Ethics/Government TransparencyRead

Why does the richest District in Arkansas get the lion’s share of low-income assistance?

By JD Haigler

 

A common argument in Arkansas politics is that much of Arkansas’s tax dollars and credits, via state or federal, end up in Fayetteville and Little Rock, no matter where those tax dollars came from. Senator Dan Sullivan (R-Jonesboro) ran with that as one of his driving points for his Senatorial campaign, that Northeast Arkansas isn’t supported by the administration.  They get what’s left, while Fayetteville is developed.

This argument is being denied by the administration, yet as more numbers come out, it’s increasingly obvious that this is true.  It’s blatantly obvious with funds such as ADFA, as a complaint filed this month points out.

ADFA stands for Arkansas Development Finance Authority.  (For more info on the authority see: https://adfa.arkansas.gov/about-us/.)Their stated mission is “To promote economic growth in the state of Arkansas by providing and supporting financing for affordable housing, agricultural business enterprises, industrial and economic development, capital improvement for state agencies and local governments, higher education funding and related programs, and by promoting better economic policy.”

This is a massive umbrella, but the specific focus of this article is on a complaint (Attached here) that references the low income housing development side of it, including the HOME investment partnership loan program.  Per the complaint, these programs goal “is to incentivize and indirectly subsidize affordable housing”. The complaint alleges that these programs are not being used for low-income housing, but rather the ‘creation of housing stock’ in areas of economic or potential economic growth.

E.g., Fayetteville and Little Rock.

The program works through the federal granting of tax ‘credits’ to each state, which are then sold to banks and organizations willing to loan the money to developers interested in building low income rental home projects.  Those organizations will then receive that credit as a federal tax break over the next ten years, creating an incentive to fund such projects.  To take advantage of this, a developer puts together the proposal and looks to get it approved through ADFA, and one of those organizations with the tax credit will then pick up the loan.

However, ADFA does not fall under any Legislative review, but rather a board composed solely of the Governor’s Appointees. The complaint alleges that the criteria developed in the vacuum of any legislative oversight has created a process that unfairly favors Fayetteville and Little Rock so much that the rest of the state can’t compete, and thus is missing out on these development opportunities.

We can break it down by Congressional District to demonstrate this. Each district is roughly 25% of Arkansas’s population.  However, from 2018 to 2020, District 3 received 45.99% of the section 42 tax credits, and 49.12% of the HOME funds.  District 2 received 27.86% and 22.26% respectively.

Meanwhile, the rest of the state combined only picked up 26.15% and 28.62%.  Given that these funds are for low-income populations, it’s inexcusable to see such unbalanced distribution when the total population below the poverty line in each district shows only a 4% difference.

 

District # Population % of State Pop Section 42 Tax Credits % of overall S42 funds HOME funds % of overall HOME funds Total pop below poverty level.
District 1 719,048 23.82% $2,902,760 10.59% $1,800,000 12.72% 18.30%
District 2 767,662 25.44% $7,639,656 27.86% $3,150,000 22.26% 14.60%
District 3 829,149 27.48% $12,609,949 45.99% $6.950,000 49.12% 14.60%
District 4 701,945 23.26% $4,266,657 15.56% $2,250,000 15.90% 17.80%

This makes it hard to argue that the ADFA board is distributing these funds proportionally.

Because this system works over a ten year dispensation plan called the ‘Credit Period’, and  calculating this against distribution by population, these numbers show that Districts 1 and 4 have lost out on $53,107,730 in tax credits awarded to developers for projects those districts because the board doesn’t approve projects in those districts based on their criteria.

The complaint points out that there are two criterias that assist in allocating these funds.  The first is an “Area of Opportunity Index”, or “the scoring computation for all census tracts that is intended to promote selection of developments that will create new housing supply in areas where the population is growing, jobs are plentiful and housing is comparatively scarce.”  Furthermore, ADFA states that they looked to allocate to areas “with relatively more population growth, lower vacancy rates, and lower unemployment rates.”  They also “took indicators of school quality, crime” into account.

None of this sounds like areas with low-income issues, and in fact, targets areas doing well and simply needing housing.  Given these economic indicators that ADFA has specified, no prospective developer looking to pick up ADFA funds would ever apply to develop in Districts 1 or 4 where it’s needed the most.

The second criteria is the primary culprit though.  This particular criteria was created in 2017, at which point projects struggled to be approved in Districts 1 and 4.  The criteria looks at how much lower than the average the rent can be once the development is completed.  Because of the higher rents in Districts 2 and 3, and the costs of construction being relatively the same across the state, the rent can afford to be lower in those Districts simply because it’s already higher than Districts 1 and 4.  The rent is a direct reflection of the higher average incomes in those districts, but that doesn’t appear to be taken into account.

Therefore, not only is ADFA favoring growing economic areas over actual low-income, they’re operating outside of the intent of Congress’ national housing policy, and denying assistance to those who actually need it.  Again, Senator Sullivan’s argument is that Little Rock clearly favors the Northwest corner of the state, then Little Rock before considering the rest of us.  It’s hard to argue this point in the face of evidence like this, and further reinforces that he’s been right from the start.

About the Author: 

James Haigler is a political pundit in Northeast Arkansas, heavily involved in local campaign efforts, based in Jonesboro.

 

 

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