.

An initiated act to raise the state’s minimum wage and a proposed constitutional amendment to allow liquor sales in all 75 counties in Arkansas both submitted more than the minimum number needed to be considered for the November ballot.

Supporters for a proposal to allow for medical marijuana said they fell short of signatures to qualify.

Arkansans for Compassionate Care, which qualified a medical marijuana proposal that fell short in 2012, only collected about 52,000 signatures well short of the 62,507 needed to be reviewed by the Secretary of State’s office.

But Secretary of State Mark Martin’s office will review the two other proposals.

Let Arkansas Decide turned in just under 85,000 signatures Monday. The measure would legalize alcohol sales statewide. Currently, 38 of the state’s 75 counties are “wet,” while 37 are “dry.”

Supporters need to keep at least 78,133 signatures from registered voters to qualify for the November ballot. Give Arkansans a Raise Now, the group pushing for passage of a hike in the state minimum wage, turned in more than 77,000 signatures. It needed to muster 62,507 signatures to qualify for the general election ballot.

The initiated act would raise the Arkansas minimum wage from $6.25 per hour to $8.50 incrementally over the next three years if it is approved.

After an initial review by the Secretary of State’s office, Let Arkansas Decide and Give Arkansans a Raise Now could both be allowed to collect additional signatures as part of a cure period during the next 30 days.

Ed Thicksten believes building the Interstate 49 bridge and connection between Alma and Barling is a “cornerstone” part of system, and the Arkansas Highway & Transportation Department is sticking with a preliminary and conservative estimate that the 15-mile connection will cost $350 million.

Multi-state and local officials gathered June 25 in Alma to start a campaign to build a stretch of Interstate from Fort Smith to Alma that they say would eventually give Fort Smith a non-stop interstate route to Canada.

In attendance at the June event was Gard Wayt, president of the I-49 International Coalition. The Coalition included “International” in its name because Interstate 29 already exists from Kansas City to Winnipeg, Canada, and completing I-49 from Kansas City to New Orleans will create a 1,700-mile uninterrupted Interstate Trade Corridor from Canada through the heart of America to New Orleans – and, through the Port System of Louisiana, to Central/ South America and points beyond through the expanding Panama Canal. 

“Along the way, this North-South Interstate route will intersect 9 existing East-West Interstate highways to create a comprehensive transportation grid that will enhance the movement of food, goods, energy and people to and from anywhere in mid-America and the rest of the world,” the I-49 Coalition notes on its website.

Their are two sections of I-49 in western Arkansas without designated funding or engineering work. The shortest is the 15-mile section between the I-40/I-49 interchange near Alma and across the Arkansas River into Barling. That work, according to Randy Ort with the Arkansas Highway & Transportation Department, will cost in today’s dollars around $350 million. That’s about $23.3 million per mile.

The longer stretch is about 185 miles and runs from just north of Greenwood to Texarkana. Cost estimates for that portion are around $3 billion. That’s about $16.2 million per mile

An about 6-mile section of the interstate is near completion through Chaffee Crossing and stretches from Barling to U.S. 71 South between Fort Smith and Greenwood. That stretch cost $95 million to build, or about $16 million per mile.

Thicksten, a former Arkansas legislator from Alma who does not hold an official position with the I-49 Coalition but has become an advocate for the “I-49 Build the Bridge” push, said lobbying for precise engineering on the bridge is key to obtaining federal and state dollars for the 15-mile section.

“It’s the cornerstone, if you would, for everything that will happen for everything to connect that road between Alma and Texarkana,” Thicksten said. “If you don’t do the engineering, and don’t get firm figures, then our federal legislators and our state legislators can’t do anything. You can’t go to Congress, you can’t go to Congressman (Steve) Womack and say, ‘This is about what we think it will cost.’ That won’t work with this. That just won’t work.”

Thicksten said part of the lobbying push is to convince the AHTD to move forward on precise engineering work. He admitted that Congressional inability to restore future solvency to the federal Highway Trust Fund “puts in jeopardy” existing highway projects and causes state highway agencies to be reluctant to study future project.

“But what we’d like is to get a commitment from them (AHTD), as much as they can, on this because Congress, at some point, Congress will get this (Highway Trust Fund) done. ... Let’s not wait, let’s be prepared to go forward,” he said.

Thicksten said conversations with Arkansas Highway Commissioners and AHTD officials about the matter have been friendly, but said “it will take continued pressure in a positive way” to get the engineering work authorized and completed.

When Wal-Mart calls, people listen. And the listening could result in more new manufacturing jobs being announced in Northwest Arkansas as a result of the retailer’s efforts to buy more American-made products.

The retail behemoth on Tuesday (July 8) drew a crowd of more than 500 suppliers to its home office and apparel center in Bentonville for its first ever “Open Call” meeting in a quest to source more products made in the America. There were more than 800 meetings scheduled today (July 8) and Walmart U.S. CEO Bill Simon said he had shopping to do. Walmart’s head merchandiser Duncan Mac Naughton also said he was eager to make some deals.

Simon, who introduced Gov. Mike Beebe at the morning session, praised Arkansas for being active in trying to recruit suppliers.

“A country that does not make anything can never be great,” Beebe said in his opening remarks.  “Nobody can match America when we set our mind to it. In Arkansas we believe that workforce training is also crucial to setting up manufacturing hubs. But can’t train these professionals as though they are a farm club for other states. Arkansas is open for business.”

He thanked Wal-Mart for entertaining the conversation and also jokingly told potential suppliers that “Wal-Mart likes you better if you manufacture in Arkansas.”

Jospeh Rosenberg, vice president of sales for Aluf Plastics, made the trip from his home state of New York and was setting up for his buyer meeting in Room 35 when The City Wire caught up with him Tuesday morning at Wal-Mart’s home office.

“We sell plastic bags manufactured in Orange (New York). Aluf bags are already sold in lots of retail stores but this is my first pitch to Wal-Mart,” Rosenberg said. 

BAGS, BALLS AND TACO PLATES
He was pitching a consumer product tagged “Harmonyx,” a three-ply bag with Microban antimicrobial protection. It is made from 50% recycled material and comes in a reversible black outside, white inside color. Aside from being made in the U.S. the most unique thing about this product was its packaging. It comes in a self-dispensing tube that stands upright in a pantry or under the sink, requiring less space on the shelf. The company has patented the self-dispensing tube packaging.

“We would love to make these products for Wal-Mart and we have a big private label business, perhaps Great Value in the future,” Rosenberg said.

Down the hall, Steven Udwin, CEO of Enor Corp., made the trip to Wal-Mart from his home in New Jersey. He said Enor is already a Wal-Mart supplier for toy/sporting good items. Udwin told The City Wire they were meeting with Wal-Mart buyers today to show products that will be made in their new South Carolina operations, soon to be onshored from production in China.

Encor was showing Wal-Mart buyers whiffle balls, football tees and soccer stands and a catalog of other plastic toy items and sporting goods that will be made in the new South Carolina plant. Udwin said the company chose South Carolina for its new manufacturing facility because of the relationship they have with Kent Bicycles, located across the street of their new site.

Hugh Jarratt, founder of Jarratt Industries in Fayetteville, presented his taco plate to buyers on Tuesday and walked away with an order in hand. Jarratt said finding a manufacturer in his own backyard makes it possible for him to be in business. Polytech Molding in Praire Grove makes the plastic taco plates and double-dipper bowls for Jarratt. They also handle his shipping and fulfillment orders.

SUPPLY CHAIN 
Bill Simon, CEO of Wal-Mart U.S., told the crowd of 500-plus during the opening session that Wal-Mart hopes to lead the charge of helping to develop manufacturing and supply chain hubs across the United States over the next decade.

He said assembling the parts needed to manufacture certain products is a critical piece of the puzzle, which is why the retailer extended an open invitation to suppliers to attend the Manufacturing Summit Aug. 14 to 15 in Denver, Colo.

Michelle Gloeckler, executive vice president of consumables and U.S. manufacturing lead at Walmart, told The City Wire that this year’s summit will connect suppliers who make component parts with companies wanting to onshore and needing to source manufacturing components. She said being able to source all the components is one of the biggest factors faced company’s looking to onshore or relocate. Gloeckler rejected the notion that Wal-Mart is a major influencer for companies in where they choose a manufacturing site. 

“When you think of the meeting in Orlando last year and the Denver meeting next month, there will be some product suppliers coming in with a laundry list of components and site characteristics they need to make onshoring happen. They will be able to meet with several states and component suppliers all in the course of two days,” Gloeckler said.

She said many of the suppliers were already considering onshoring possibilities.

“We are able to help them make contact with state leaders and we have given some extended contracts when it makes sense,” Gloeckler said.

ARKANSAS DRAW
Grant Tenniille, executive director for the Arkansas Economic Development Commission, told The City Wire that there are two new manufacturing deals coming to Northwest Arkansas as a result of the Wal-Mart initiatives.

“Expect an announcement later this summer,” he teased.

When probed, Tennille said to think of Redman Associates and what they make (plastic ride-on toys) and the two other manufacturing deals require similar components. Redman announced in October 2013 plans to invest $6.5 million in a toy assembly operation in Rogers estimated to create around 75 jobs.

“The companies we have visited with so far have expressed an interest in Northwest Arkansas for their onshoring effort because they see Wal-Mart as their largest customer.     Plastics and plastic injection molding is turning out to be a niche area that Arkansas has some capacity in, as well as a trained workforce. It has given us a sweet spot,” Tennille said.

He said it’s not just those manufacturers making the end-use plastic products, but those suppliers who recycle used product into beads that go back into new products.

“We hope to keep tightening up the supply chain for plastics. We are really bullish on plastic injection molding. The geographic region is the a large slice of Arkansas in the Northwest quadrant with strong companies in Mountain Home, in central Arkansas, Fort Smith and Northwest Arkansas,” Tennille said.

He said state uses its leverage with Wal-Mart when recruiting new businesses. But it often comes down to the workforce needed to run a manufacturing site and access to the raw materials.

When asked why the biggest onshoring deals announced so far by Wal-Mart are both in South Carolina — Kent Bicycles and Element Televisions — Tennille grinned and said “we have more deals coming.”

“When we announce the next two deals later this summer, Arkansas will have three, the same number of South Carolina and more than most states,” Tennille said.

Allens, an iconic name in Arkansas’ business history, is changing its moniker effective immediately to Sager Creek Vegetable Company as part of new ownership and management changes.

Officials with Siloam Springs-based Sager Creek made the announcement Tuesday (July 8), and said product brand names like Allens, veg-all, Allens Popeye Spinach, Freshlike, TRAPPEY’S, Princella, Allens Butterfield, Royal Prince and Sugary Sam will not change..

“Sager Creek is a beautiful resource that runs through our hometown of Siloam Springs, Ark.,” CEO Chris Kiser said in the statement. “Our company was founded in this region in 1926, and this place has nurtured and helped sustain our business. Our new name reflects our history and better positions us to strengthen our brands in the marketplace.”

Sager Creek Acquisitions Corp. acquired the 87-year-old Allens, Inc., in February of this year. Kiser was named CEO in March. It was the first time in 88 years that the Allen family is not running the company. CEO Josh Allen stepped away from the family business as a result of the company’s bankruptcy sale.

Kiser has more than 20 years experience in the food business, from his early years as a vice president for Campbell Soup Company to managing national accounts for Diago, to nearly seven years at Pinnacle Food as executive vice president of sales. He later spent three years as president of AdvancePierre Foods, overseeing the company’s retail and foodservice business.

Sager Creek now employs more than 1,000 people in Arkansas, Wisconsin and North Carolina.

ALLENS’ HISTORY
Allens filed bankruptcy in October, and the company showed $294.465 million in assets and debts of $287.945 million. The company notes that income had been tight since 2012, when Allens reported $420 million in 2012 revenue, down 30% from 2011. Allens officials made several moves in 2012 to shore up business, including a March 2012 announcement that Allens was selling six frozen vegetable brands to the French company, Bonduelle Group.

The company also announced in early 2012 that the company would move operations and 150 jobs from Van Buren into an Allens canning operation in Siloam Springs. The company’s Van Buren warehouse operation was expected to remain open.

Consolidating the canning operations came more than 30 months after Van Buren operations were expanded. In June 2010 the company announced a more than $20 million expansion that included a $13.5 million investment in the company’s Van Buren operation. The $13.5 million investment in Van Buren expanded the company’s capacity to process sweet potatoes.

Twice in the past few years Allens' execs sought to merge with Seneca Foods. Once in 2011, the two companies said they in hoped to merge, but after months of due diligence the firms could not reach an agreement and abandoned the deal.

Allens then approached Seneca Foods about being the stalking horse bidder in the firm’s bankruptcy sale. Seneca was outbid by Sager Creek Acquisition and McCall Foods, who submitted the backup offer.

Economic conditions in two of Arkansas’ three largest metro areas continue to be stable or improving, with central Arkansas – the state’s largest metro – continuing to show signs of weakness that began in the first quarter of 2013, according to The Compass Report’s analysis of first quarter 2014 data.

The quarterly Compass Report is managed by The City Wire. The report is the only independent analysis of economic conditions in Arkansas’ three largest metro areas.

To underscore the impact of the three largest metro areas, for March of this year the unemployment rate for the rest of the state was 8%, down 0.5% from March 2013 to March 2014. The statewide unemployment rate with the three largest metros added back in was 7%, down 0.5% March-on-March.

NORTHWEST ARKANSAS
Continued gains in key employment sectors and building activity helped the Northwest Arkansas economy begin 2014 with a strong quarter. The first quarter 2014 grade of B- was slightly off compared to the first quarter 2013 grade of B and reflected a slight decline form the the fourth quarter of 2014.

However, while the regional economy slowed compared to the first quarter of 2013, the grade reflects an economy in expansion mode. For example, non-farm employment in the region was 217,400 in March, well ahead of the 213,600 in March 2013. Building permit values in the region totaled $126.551 million in the first quarter, up over the $100.803 million in the first quarter of 2013.

Economist Jeff Collins, who conducts data collection and analysis for The Compass Report, said the Northwest Arkansas economy may have slowed but the pace of growth continues to outpace the state’s largest metro economy.

“Despite being roughly two-thirds the size of the Central Arkansas economy, nonfarm employment grew at at three times the rate of the state’s largest MSA,” Collins noted in the analysis. “Looking at the real estate data for the two regions, building permits in the third quarter for Northest Arkansas were roughly 87% of the total for Central Arkansas. However, the value of the permits during the period was roughly 151% of that for Central Arkansas.”

A potential problem on the horizon is the connection between regional employment and housing sector growth.

“There has been considerable development of residential real estate in the last two quarters which may cause disequillibrium in the housing market given slowing employment growth rates,” Collins wrote.

FORT SMITH REGION
The Compass Report for the first quarter of 2014 in the Fort Smith area shows gains compared to the first quarter of 2013, but a small decline from the fourth quarter of 2013. A first quarter 2014 grade of C was better than the C- of the first quarter of 2013 but below the C+ of the fourth quarter of 2013.

Collins said regional economic conditions were “somewhat encouraging given the national statistics.”

Non-farm employment in the metro area hit 116,600 in March, up from 116,000 in March 2013. And although the metro jobless rate fell from 8.1% in March 2013 to 6.9% in March 2014, the number of employed did not gain. That was partially reflected in continued pressure on metro sales tax collections. For example, tax collections in Fort Smith totaled $10.246 million in the first quarter, below the $10.377 million in the same quarter of 2013.

“The number of employed was basically unchanged year-on-year. These data indicate the local labor market is improving primarily due to people either leaving the area or choosing not to look for work. Either way, it would be difficult to conclude the employment situation is improving in the Fort Smith area despite the declining unemployment rate,” Collins wrote.

And while the employment picture in the Fort Smith region is not pretty, Collins said “the region has performed relatively well compared to most other metros and the state as a whole.”

CENTRAL ARKANSAS
The 2014 first quarter economy in the central Arkansas area received a grade of C- meaning that economic conditions declined slightly compared to the first quarter of 201 and were unchanged from the previous four quarters of the year.

“The Central Arkansas regional economy continues to underperform. This is likely due to weak national growth and the impact of reduced state and local government spending,” according to Collins.

Non-farm employment ended the quarter at 346,100, up from 344,900 in March 2013. However, sales tax revenue in the region continues to lag.

“Despite improvement in the unemployment rate, nonfarm employment added only 1,200 jobs or 0.3% since March 2013. Given recent job creation data for the Central Arkansas metro, this was a weak showing,” Collins noted. “By comparison, the Northwest Arkansas regional economy added 3,800 or 1.8% while the Fort Smith regional economy added 600 jobs or 0.5% during the same period.”

REGIONAL GRADE HISTORY
FORT SMITH REGION – Fort Smith regional economy
1Q 2014: C
4Q 2013: C+
3Q 2013: C+
2Q 2013: C
1Q 2013: C-
4Q 2012: C
3Q 2012: C-
2Q 2012: C-
1Q 2012: C-
4Q 2011: C-
3Q 2011: C
2Q 2011: C
1Q 2011: C-
4Q 2010: C-/D+
3Q 2010: C-
2Q 2010: C-
1Q 2010: C-
4Q 2009: D
3Q 2009: D
2Q 2009: D-
1Q 2009: D+

NORTHWEST ARKANSAS – Northwest Arkansas regional economy
1Q 2014: B-
4Q 2013: B+
3Q 2013: B+
2Q 2013: B
1Q 2013: B
4Q 2012: C
3Q 2012: B+
2Q 2012: B-
1Q 2012: B-

CENTRAL ARKANSAS – Central Arkansas regional economy
1Q 2014: C-
4Q 2013: C-
3Q 2013: C-
2Q 2013: C-
1Q 2013: C-
4Q 2012: B-
3Q 2012: C-
2Q 2012: C+
1Q 2012: C-

DATA AND REPORT DOCUMENTS
Link here for the raw data used to prepare The Compass Report for the three metro areas.

Link here for more narrative about regional and national economic conditions.

UNDERSTANDING THE COMPASS REPORT GRADES
A key factor in understanding The Compass is in understanding the “grading” approach used to measure the current and leading economic indicators.

The strategy is to place the most recent data in historical context. Average values for the percent change over the referenced time period were calculated, as were standard deviations for each measure.

The more similar current values are to historic averages the more likely the indicator grade is to be a “C.”

The farther away the observed value, as measured by the standard deviation of the data, the more divergent the grade from “C.” In other words, “C” reflects no change in economic activity. The grades “B” or “A” indicate improvement above the historical average, and “D” and “F” indicate a decline in economic activity compared to the historical average.

A building permit valued at $9.764 million was issued last week for the Ben Geren Aquatics Center and Sebastian County Judge David Hudson said it was a sign that the project is on schedule for a Memorial Day 2015 opening.

Hudson said sealed bids unveiled for different aspects of the aquatics center were favorable enough for the site that amenities initially scaled back were able to be reintroduced to the design of the aquatics center.

"One area of enhancements that I was particularly grateful to address was more shade structures that will serve everybody well, particularly parents, grandparents and adults there for their children. They'll appreciate more shade and I've appreciated that," he said, adding that there would be "enhancements to some of the amenities to the lazy river, like the fake rock and a waterfall, things like that. It will help it be more visually stimulating and enjoyable."

In all, Hudson said it appears bids came in about $900,000 under what the county and city of Fort Smith were expecting for the nearly $11 million project. But he said the money saved was not just extra money to be put back into each government's designated parks or capital improvement funds.

"In order to try to get the project within budget, some of the features were scaled back," he said, adding that the hope was to try and get low bids and reintroduce those amenities based on the actual numbers versus estimates.

"But understanding that we were curtailing features below what we would anticipate were desirable, frankly, I was relieved to bring these features into the project. I think people will be thankful we've done that and it will serve us well for years to come."

AQUATICS CENTER MANAGEMENT
With construction and final designs on track and with building permits now issued, Hudson said focus is shifting to management in anticipation of the aquatic center's opening next year. He said the city and county are soliciting RFQs (request for quotes) from companies interested in managing the aquatic center for the governments.

While the governments are seeking RFQs, Hudson said hiring an outside firm to manage the facility is not something he or his counterparts at the city are ready to do just yet. He said the governments are in an exploratory phase when it comes to management.

"It's worth giving consideration to someone with experience to see what we can learn from them and what they can offer to run this as efficiently as we can," he said.

The final recommendation to the Fort Smith Board of Directors and the Sebastian County Quorum Court will come after the RFQs have arrived, as well as an updated business analysis from Ballard King & Associates.

Ballard authored a January 2010 study that showed the aquatics center could lose somewhere between $113,472 and $125,213 per year. But Hudson said total revenues from municipal water parks in other parts of the state show the facilities producing a positive cash flow.

"The Rogers facility had a good year in their first year. Their revenues exceeded expenses by $400,000. Clarksville (was) over, I think, by $20,000. Those were good signs for us that if these are properly priced and operated well, they'll be favorably received. These could be self-sufficient and have funds go back into maintenance and to some extent, improvement. Those are the goals there."

Hudson said he was ready to get the updated plan from Ballard, as well as the RFQs, as the two governments work together "to assess the value of services that could be rendered and how that will work with our program, that's the goal. Whether we see value or not, we don't know."

He said the landscape for an aquatics center from a business standpoint was different now than when the study was being researched and authored in the latter half of 2009. And that is why work is starting now just after the multi-million building permit was issued to ensure the aquatic center is ready for business on Memorial Day 2015. As more activity happens at the construction site, Hudson said citizens should also expect more action by the administration and legislative bodies of both governments.

"(Updates will) continue to be reported and discussed between the city and county. I imagine more meetings will be necessary as discussions need to be had. This will be a fun project for people and I hope it is an asset for our area that keeps us competitive in the regional marketplace."

An item before the Fort Smith Planning Commission Tuesday evening (July 8) could convert the historic Maness schoolhouse into the first commercial business to locate at the Chaffee Crossing development on the east side of the city.

Owner Brenda Gregory of the Red Rooster Bistro confirmed that if the property at 8801 Wells Lake Road is rezoned by the planning commission and the Fort Smith Board of Directors from not zoned to commercial, she and her husband, Kenneth, would expand their business to include a third location at Chaffee Crossing.

The proposed restaurant development would sit on about 2.58 acres at the intersection of Massard and Wells Lake Roads, according to a development plan review submitted to the commission, and will "utilize the existing Maness Schoolhouse for a 120 seat restaurant with the associated parking. If approved, they will be adding a kitchen and enclosing the existing outdoor patio area as well as remodeling the existing structure."

The location is part of a larger tract of land purchased by developers Jim Meadows and Ronnie Rouse's RUM Inc. on July 7, 2011, according to records held by the Fort Chaffee Redevelopment Authority.

The FCRA records indicate that RUM Inc. purchased 38.84 acres of land for a sale price of $971,000. At the time of sale, FCRA Executive Director Ivy Owen described the development of the land as being “similar to the Hendrix College development at Conway with commercial and retail centers scattered in.”

Attempts to contact Meadows Tuesday were unsuccessful, but the development plan review submitted for approval did not specify any further development at the site at this time.

Pat Mickle of Mickle Wagner Coleman, the agent for the restaurant development, confirmed that no firm development plan for the rest of the property was in place but said he expects "some sort of mixed use deal. It would be some mixture of lighter commercial and some residential, but I don't know. You can't tell what form mixed use will take."

Mickle said the type of mixed use he expects in the future include possible commercial structures that have businesses on the ground floors and apartments on the second and third floors.

The zoning request for the site, Commercial Light (C-2) allows for such developments, with the development plan stating the zoning would allow for a "wide variety of retail uses including clothing stores, specialty shops and restaurants."

"C-2 zoning is appropriate in the Commercial Neighborhood, General Commercial, Mixed Use Residential, and Mixed Use Employment classification of the Master Land Use Plan," the development plan said. The plan also states that the restaurant will be able to accommodate 120 customers and would have 55 parking places.

Gregory explained the layout of the restaurant, including the addition to the schoolhouse, when reached by telephone Tuesday. She said the one-room structure on site would be kept in its original state on the exterior of the building, while the interior would be used as the seating area.

"The old school house has such character. That will be kept as our dining area," she said. "Hopefully the city (planning commission and board of directors) will give us permission to build a new kitchen. The old school house was a one room school house built by German prisoners of war in 1943 and that will remain untouched on the exterior. We will just remodel on the inside. It will be a real neat and pretty place. We'll have outside dining, as well."

Gregory said she has no fears about adding her third location at the Chaffee Crossing development and being the first restaurant to build in the area because the site is already busy with residents and employees of other businesses, with more to come. In all, Gregory said the restaurant would employee somewhere from 20 to 25 people.

"When you drive out there, that area is just growing very fast. As far as a business, we will be the first. You know about the industry that is out there, but as far as commercial, I will be the first. … They are building a church out there. There are multiple subdivisions and there are apartments. … I feel like it is the upcoming place for Fort Smith. That is the only direction Fort Smith can go to grow."

She said the possibility of a new high school and the planned osteopathic college are another reason why she and her husband decided to expand beyond their current locations on Rogers Avenue and inside the Brick City Emporium.

No date has been set for a grand opening, Gregory said, as the re-zoning will first need to be approved by the Fort Smith Board of Directors at a later date.

Mickle said he did not have an estimate for the total cost of the restaurant development.

The re-zoning passed the planning commission Tuesday evening with a 9-0 vote.

Officials involved in the remediation efforts of the shuttered Whirlpool manufacturing facility gave an update to the Fort Smith Board of Directors on efforts to clean up a plume of potentially cancer-causing trichloroethylene (TCE) in the area in and around its closed factory.

Jeff Noel, Whirlpool's corporate vice president of communications and public affairs, told the Board at a Tuesday (July 8) study session held at the Fort Smith Senior Activity Center on Cavanaugh Road that the company had made meaningful progress on remediation during the last six months.

"You'll see that we have, I think, advanced the ball very nicely in terms of the remediation," he said.

REMEDIATION EFFORTS
In all, Noel told the Board that more than 25,000 gallons from two chemical oxidation treatments had been pumped into the plume at about 100 different "access points."

"We worked with the Arkansas Department of Environmental Quality, based on your direction, to add that, if you will, to the RADD to make sure we were address injections in the neck of the plume itself. And we think over the last several months, that level of activity has been very, very effective."

Noel said the last treatments completed during the last week of May and the first weeks of June were still being analyzed for effectiveness before moving forward with further treatments. In all, he said more than 200 holes have been punched in the site.

Project Manager Mike Ellis of ENVIRON, the environmental consulting firm hired by Whirlpool to deal with the TCE plume and remediation of the site, said his firm's ongoing monitoring of the site had showed improvements since chemical oxidation treatments had begun.

"You'll see that the TCE in the groundwater plume, on average, that trend is continuing to decrease," he said. "We will see and have seen fluctuations in the concentrations of TCE in the groundwater. We see increases and decreases. What we're referring to is looking at the data package as a whole (and) average concentrations continue to decrease."

Ellis said ENVIRON expected continued "fluctuations in the plume," adding that exact boundaries of the plume could change based on concentrations of TCE near the site.

In questioning from the Board, Vice Mayor Kevin Settle asked for improved communication, quoting an April 24 memo from the ADEQ first reported by The City Wire that detailed "an area of highly impacted soils to as deep as 25' - 30' have been located at the northwest corner of the Whirlpool building ... "

"When you're talking about communication, what I would like to see is if you know something's coming up, give us a heads up. Because this came up right after a meeting you had with us and I would have rather had it as a heads up than finding out about it after the fact."

Noel agreed with Settle's statement and said the company would work to better inform the Board of its meetings and interactions with ADEQ. After the meeting, Noel did clarify that while the memo in question discussed "source removal" of some of the contaminated soil, it did not necessarily imply that the company was going to be actually be removing any dirt from the site.

"The way I read the letter, and I think the way Mike (Ellis) reads the letter, is what we need to do is … how are we proposing to go in and collect the sampling in that area and then get the report and submit it to ADEQ about what it is that we would propose to do. And I don't think there was anything in those letters that said ADEQ is expecting soil removal or ADEQ is expecting no soil removal. What they're looking for is the right science, the right best practice remedy and the best approach for dealing with the site which is what we're compiling now. It would be premature to say what we're doing until we get all the information, get the report and spend some time on it. … That's the way we read it and I really honestly believe that's how ADEQ views it."

Asked by the Board about how ADEQ views the current efforts by Whirlpool to remediate the site, Deputy Director Ryan Benefield said the agency thought the process was properly progressing.

"I do believe we're getting the information (we need). If we had not been getting (the information), you'd be seeing more letters than that stack where we were asking for more information."

LEGAL RESOLUTION
Noel also told the Board about the settlement of the class action lawsuit, which would only pay out damages caused by the reduction of property values that occurred in 2013 as a result of the TCE contamination.

Property owners eligible to participate in the settlement must live within an area bounded by Ingersoll and Brazil Avenues, Jenny Lind Road and Ferguson Street with those property owners receiving "either an amount equal to the devaluation estimated by the County assessor or the devaluation as determined by an independent property appraiser," a flyer available to residents Tuesday said.

Residents who live outside the area will receive $5,000 "and possibly more in the future, if TCE is detected above threshold levels in groundwater beneath their property."

Not included, Noel said, were alleged medical claims, which could still be brought against the company in court at a later time should residents choose to sue for damages.

City Director Pam Weber told her fellow Board members that while the settlement may be viewed as a resolution for the residents harmed by the devaluation of their properties, it was not the end of their suffering.

"While I'm glad that a settlement is in the works for the property owners, I want the Board to be aware that doesn't solve the future issue of that property and what's going to happen to it in the future and the fact that it's not going to appreciate, in my opinion. It's still going to be a fiscal problem even after the settlement for those residents."

REDEVELOPMENT
Noel said redevelopment of the site was moving forward, with a purchase agreement now in place for part of the property that he expects to close within the next 45 to 60 days. Spartan Logistics announced its plans to acquire the site's the almost 620,000-square-foot warehouse and distribution facility.

The company said its operations in Fort Smith could total 200 employees once the space is fully in use.

Noel himself did not confirm that Spartan would purchase the site, but said it was a "big step forward." He also said Whirlpool was in fruitful discussions with a possible buyer for other parts of the property, but declined to disclose what type of company may purchase the site.

"I don't want to speak on their behalf, but what we have said from the beginning is that we anticipate that this will be some type of a mixed use development. There will probably be some strategic demolition and some new construction. So long term, because it's a long term plan, it's probably going to be industry, light industry, technology. I suspect that we'll have mixed use development in that area, but I can't speak on their behalf until we know who it's going to be and we know what they're proposing to do. But that's fairly consistent with what we're hearing."

While Whirlpool did initially plan to sell off all of the property, Noel did say that the company would be retaining a portion of property in order to maintain the ability to monitor the site even after remediation efforts have ended.

One million taco plates. And potentially more local jobs. That was the order and the impact Wal-Mart handed to Hugh Jarratt of Fayetteville and his local manufacturer PolyTech Moldings in Prairie Grove during a 30-minute meeting at the retailer’s “Open Call” event held in Bentonville on Tuesday (July 8). 

Jarratt, founder of Jarratt Industries, described the experience as surreal and said the meeting itself went incredibly smooth thanks to John McCutcheon, one of the owners of PolyTech Moldings.

“I would not have gotten this order without PolyTech. They have been with me from the beginning. When Wal-Mart asked how quickly I could supply them with the product, John stepped up and assured them it could be done in short order,” Jarratt told The City Wire.

He said the buyers had done their homework before his 11:15 a.m. meeting. The biggest question was product lead time given the large order. The Jarratt Industries “taco plate should be on Walmart.com within 30 days and in-stores soon thereafter, Jarratt said.

“We are slated to have a follow-up meeting on the logistics of it all in the next couple of weeks. I will know more after that,” he said. “One unexpected moment for me was when Bill Simon (CEO of Walmart U.S.) opened the door on our meeting to congratulate me on the order. I was not expecting that.”

PLASTICS JOBS
McCutcheon said he and his partner Jim Benton purchased PolyTech Moldings about 18 months ago just before Wal-Mart announced its U.S. Manufacturing initiative. Since the Wal-Mart U.S. push, McCutcheon said PolyTech’s business has taken off and continues to get new business from Wal-Mart suppliers looking to onshore their plastics product manufacturing.

“Before this big order from Wal-Mart today, we were already making product for Smith’s Consumer Products of Conway, a longtime Wal-Mart supplier. They moved production from China to us in line with Wal-Mart’s announcement. We make knife sharpeners for Smith’s,” McCutcheon told The City Wire.

He said PolyTech also makes fitness products for Nautilus sold at Wal-Mart, and this business was also onshored from China in the last year. McCutcheon was reluctant to give other names but said there are more companies PolyTech is working with who plan to sell or already sell to Wal-Mart Stores. 

This uptick in business has prompted the Prairie Grove plastics manufacturer to expand. McCutcheon said PolyTech is working with the Arkansas Economic Development Commission, as they have planned to add 20 new jobs in the next year, purchase new equipment and expand the schedule to six production days from five. The new jobs are a 40% gain to PolyTech’s employee count of 50.

Grant Tennille, executive director of AEDC, told The City Wire that plastics injection molding was a “sweet spot” for the region. He echoed the fact that suppliers are looking at Northwest Arkansas and surrounding regions of Mountain Home, Conway and Fort Smith for the plastics molding services. Tennille said there will be two new NWA announcements related to Wal-Mart’s U.S. manufacturing made by summer’s end, and the state continues to pitch Arkansas to any manufacturer or component supplier looking for a new home closer to Wal-Mart’s front door.

TRASH BAGS AND HOLDERS
John Cundy of Detroit, Mi., inventer of Trash-Ease, a device that turns trash bags into portable trash cans, was smiling from ear to ear after his meeting with Wal-Mart buyers Tuesday.

“Three years ago me and other parents had to pick up trash at our kids’ track meet and I thought I don’t want to that do again. I went home and crafted a device that could clamp to a ledge surface like a bleacher, countertop or tailgate and hold up to a 30-gallon trash bag,” Cundy said.

Cundy is a clay sculptor of model cars for General Motors, but in his spare time he is CEO of Trash-Ease, a company he pitched to producers of Shark Tank last year. He outsources the manufacturing to a company in northern Michigan, his home state with an annual capacity of one million items per year.

In the first year, Cundy said he sold 5,000 units to Ace Hardware. In his second year he sold 20,000 units through Lowe’s. This year until Tuesday, Cundy said sales were at 42,000, but Wal-Mart doubled that with an order for 50,000 units.

“Wal-Mart made the year and more, with the biggest order of my life,” Cundy said.

Joseph Rosenberg, second generation business owner of Aluf Plastics from Orangeburg, N.Y., pitched trash bags to Wal-Mart at his first supplier meeting on Tuesday. When The City Wire caught up with Rosenberg he was hopeful his “Harmonyx” bag would be a hit because of its innovative packaging and three-ply, yet aesthetic, reversible colors of black and white.

After his meeting, Rosenberg told The City Wire that Wal-Mart loved the patented packaging of Harmonyx, but it was another product that garnered the most attention, the UltraSac bags which are made from 90% recycled materials.

“We are thrilled that Wal-Mart wants our product. We are going to sell them our branded UltraSac bags. This order from Wal-Mart is a testament to our family business that is now in its second generation,” Rosenberg said. 

He said the Hamonyx product was deemed a little too “premium” for Wal-Mart’s core customer, but the patented cylinder packaging that requires less shelf space, is something they might expand to other products.

BUYER MINDSET
Bill Simon, CEO of Walmart U.S., said last week top management had a meeting with its buyer merchants to lay down the ground rules for Tuesday’s open call event. He said while the buyers have the responsibility to select products that will sell, helping supplier and retailer alike, on this day they were to think about a bigger picture — expanding U.S. jobs.

“We told them to go into the meetings with a bias toward yes,” Simon said.

Knowing that half of the meetings would be with prospective suppliers, many small entrepreneurs that might need some assistance, Simon said “buyers were encouraged to look for ways to get some deals done.”

Michelle Gloeckler, executive vice president of consumables and U.S. manufacturing lead for Walmart, said about half of the 800 plus meetings on Tuesday were with present suppliers and half with prospective vendors. She said Wal-Mart will have a debriefing announcement in a few days with results of Tuesday’s Open Call extravaganza.

In her prepared remarks at the afternoon press conference, Gloeckler said deals were struck with suppliers selling toys, home goods, kitchen items, sweaters, shampoo and flashlights. She said important connections were made for suppliers who didn’t get an instant order but had interesting items that warranted a second look.

MAYBE LATER
Monica Kroeger, president of Science Solutions, presented several items to various category buyers throughout the day. Science Solutions is a consumer product company based in Lake Forest, Ill. The main outlet for sales are informercials as well as Home Shopping Network and QVC.

“One product we got really good feedback from is our Liqui-Sew item. It’s a bonding agent that eliminates the need for needle and thread creating a stitch that can withstand washing and drying, wear and tear,” Kroeger told The City Wire.

She said the Wal-Mart craft buyer wants to revisit with them again in September when they reset for holiday ordering.

Wendell Smith, CEO of Rondell Corporation, made the drive from Little Rock to pitch his tire treatment product “Miracle Glaze” to the automotive buyers at Wal-Mart. Smith said his product got into a few Wal-Mart Stores but it didn’t sell as good as the retailer had hoped, so the product was discontinued.

Made in Little Rock, Smith pitched the product again on Tuesday and said the buyer was receptive to another look contingent upon better marketing in a space crowded by major name brands.

“The buyer gave me some homework to do scoping out area covered by three distribution centers as a place to start. I know from my past experience that making sure your product can be seen in stores, where consumers expect to find it is a big deal. I am working on getting some endorsements from NBA players who use the product as part of a marketing pitch as well. I am excited about today’s meeting and look forward to seeing how far we can take it,” Smith said.

A group of 2014 graduates of Fort Smith's Union Christian Academy presented a dream Wednesday (July 9) that they admit is big, but believe is a possible if the community rallies together.

The students told a group gathered at the Golden Corral about their vision to build a $450 million sports arena in downtown Fort Smith that would house a community-owned franchise of the National Hockey League. Superintendent Paul Bridges of UCA told the small group of residents that the students' dream came about as part of a project in a leadership course taken during their recently-concluded senior year at the school.

"Our leadership class worked on a project for (City Administrator) Ray Gosack and it was what problems are out there that the city has that our students could work on. Well, what they worked on was the question, 'How do we get young people more involved in local government?'"

The group came to "some good conclusions," Bridges said, but out of that came the dream to build an arena and locate a hockey team in the city as a way to "radically change" Fort Smith and hopefully attract young people to the city and bring back other young adults who may have left the area to attend college.

Student Brock Smith said the goal for the group is to set the bar high and become an example that other cities follow. He said Fort Smith can do that by becoming the first city in Arkansas to host a major league sports franchise. The students proposed following the example of Green Bay, Wis., and how the city's NFL franchise is community-owned, the only in the league to be structured in such a way. They also pointed to how Green Bay is the smallest city to host a team in the NFL.

But why hockey?

Smith said while it is generally an overlooked sport, it was "more exciting" than other types of sports and "could give Fort Smith an identity." Bylaws for all major American sports leagues also specifically ban community ownership, with the exception of the NHL. (The Green Bay Packers were grandfathered in when the NFL changed ownership rules in the 1980s.)

As for how to pay for the arena, student Nico Treshnell said it would be a mix of different funding mechanisms. A one cent sales tax would account for 44% of the funding, the students estimated, with an additional 33.5% of the funding coming from asset backed securities such as bonds and another 22.5% would be secured through naming rights for the arena.

While the dream of an NHL team may be enticing for the students, it will be an uphill slide. In the case of the Green Bay Packers, the team became a part of the NFL in 1921 when the economics of professional sports was completely different than it is today.

As one of the observers of the students' presentation pointed out, the purchase price of a team itself would be a separate deal from the financing and construction of a venue to host the team, pointing specifically to NHL great Wayne Gretzky's recent efforts to bring an NHL team to Seattle at an estimated cost of $500 million. A New York Post report on his efforts noted that Gretzky was part of a previous effort by a private-equity firm that attempted to buy the parent company of the NHL's Toronto Maple Leafs and the NBA's Toronto Raptors for $1.5 billion.

"However, the NHL rejected the group’s offer because it would have been structured as a leveraged buyout with debt levels higher than 50 percent of the franchise value — which is against NHL rules," the Post reported.

Also unknown are operating costs for a nearly half billion dollar sports arena. And while the students, who worked on the proposal for a full academic year, believe the arena could be built using the funding mix of sales tax, asset backed securities and naming rights, the bankruptcy of what was then known as the Rose Garden in Portland, Ore., shows that arenas are not always a sound business.

The city of Fort Smith has also explored the possibility of bringing a minor league baseball team to the city before, but nothing came of it after a $160,000 fee was paid to a set of consulting groups to study the idea as part of a larger riverfront development plan.

City Director Philip Merry was on hand Wednesday to support the students and said supporters of the students' dream of securing an NHL team for the city were working to figure out next steps, including how much it would cost to do a feasibility study for the proposal, a study that itself must still find funding.

"We're going to keep encouraging all to come help and then we're going to see who will fundraise for this. … I guess over time maybe get a 501c(3) or whatnot. We're right at square one, sir."

When it comes to ordering products online more consumers of all ages are becoming active shoppers, but the vast majority of them are not willing to pay shipping costs and do not require same-day service, according to studies completed by PwC and The Boston Consulting Group.

So why have so many retailers from Amazon to Wal-Mart invested in testing same-day delivery options? Research indicates same-day delivery for a fee appeals to roughly 5% of the U.S. population. Meanwhile retailers invest heavily in making same-day delivery available at a staggering cost.

Amazon has spent $13.9 billion to open new fulfillment centers since 2010. Wal-Mart has added two, and announced a third online fulfillment center to get them in delivery proximity to 160 million U.S. consumers by 2016. Wal-Mart’s fulfillment infrastructure, which includes its 4,200 U.S. stores, puts the retailer within 5 miles of two-thirds of the U.S. population.

As retailers expand these fulfillment centers PwC research estimates that same-day delivery costs could come down for consumers as low as $15, but that’s still more than most consumers are willing to pay. At just $10, the PwC researchers found only 10% of the respondents would pay for the expedited delivery.

Carol Spieckerman, CEO of NewMarketBuilders, said retailers pursue same-day delivery efficiencies in an effort to provide more delivery options.

“The fact that a low percentage of shoppers choose same-day delivery is great news for retailers since it is more expensive to execute. The current low demand in no way should discourage retailers from pursuing it, however. Retailers have come to the realization that offering a portfolio of shipping and delivery options is critical for customer retention. Attempting to force shoppers into one or two options that are easier and cheaper for retailers to execute only encourages comparison and cart abandonment. It’s high-risk behavior these days,” Spieckerman said.

She said retailers have no choice but to focus on same-day delivery because their competitors and third-party platforms like Google Shopping Express are raising expectations among consumers. 

“Resistance is futile,” Spieckerman said.

Matt Nemer, retail analyst with Wells Fargo, said same-day delivery introduces a a service that will one day prove more popular.

“I think this is something that consumers don’t know they want yet, but will — much like a tablet,” he said.

Retail giant Wal-Mart has been very vocal on the importance of giving consumers options. With its recent grocery delivery test in Denver, Wal-Mart also began offering a curb-side pick-up option for the online orders for no added charge. The home delivery charge is $30. 

Bill Simon, CEO of Walmart U.S., has said consumers in Denver have rated the Walmart To Go delivery and store pick-up services at 90% approval in four out of five surveys. He said the curbside pick-up option at the store, which is free, has become more popular and more widely used than the home delivery service. Wal-Mart believes that in markets where driving is the common mode of travel, pick-up depots and curbside pick-up options at the store nearby will become mainstream long before home delivery, according to Simon.

Wal-Mart also launched a same-day delivery service for general merchandise called “To Go” in five markets, including Minneapolis late last year. Wal-Mart has since temporarily suspended the same-day service in Minneapolis because of a technical issue. Wal-Mart says these are tests to determine feasibility and access demand and it has the scale and infrastructure in place to roll them out more widely anytime demand dictates.

“Walmart is a great example of how to steer customers into more easily executed options simply by making them convenient, free and fast,” Spieckerman said, adding that she applauds retailers who are testing multiple delivery and pick-up options.

“It goes back to the portfolio approach. Retailers can’t afford to force options on consumers since every customer has a different idea of ‘convenience’ and ‘affordability’ that can also vary by category, need state, usage occasion, time of day and other factors. The old wisdom was that certain shoppers preferred a single option across the board. These days, retailers have to be able to cover on all possibilities or risk losing customers,” Spieckerman said.

Analysts with the Boston Consulting Group note that same-day delivery will be niche service in the near future and retailers may choose to offer it to build customer loyalty, enhance brand awareness or keep up with competition.

“That said, same-day delivery is unlikely to generate significant revenues for retailers or carriers,” according to Rob Souza, partner at BCG. (Souza is no relation to the reporter of this story.)

Although no one is baking a cake or holding a big celebration, it has now been a full decade since Fayetteville Shale leader Southwestern Energy Corp. announced in 2004 that it was taking a big chance on an undeveloped natural gas play on the Arkansas side of the Arkoma Basin.

That unheralded announcement 10 years ago largely changed the state’s economic fortunes during the Great Recession and hailed the emergence of the natural gas industry in Arkansas – both as one of the largest marketed producers in the U.S. of the methane-rich hydrocarbon and as a major rival to coal and nuclear energy for retail electric generation.

What remains to be seen is whether the Environmental Protection Agency’s new proposal to drastically cut so-called “dirty air” emissions from existing U.S. power plants will benefit the natural gas sector in Arkansas. The gas industry seems to be a favorite of the Obama administration, getting a big boost in the president’s most recent State of the Union address.

“The all-of-the-above energy strategy I announced a few years ago is working, and today, America is closer to energy independence than we’ve been in decades. One of the reasons why is natural gas – if extracted safely, it’s the bridge fuel that can power our economy with less of the carbon pollution that causes climate change,” President Obama said in his Jan. 29 speech to the nation. “Businesses plan to invest almost $100 billion in new factories that use natural gas. I’ll cut red tape to help states get those factories built, and this Congress can help by putting people to work building fueling stations that shift more cars and trucks from foreign oil to American natural gas.”

FROM CHANCE TO WALL STREET STAPLE
In Arkansas, the state is still experiencing huge economic benefits from the 5,853-square-mile geologic formation that was estimated to hold 375 billion cubic meters of unproved, recoverable gas when early exploration began.

Danny Ferguson, a former state lawmaker who is now vice president of government and community relations at Southwestern Energy, remembered during this time that economic development discussion during the Huckabee administration largely centered on landing an automobile plant, often considered the crown jewel of jobs-producing, capital-intensive superprojects.

“I was a part of those discussions about bringing the Toyota auto plant to Arkansas,” Ferguson, who is also a former Forrest City mayor, said. In his role at the state Capitol, Ferguson was a central figure in authoring enabling legislation that defined a superproject as an economic development venture with at least $500 million in initial investment and at least 500 jobs.

Unbeknownst to most, Southwestern Energy was a relatively minor player in the oil and gas industry in the early 2000s that had quietly invested a few million dollars to purchase prime leasehold positions in the untested Arkansas shale play. Harold Korell, Southwestern’s former CEO and current chairman of the board, was cautiously optimistic about the shale formation after the former Fayetteville-based oil and gas company spent about $8.5 million to drill about 20 test wells in the basin in August 2004.

“Although there is a significant amount of data yet to be collected in order to confirm the economic merit of the play, we are encouraged by what we have seen to this point,” Korell said. “If our testing yields positive results, we expect that our activity in the play would increase significantly over the next several years.”

Ferguson said after his legislative term ended, he found himself looking for work and was interviewed for his current position by Korell.

“I remember him saying that if I took this job, I would be involved in the biggest economic development project the state has ever seen,” Ferguson recalled in his office across from the state Capitol. “At the time, it was a secret and I was thinking ‘what could this project be?’”

Korell’s clandestine forecast was vastly understated. A few months later, Southwestern made a decision that would change the company’s destiny. Just before Christmas of 2004, Southwestern announced a planned company-wide capital investment program for 2005 of up to $352.7 million, an increase of 24% over the previous year.

The surprise, however, was that the company’s investment in the Arkansas shale would nearly quadruple to more than $100 million. A year later, after reporting financial and operation records across the board, Southwestern would blow the top off Wall Street expectations by announcing a planned capital investment program for 2006 of $830.1 million, an increase of 66% over the previous year’s spending program that had to be revised several times.

Not long after, the Sam M. Walton College of Business at the University of Arkansas released an industry-sponsored “economic impact” study that forecasted the development of the Fayetteville Shale Play. The report said the infant shale play would have an estimated $5.5 billion total economic impact on the state through 2008 and “the potential to be one of the most significant tax revenue generators in Arkansas history over the next 10 to 15 years.”

By this time, news of the Fayetteville Shale play had spread across the industry. Billionaire Audrey McClendon, then CEO of Oklahoma City-based Chesapeake Energy, led a mad dash to the Arkansas shale play, hoping to reap the same rewards as Southwestern, at the time a much smaller rival. Other big names players followed, including integrated oil giant Shell Oil and oilfield service conglomerates such as Baker Hughes and Schlumberger.

But because of its early leasehold positions, Southwestern held most of the prime drilling areas in the shale and invested well over $800 million and $1 billion annually between 2007 and 2013. Today, even though the number of rigs in the Fayetteville Shale is almost down to single digits, natural gas production levels have actually increased because of improved drilling technology and better knowledge on how to maximize well production, said J. Kelly Robbins, executive vice president of the Arkansas Independent Producers and Royalty Owners (AIPRO).

“Despite the rig count, producers have more knowledge and wisdom on how to get the most out of these geological formations in Arkansas,” Robbins said.

That wisdom has led to nearly 10 years of economic prosperity that has seen Southwestern invest more than $10 billion in the Arkansas shale play, Ferguson said, adding that the company also employs more than 1,500 workers across the state.

IMPACT FELT LOCALLY AND STATEWIDE
Kathy Deck, director and economist at the Center for Business and Economic Research at the University of Arkansas, said the impact of the shale has been much better than previously projected. According to a May 2012 report by the university that revisited early economic projections for the shale development from 2008, the average annual pay in the “oil and gas extraction industry” was $74,555 in 2010, twice that of any other industry.

Also, the report said, Arkansas has benefitted economically from additional income from mineral leases and royalty payments, the highest growth rate in payroll employment and other employment activity generated by shale development. Those other economic offshoots include construction of the $1 billion Fayetteville Express Pipeline to ship natural gas from Arkansas to other markets, and the landing of the India-based Welspun Corp. pipe manufacturing factory, which has invested nearly $300 million at its location at the Port of Little Rock.

Deck’s report said that between 2008 and 2012, oil and gas companies invested more than $12.7 billion, or 29 percent more, than was previously forecasted. Overall, according to the center’s 2012 report, exploration and production activities related to the Fayetteville Shale from 2008 to 2011 generated more than $18.5 billion in total economic activity, exceeding the 2008 projections of $14.2 billion. Total annual state employment from Fayetteville Shale activity increased from 14,500 to more than 22,000 from 2008 to 2011, higher than the 2008 projection of between 11,000 and 12,000.

Also, nearly $2 billion in state and local taxes from permit fees and severance, property, income, sales and other taxes were collected as a result of Fayetteville Shale activities from 2008 to 2011. This is higher than the $1.2 billion projected in the 2008 study, following higher-than-projected expenditures by companies in the area and higher total employment.

“To put this in perspective, from 2001 to 2010, the state of Arkansas experienced only tepid growth in employment. Without the employment associated with the exploration and development of the Fayetteville Shale, Arkansas would have suffered a ‘lost decade’ where employment at the end of the period was lower than employment at the beginning,” Deck said after the report was released.

Although two years has passed since that report, not much has changed since the university released its highly watched economic report. In late May, Fayetteville Shale production boosted severance tax collections to quarterly and monthly highs, according to the state Department of Finance and Administration.

For the first three months of 2014, gross natural gas severance tax revenue came in at $19.9 million, up 29% from $15.4 million in the same period of 2013. At the same time, monthly collections of $7.3 million and $9.1 million in March and April, respectively, were the highest severance tax revenue totals posted since the state began keeping such records. Severance tax collections for January, February, March and April all came in well above $6 million, also a first for the state.

ARKANSAS IS A MAJOR PLAYER
Perhaps the biggest surprise in the past 10 years is the fact that Arkansas is now a major player in the natural gas industry. Today, Arkansas is the nation’s eighth-largest marketed producer of natural gas and is poised to top a trillion cubic feet (Tcf) of marketed natural gas production for the third straight year, according to preliminary data from the U.S. Energy Information Administration (EIA).

Between 2004 and 2008, as Fayetteville Shale drilling and development matured, Arkansas’ annual production of marketed natural gas jumped nearly 140% from 187 billion cubic feet (Bcf) to 446.5 Bcf. Then in 2009, Arkansas first joined the list of the nation’s top 10 marketed natural gas producers when sales of Arkansas natural gas spiked 53% to 683 Bcf of production. In 2010, Arkansas natural gas sales continued on an upward trend, jumping 35.7% to 927 Bcf of annual production, according to EIA figures.

Then in 2011 and 2012, despite fewer drilling rigs, Arkansas marketed production moved over a trillion cubic feet for the first time, jumping to 1.07 Tcf and 1.14 Tcf, respectively. The EIA, which is housed in the U.S. Department of Energy, is expected to release 2013 natural gas production statistics at the end of June.

For the record, Arkansas’ marketed natural production accounts for 4.5% of the nation’s output, the EIA says. And although Arkansas’ share of natural-gas fired electric generation has grown steadily over the last decade, most of the Fayetteville Shale and Arkoma Basin production is shipped out of state by pipeline to Midwest and Northeast U.S. markets.

Still, the industry’s largest trade association, America’s Natural Gas Alliance (ANGA), is lobbying hard to make sure that natural gas is part of the discussion as Arkansas and other states look to cut their greenhouse gas emissions. Nearly 30,000 jobs are supported by the industry and more than 20% of the state’s electricity is generated from the natural-gas fired power.

“As we consider EPA’s proposal with our members and with our power generation customers, we agree the rules should be flexible and fair and we believe they should recognize the ability of natural gas to play an increasing role in the delivery of reliable, safe and clean power,” ANGA President and CEO Marty Durbin said.

Ferguson said Southwestern is “exploring” possible ventures for the future that will allow the company, which has market capitalization of $16.1 billion, to get a seat at the table with regulators to discuss how natural gas producers can market their product directly to consumers. He mentioned current regulatory rules that allow utilities to negotiate deals for distribution and transport of electricity directly with large industrial customers, such as an automobile or steel plant.

“We think it would be great if we could engage directly in the future with the end users,” he said.

The tide is shifting in auto loan finance with large banks taking market share away from captive finance companies linked to auto makers, according to a recent report from Experian.

Auto sales in the U.S. are one of the fastest growing consumer borrowing segments since 2012, growing 10.2% between 2012 and 2013. Experian reports banks held $290 billion in outstanding auto loans for the first quarter of 2014 while captive financing companies had $221 billion. The study shows that year-over-year bank loan balances have increased 13.8% while captive loan balances rose just 4%.

Large banks are being drawn into the auto lending space for several reasons. Demand is hot and yields – more money from higher interest rates – are improving as credit quality stays marred.

BANKS TAKING SHARE
Arvest Bank, the largest in the state, reports its auto loans increased more than 13% since 2011. The bank said the rise in business reflects its frequent and aggressive loan sales promotions. Other area banks actively marketing auto loans include Simmons Bank and First Security.

"As a community bank, we try to meet the needs of our customer base. With auto loans, Centennial Bank continues to have demand, but that demand shifted several years ago to existing customers that want to work with their relationship banker. When large finance companies (many times related to the auto manufacturer) entered with 0% rate and numerous incentives to facilitate the purchase, auto loan demand for community banks declined,“ said Blake Holzhauer, regional chief lending officer for Centennial Bank.

These Arkansas-based banks must now compete with giants like Wells Fargo, Capital One, Chase and Ally who also are aggressively adding to their auto loan portfolios.

In the first quarter, Wells Fargo said it originated $7.8 billion in auto loans, a 15% increase from the same period a year earlier. The gains cemented Wells Fargo as one of the nation’s largest auto lenders. Wells Fargo tops the list for used car loans and recently expanded its offering into the subprime arena. Wells Fargo executives said in their recent earnings call that despite their growth, the credit quality of its loans hasn’t slipped.

Chase and Ally Bank also each increased their market share from a year ago. Chase ranks No. 2 with 4.77% of the market, while Ally has 4.65%. These shares rank ahead of Toyota Finance (4.09%), Ford Motor Credit (3.38%) and Honda Finance (3.16%) of the retail auto loans made in the last year.

CREDIT QUALITY WATCH
Experian reports that all credit classes from deep subprime to super prime grew loans year over year. The biggest increases were found at top and bottom of the credit spectrum, with non-prime or average credit borrowers in the middle and growing the least at 0.3% from a year ago.

Analysts believe big banks are chasing the higher yields in the auto loan market, particularly subprime.

“I don’t have any question that this rising growth in auto loans is tied to declining credit quality,” said Joshua Rosner, a managing director at research firm Graham Fisher & Company. “That is where the borrowers are.”

That said, borrower delinquency rates are improving. The Experian report shows that 30-day auto loan delinquencies were down 7.1% at the banks, 3.9% lower at captive finance companies and down 2.3% at credit unions.

Repossession also declined in the first quarter for banks, captive finance companies and credit unions. But independent finance companies saw a spike in repossessions, up 69% from a year ago.

Buy here, pay here, car dealer America’s Car-Mart felt that sting, saying that its customers were being lured away from big banks and other investors who have entered the subprime auto space in the past year looking for higher yields. Car-Mart CEO Hank Henderson said they had customers turning their cars back into the lot where they bought them because they financed other vehicles with big bank offers for terms much longer than Car-Mart’s average 24 months.

Shares of Bentonville-based Car-Mart (NASDAQ: CRMT) are off recent highs as a result of market concern about losing financing revenue. The shares were trading almost 2% lower in Thursday afternoon trading after a Wednesday close of $40.17. During the past 52 weeks the share price has ranged from a $47.93 high to a $39.34 low.

SMALLER BANKS ON THE SIDELINE
Smaller community banks like Signature Bank and Legacy National said they have not seen an increase in consumer auto loans over the past year.

Don Gibson, CEO of Legacy National, said his bank does not aggressively market auto loans to consumers and tends to focus more on business and commercial lending. That doesn’t mean the bank won’t make auto loans for its customers, it’s just not the core business.

Gary Head, CEO of Signature Bank, said farm loans in south central Arkansas and business loans in Northwest Arkansas are its bread and butter. But it does do some home equity lines of credit where customers take that money purchase a car, which allows them to deduct the interest. Head said the smaller banks are mostly on the sidelines of the auto lending boom.

“We have not written more car loans in the past year, but when our customers want to purchase a vehicle we make them a loan. They can take a check to the dealership and negotiate their price with less pressure,” Head said.

If there is one area of Arkansas' economy that is doing well, it is in jobs that require strong skills in math and science, according to Dr. Suzanne Mitchell. She says STEM is the one of the few areas in academics that can make a direct economic impact.

"If you want to improve the economy in Arkansas and get students interested in math and science and produce jobs with a better way of life and wealth, you have to have good STEM education and have choices."

Mitchell, executive director of the Arkansas STEM Coalition, said it was one of the reasons why public schools and universities across Arkansas are placing an increased focus on science, technology, engineering and mathematics (STEM) education.

"STEM education … is the foundation students need to (have) to make a good choice of careers and majors going into college," she said.

She acknowledges that little focus was placed on STEM as a whole during much of the 20th century, but said Arkansas saw the need starting during the last decade of the century. She said momentum has picked up in the last five years with the topic not only becoming a talking point for politicians and manufacturing executives in Arkansas, but Mitchell said STEM is starting to gain traction nationally.

The reason for that, she said, is because even if a job is not necessarily working directly in STEM, she said many times jobs require some level of science or math expertise, if not both.

"Actually, Arkansas has been trying to improve STEM education since 1990. But it takes nearly 12 years, or a whole generation, to make changes."

STEM JOBS REPORT
A report released Thursday (July 10) by the U.S. Census Bureau reported that the majority of college graduates with a STEM-focused degree were not working in STEM occupations.

"STEM graduates have relatively low unemployment, however these graduates are not necessarily employed in STEM occupations," said Liana Christin Landivar, a sociologist at the Census Bureau's Industry and Occupation Statistics branch.

The unemployment rate for STEM graduates was not disclosed, by the study said as of 2012, only 3.6% of all college graduates between the ages of 25 and 64 were unemployed.

But Mitchell said in Arkansas, the state was still underserved by STEM graduates.

"But most businesses tell us they do not have enough (qualified applicants). They'd rather hire inside Arkansas, but we just don't produce enough (STEM) graduates," Mitchell said.

As a way of changing the tide and promoting more interest in STEM within the state, Mitchell said her organization has worked with 12 colleges and universities across Arkansas to develop STEM Centers tasked with enriching "the knowledge and teaching practices of teachers in Science, Technology, Engineering, and Mathematics" by:
• Linking institutions of higher education to K-12 public schools, educational service cooperatives and businesses; and
• Providing services and resources for teachers, administrators, and students.

SUMMER CAMPS AND GENDER GAPS
One of those centers is housed at the University of Arkansas at Fort Smith, where Associate Professor Dr. Michael Reynolds, the head of the UAFS Department of Engineering, said the school is attempting to further promote student interest in STEM by hosting a series of summer camps throughout June and July.

Reynolds said using something like a summer camp was another way to peak interest for students in an environment outside of the classroom.

"What studies show, particularly with girls, is they don't see themselves as even considering engineering and my goal in (these camps) is to move their attitudes from, 'I'm not going to consider engineering or other STEM fields,' to 'OK, now I will consider it. It is a viable option for me.'"

Thursday's Census Bureau report highlighted the gender gap in STEM majors and employment nationally, noting that only 14% of engineers are women, the most underrepresented of all STEM fields. A higher percentage of women worked in mathematics (45%) and sciences (47%).

Reynolds said one of the camps held at UAFS in June focused specifically on getting girls interested in STEM fields and he hoped to expand camps that appeal to female students with future offerings at the university.

Within Arkansas, Mitchell said it was difficult to tell what kind of an impact any camps would have when making a dent in STEM majors and employment in Arkansas, especially among females.

"I don't think that we keep good records on following the girls longitudinally, especially if they go to a camp. And I don't know the number of camps across the state. … We really are at the beginning point here in Arkansas of offering camps in engineering or any type of sciences for boys or girls. They are probably going on all over the state, but we're not tracking it."

DIVERSE SKILLS NEEDED
Between UAFS' electrical and mechanical engineering programs, Reynolds said there were about 300 students enrolled at last count and he hopes the camps can begin to grow the enrollment. But he said many manufacturers and other companies across the state are needing a "diverse" group of skill sets, not just those being gained by his department's 300 students, which is why the diverse set of engineering programs across Arkansas' universities are so vital to today's economy.

"I would say the needs are diverse. Definitely the key thing I hear is that students have strong math and science skills with specific technical training. So they need to have a good math and science background and then they need to know how to do stuff. They need to know how to actually go into a plant or a company and actually use modern tools. So that's the thing that we try to do (at UAFS) is give them that broad-based math/science, then also teach them some tools, some real things because that's what industry tells me they need. It's both. It's not just, 'We need you to have a broad math/science background and then come to us and we'll teach you everything else.' Employers are increasingly telling us, 'We want you to have that math/science background, but now we also want you to be able to come to our company and be able to start day one doing something.'"

Mitchell said that was the other aspect of STEM education her group is working to expand, bringing more diverse training into the educational curriculum as early as secondary school.

"I do know there is talk about classes in computer science, programming, coding, things we can build upon over the years to get students ready for college. But we just need more students to have hands-on experience in math and science," she said.

TRAINING TEACHERS
Using the STEM Centers to train teachers on how to bring STEM to the secondary classroom will help with that, she said, as will non-classroom training students can receive at places like the soon-to-launch Arkansas Innovation Hub in North Little Rock.

"We have a new innovation hub in Little Rock that uses a maker model," Mitchell said. "That's the type of learning we need in school."

As for when the manufacturing world and other businesses could have enough graduates with STEM background, she said it would take a whole generation of 12 years or more before real substantive change could be seen. And she said it would take the cooperation of groups like the Arkansas STEM coalition, other non-profits, universities and the Arkansas Innovation Hub, which hosted its own summer camps.

"We must work totally together," Mitchell said. "I'm with the Arkansas STEM Coalition as their executive director and I try to pull together (all types of organizations, schools and agencies). We're all trying to work together on this."