Missouri Gov. Mike Parson and Kansas Gov. Laura Kelly on Tuesday celebrated what they said is an end to the longstanding economic border war and pledged to usher in a new era of cooperation between the two states, whose rivalry spans more than a century.
The pair signed an agreement pledging to end the use of tax incentives to lure companies across the state line that do not create new jobs for the region. They said that practice has cost the states hundreds of millions of dollars with little to show for it.
“Sometimes commonsense does prevail,” Parson said to more than 300 people gathered at Memorial Hall in Kansas City, Kansas. “Because you don’t have to be a scientist to figure out this was a bad deal for both states.”
While both governors criticized the use of tax breaks to shuffle jobs around the Kansas City region, they both broadly defended the use of subsidies as a tool to spur economic growth.
“I think both of us would prefer that we wouldn’t have to do that, but I don’t think either one of us is really ready to unilaterally disarm,” Kelly told reporters after the event.
The newly inked agreement means moves like that of AMC Entertainment from downtown Kansas City to Leawood would no longer be aided by state incentives. The company’s 2011 decision to relocate some 450 workers made AMC eligible for more than $21 million in incentives from the state of Kansas. Such moves continue today: Overland Park’s Waddell & Reed, which recently announced it would lay off 158 workers, qualified for a Missouri incentive program to hop the state line.
The governors said incentives for those deals that don’t create new net jobs would end immediately. The agreement follows previous action from both states: Parson on June 11 signed legislation that sought to end the economic border war. Kelly followed with an executive order on Aug. 2.
In the agreement signed Tuesday, both governors committed to limiting future incentives for companies in Jackson, Clay, Platte and Cass counties in Missouri and Johnson, Wyandotte and Miami counties in Kansas.
“I hope that other states, I hope Washington, D.C., takes a good look at what happened here today when a Republican and a Democrat governor can sit down together and do what is right for our states,” Parson, a Republican, said.
Kelly, a Democrat, said both states would continue to compete for business startups or relocations after the truce.
“But we will now use strategies that are sensible, cost-effective and productive for people in both states,” she said. “That’s how healthy rivalries should work.”
‘A real opening for Missouri and Kansas’
Before Tuesday’s agreement, the Missouri-Kansas border war had become a “poster child of how not to create jobs,” said Amy Liu, vice president and director of the Metropolitan Policy Program at the Brookings Institute.
In her keynote address, she cheered the new truce, but encouraged both states to do more. Incentives rarely sway companies to move or create more jobs, she said, and their cost to taxpayers generally outweighs their benefit.
“While this agreement today applies to the Kansas City area only, there’s a real opening for Missouri and Kansas to make the use of incentives rare, targeted and transparent statewide, leading the stance for all states,” she said.
She said midsize cities like Kansas City have not kept up with the economic growth of coastal cities like San Francisco and Boston. And one-quarter of all Kansas and Missouri jobs could be lost to automation, she said. Liu urged the states to focus on talent development, learning and innovation rather than taxpayer subsidies for companies.
“The bottom line of all this is that luring jobs with tax incentives is a minuscule activity,” she said, “that addresses none of the structural challenges that must be overcome to position states and regions well for the modern economy.”
Newly inaugurated Kansas City Mayor Quinton Lucas, who decried the use of public incentives in his campaign, said he agreed with that message. The U.S. cities that have shown the most economic growth are safe, livable cities that are desirable places for workers, he said.
Lucas said he’s drafted an ordinance that would limit local property tax abatements to 10 years for companies moving into Kansas City from Kansas border counties. That levels the playing field because Kansas law allows local governments to offer abatements of up to 10 years. In Missouri, cities can offer abatements of up to 25 years.
He said Missouri-side suburban mayors are also committed to equalizing the playing field to ensure Tuesday’s agreement is a lasting one.
“I think all have said they support this effort,” Lucas said. “They want to make sure that this detente or this accord is something that’s followed by all the mayors on both sides.”
‘Just the beginning’
Under the agreement, Kansas will limit its use of the PEAK (Promoting Employment Across Kansas) program, the Kansas Industrial Training and Retraining program, the Job Creation Fund, state loan funds and any other state-administered discretionary incentive programs. Missouri committed to limit use of the Missouri Works program, the BUILD (Building Use Incentives for Large-Scale Development) program and the new or expanded business facility tax credit, along with other state discretionary programs.
Either state can choose to rescind the agreement. And it carves out exceptions for hotels, retail businesses and “local services” companies.
The Hall Family Foundation has for years pushed for an end to the economic border war. Foundation research estimates both states have spent some $300 million luring companies back and forth across the state line with few new jobs created.
Don Hall, executive chairman for Hallmark Cards Inc., characterized the previous practice as a “zero-sum game.”
“It has taken political courage to end this wasteful and divisive practice,” he said.
The economic border war belied the reality of living in Kansas City, where local residents frequently cross the state line for work, health care or entertainment, Hall said.
“As a region, we are a major American city,” he said, “but if separated by a state line we are not.”
“Today marks a major step toward achieving a more unified Kansas City region,” he said. “This truce legislation is just the beginning, and I personally cannot wait to see what the future holds for metropolitan Kansas City.”