LITTLE ROCK — Arkansas invested millions of dollars in economic incentives to lure Hewlett-Packard Co. and Nordex USA and the hundreds of jobs they brought to the state. Economic development officials are looking to recoup a portion of the funding now that the companies, both announced with great fanfare, are scaling back operations.
Just how big a portion the state can expect may not be determined for a year.
“The process now is working with both companies and both companies have acknowledged to me personally that they will owe us some money back,” said Grant Tennille, director of the Arkansas Economic Development Commission. “It’s not a question of if we can get any back. In both cases we will get clawback.”
Clawback is the term used for financial incentives that can be taken back if a company does not meet its guarantees.
California-based Hewlett-Packard announced last week it will lay off about 500 of the 1,400 employees at its services center in Conway. The layoffs are expected to occur this fall, company officials said.
The announcement followed Nordex’s notice last month that it is closing its wind turbine factory in Jonesboro because of overcapacity and cuts in government benefits. About 40 employees, some in Jonesboro and some in the company’s Chicago offices, will be laid off.
Naomi Lovinger, spokeswoman for Nordex USA, a subsidiary for the German firm Nordex SE, said recently that the layoffs would begin this fall and that she did not know how many would be at the Jonesboro plant.
Tennille said last week that the decisions by both Hewlett-Packard and Nordex to layoff workers in Arkansas does not mean that the state’s efforts to lure the companies with lucrative incentives were to no avail.
Both companies will still have employees in the state, including 900 at Hewlett-Packard, and modern facilities are in place in both Conway and Jonesboro for potential future growth, Tennille said.
“In both cases the companies have experienced large changes in their market and have had to make the kinds of decisions that companies around the world have had to make on a daily basis, that is ‘how are we going to right-size our work force to respond to the current situation in the market place,’” Tennille said.
Joe Holmes, spokesman for the AEDC, said talks have already begun with Nordex in an effort to recoup some of the financial incentives the company received from the state.
When Nordex officials and the Jonesboro Regional Chamber of Commerce announced plans in 2008 to build the $100 million facility in Craighead Technology Park, they said the wind turbine manufacturer would employ at least 700 workers with averages wages of $17 an hour.
AEDC offered $8 million in economic development incentives from the Governor ‘s Quick Action Fund to attract Nordex to the state. Of that $8 million, $6 million was allocated to Nordex for training and site preparation. The company has spent about $2.5 million of that, AEDC spokesman Joe Holmes said recently.
The city of Jonesboro received the other $2 million for road and rail improvements, and has spent about $1.4 million, Holmes said.
At its peak production, not more than 100 worked at the facility, Holmes said.
The AEDC and the Arkansas Development Finance Authority also gave Nordex an $11 million bond guarantee, Holmes said, adding that the company still owes about $9.3 million and has making timely payments.
Nordex also was offered a cash rebate for 10 years at 5 percent of total payroll for new jobs. The company received one check for $263.275 last year, which it returned to the state.
Holmes said the check was returned by Nordex officials because they knew then that they were not growing as scheduled.
“Obviously (Nordex) came no where near the 700 employees,” Holmes said, “but they know they’re going to owe some money back.”
He said the state will recoup some of the $3.9 million spent on the project but exactly how much is yet to be determined.
“We’re working some formulas now,” he said. “We’re really just now starting to get into the middle of it.”
Hewlett-Packard announced in 2008 plans to open a new service center in Conway and said they would eventually employ more than 1,000 at annual salaries averaging about $40,000.
The $28 million center at Meadows Office & Technology Park opened in 2010 and the company currently employs about 1,400.
To help lure Hewlett-Packard to Arkansas, Gov. Mike Beebe committed $10 million from his Quick Action Fund. That money was used by the Conway Development Corp. to construct the 150,000-square-foot facility. Hewlett-Packard has been leasing the building from the CDC.
Other performance-based payroll and investment incentives — part of the state’s Advantage Arkansas standard incentive program — also were used and were contingent on the company having 1,000 employees.
Those additional incentives included sales tax refunds on building materials and machinery during the construction process, a 1 percent tax credit for payroll for new jobs for five years, and a cash rebate equal to 5 percent of payroll for 10 years.
Tennille said recouping financial incentives from Hewlett-Packard will be a little more difficult because the company, even after the layoffs, will have 900 employees.
“We’re working with Hewlett-Packard to figure out an exact number,” Tennille said. “A lot of what they received was in the form of performance-based incentives that we just won’t pay them as they would have (been) paid in the future.”
Jamie Gates, vice president of the Conway Development Corp., declined comment on the length of Hewlett-Packard’s lease agreement with CDC, but said he is confident that the the remainder of HP would not go away anytime soon and that the vacated space would likely remain vacant through the duration of HP’s lease agreement, according to The Log Cabin Democrat.
Gates also called any local tax breaks received by HP as “modest,” and said most of the incentives included rebates on equipment.