Editor’s note: This story has been updated to correct the average pay figure for Waddell & Reed employees moving to Kansas City. Employees will earn an average of $157,138 in total annual compensation.
Even after the end of the Kansas and Missouri economic border war, Missouri officials plan to award more than $62 million in incentives to aid a Kansas company hopping the state line.
Missouri has agreed to offer the financial firm Waddell & Reed the incentives under the Missouri Works program, said Holly Koofer-Thompson, spokeswoman for the Missouri Department of Economic Development. That program offers companies payroll tax withholdings or tax credits in exchange for growing or retaining jobs.
The financial services firm is headquartered in Overland Park. It recently informed Kansas regulators of plans to cut 158 jobs and announced earlier this year plans to move into Missouri.
The company has pledged to invest about $90 million in its new headquarters in Missouri and employ 1,039 workers with an average total annual compensation of $157,138, Koofer-Thompson said. She said particular details were still being worked out, but the state has agreed to the incentive package.
It is believed to be one of the biggest deals ever approved for border-hopping companies. Disclosure of the incentives comes about a month after Kansas and Missouri governors celebrated an end to the use of tax incentives to lure companies across the state line for moves that do not create new jobs for the region.
Between July 2018 and March 2019, Missouri Works awarded $36.9 million in tax credits and $44.7 million in tax withholdings to companies, according to the program’s most recent quarterly report.
Waddell & Reed has not announced details or a time frame for its move to Missouri.
Koofer-Thompson said the company’s move was unrelated to the border war discussion and was already in the works before the agreement between the two states.
“We want to make the Kansas City region an economic powerhouse,” Koofer-Thompson said. “So we’re happy business is coming to the region. It supports both Missouri and Kansas, so it’s a positive thing for both states.”
But opponents of the border war said the move stands out as a prime example of what was wrong with the previous practice.
“This is exactly the kind of thing that we hope to stop going into the future,” said Bill Hall, president of the Hall Family Foundation. “Waddell & Reed is benefiting dramatically from what is bad public policy.”
Hall has studied the border war issue for years and advocated for an end to state incentives for Kansas City-area companies that hop the state line. He said Waddell & Reed’s $62 million award is among the largest awarded by either state during the border war.
Between 2011 and the spring of this year, he estimates the states have spent more than $330 million luring companies across State Line Road.
While the award is high, Hall said he expected to see projects emerge after the end of the border war. And more are likely to be announced soon.
“My understanding is they are going to trail on. Anybody who was in the queue is exempt,” he said. “So we knew this was going to happen. I’d be surprised if four to five months from now we were still getting announcements, but we expected this.”
Roger Hoadley, a spokesman for Waddell & Reed, said the company continues exploring its options for a move to the Missouri side of the metro. He said the firm is working with state and local leaders and will follow the appropriate processes they have established.
“Our company was founded in Kansas City, and the community remains very important to the firm and its employees,” Hoadley said in a statement. “We are pleased that our current options allow us to remain part of the Kansas City community.”
Kansas City Mayor Quinton Lucas said he didn’t know the details of the company’s move. But he broadly wants to see the region turn its attention to recruiting new employers rather than shuffling around the current ones.
“This is fundamentally inefficient for our regional economy whether it’s border hopping across states, border hopping across cities,” Lucas said. “This is hopefully one of the last projects that would fall within the framework we had before.”
The mayor didn’t know where Waddell & Reed plans to locate its next headquarters, but he expects the company will seek some sort of local subsidy for its investment.
“Rare is the actor in any development project who has received a state incentive without a local ask,” he said. “So I would expect we’ll have more conversation on those local incentives.”
Kansas and Missouri governors celebrated their ceasefire on Aug. 13.
“Sometimes commonsense does prevail,” Missouri Gov. Mike 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.”
But even with the agreement, Kansas officials did not expect an immediate end to incentives, said Ryan Brinker, a spokesman for the Kansas Department of Commerce. Language in Missouri legislation and a Kansas executive order called for an end to incentives after Aug. 28.
“Both Missouri and Kansas understand that a lot of these projects take years,” he said. “The idea is that we don’t want any new projects to start after that date.”
He said commerce officials had been working to lure Hostess Brands, the maker of Twinkies, to Kansas for six years. The company is currently headquartered on Armour Boulevard in Kansas City.
Kansas approved an incentive package June 17 to aid the company’s move to Lenexa, Brinker said. The award includes up to $5.4 million in withholding taxes over nine years. That amount is not guaranteed and must be earned by the company each quarter. Brinker said Hostess can receive a refund equal to 95 percent of the withholding taxes it pays to the state for eligible employees who earn at least the median wage in Johnson County.
“This is money that the state would not have otherwise,” Brinker said, “as the collection of withholding taxes from this company would be impossible without them moving here.”
In addition, Hostess will receive $930,000 from the state’s High Performance Incentive Program, which offers tax credits and tax exemptions to employers that pay above-average wages.
On an August earnings call, Hostess leaders cited such economic development incentives as a reason for their move away from their current headquarters in Kansas City.
“With the relocation of our distribution center and now our corporate headquarters to Kansas, we expect to receive significant future tax incentives and credits based on our ability to partner with the State of Kansas and local governments on the relocation,” President and CEO Andrew Callahan said at the time.