As I See It

A border-war truce would hurt KC-area growth

Updated: 2014-02-19T23:22:35Z

By Chris Wally

The Kansas City Star

In The Star’s Feb. 14 editorial, the last sentence reads, “The public would be well served by ending these wasteful taxpayer subsidies.” That’s a great sound bite that ignores the harm the proposed border-war “truce” will bring to area growth.

Here’s why:

1. The campaign theme for the border war truce suggests the only reason companies move across the state line is to “receive any public dollars that politicians will throw at them for hopping across the state line”. If the goal is to prevent that, then the truce will work. The fact is that companies are often required to move due to other factors, such as outgrowing or needing to upgrade their space, or losing their lease – not just to receive incentives.

2. Proponents of the truce argue that companies like AMC, JP Morgan, Applebee’s and Freightquote have moved only a few miles across state line only to receive millions of dollars of incentives. Further, they believe that the incentives to relocate these four firms’ 3,000 employees were wasted because, as the editorial said, they “too often aren’t creating any net new jobs.” I would argue that while these 3,000 jobs may not have been “net new” to the metro area, no jobs were not lost either. I would further argue that successful organizations like these have organic growth. Witness Freightquote’s recent announcement about hiring 400 more employees.

3. Proponents of the border war truce often argue that the truce will stop the use of all “taxpayer-funded incentives” which take money out of local school districts, public libraries, and infrastructure improvement projects. But the truce will not prevent the use of locally sourced taxpayer-funded subsidies including Chapter 353, TIF, Chapter 100 bonds or Star bonds, all commonly used development tools in the metropolitan area. So there will be no effect on companies that can qualify to earn these incentive programs whether they are moving across the state line, moving within the state or staying where they are.

The proposed border war “truce” would only end the granting of State incentives to those businesses moving between any of four border counties in Kansas (Douglas, Johnson, Miami and Wyandotte) and four border counties in Missouri (Cass, Clay, Jackson and Platte). These State programs include Missouri Quality Jobs, Missouri Development Tax Credits and Promoting Employment Across Kansas (PEAK).

4. The proposed border war “truce” will not alter the ability of local firms, who do not move across state line, to earn incentives under the very same State programs, editorial (“Making progress to end the costly border war”), that companies like AMC, JP Morgan, Applebee’s and Freightquote would be prevented from earning under the truce. Recently, firms like Lockton Insurance, Burns & McDonnell and Country Club Bank have earned State incentives for creating 500, 200 and 45 jobs respectively. These firms, and many more, all qualified to earn incentives because, quoting the Missouri Department of Economic Development website, they “meet strict job creation and investment criteria.”

It is this last point that I believe will be so harmful to area growth because the truce would be discriminatory. It will preclude incentives if businesses move between any of four border counties in Kansas to any of four border counties in Missouri or vice versa, but does not prevent incentives for firms that simply stay where they are. So a corporation can earn incentives to grow staff, while not moving from its current location and qualify for State incentives. But like firms like those mentioned above would be told that it does not qualify for State incentives for its 800 employee staff because it moves across state line? I believe any corporation would consider such a denial as a reason to look elsewhere. And if that happens, the front-page story will ask, "How did we lose a 500- or 600-person employer?"

Chris Wally is the president of Wally & Co., a real estate consulting firm that focuses exclusively on tenant representation.

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