Despite border war truce, KC offers millions to combat Kansas’ offer to poach company
Kansas City officials moved forward Wednesday with tax incentives designed to keep a West Bottoms company from jumping the state line to Kansas — nearly a year after the two states agreed to stop poaching jobs from each other.
BlueScope Construction is in line to receive more than $20 million in incentives from Kansas. Missouri has offered $5.6 million for the company to stay and add jobs in Kansas City and St. Joseph.
On top of that, the company wants nearly $8.4 million in local Kansas City incentives to stay put.
In August, Missouri Gov. Mike Parson and Kansas Gov. Laura Kelly reached a deal to stop the much-criticized practice of using state tax incentives to lure companies back and forth across the state line without necessarily adding any new jobs to the wider region. In turn, Kansas City agreed to limit its own local incentives.
But BlueScope is grandfathered in because negotiations began before that border deal was made, the Kansas Department of Commerce said in a statement Tuesday.
The company this week asked the City Council to extend and sweeten a parking deal it struck with the city in 2001. The city has been giving the company a discount on employee parking in a nearby city-owned garage. An ordinance before the council would eliminate the fee altogether, a benefit of $2.4 million over 10 years.
If the company doesn’t add as many jobs as it expects, the city could claw back some of that parking rent.
BlueScope is also expected to ask for a 13-year 75% property tax abatement through the Planned Industrial Expansion Authority. It is nearing the end of a 20-year 100% property tax abatement it already received from the authority.
City officials and an attorney representing BlueScope described the deal as necessary to retain the jobs — and employee earnings taxes — in Kansas City.
“This does not yield sufficient net new revenues to offset the incentives request,” said the city’s director of economic development, Kerrie Tyndall. “However, the alternative, which is a loss of the company, could yield a more substantive loss in general revenues to the city in the short term.”
The company’s attorney, Roxsen Koch, said retaining jobs is just as important to the city as attracting new ones.
“As my mom would always tell me, a bird in the hand is worth two in the bush,” Koch said.
Koch argued if the company moves, the building could sit vacant for years.
But several members of the Neighborhood Planning and Development Committee on Wednesday warned about the precedent of offering a company incentives to invest in Kansas City and then having to come back with more 20 years later to get the firm to stay.
“I would love to retain this company, but at what cost?” Councilwoman Andrea Bough, 6th District at-large, said.
Commenting that they were likely to deadlock on the issue, the committee voted 3-1 to pass the legislation “without recommendation” to the full council. It is expected to come up next week.
Mayor Quinton Lucas on Wednesday declined to comment on the issue.
The issue echoes a similar controversy last year, after the declared end to the border war. Missouri granted Overland Park-based Waddell & Reed up to $62 million to move more than 900 employees to downtown. Kansas City granted another $35 million in local incentives.
But BlueScope, a subsidiary of Australia-based BlueScope Steel, has been operating in Kansas City for decades and receiving tax incentives there for the last 20 years.
“All in all, I just think it’s very unfortunate and it certainly doesn’t reflect well on the company at this time,” said Bill Hall, president of the Hall Family Foundation.
Hall, who has researched the economic border war between the two states for years, said the bistate alliance has been a fragile one that requires mutual good faith. It’s unclear whether Kansas officials disclosed a potential deal with BlueScope before the truce was reached last summer.
The company did not respond to a request for comment, and the Kansas Department of Commerce would not say when it began talks with the firm.
“If this all occurred after the August meetings, then I think it certainly is bad faith,” Hall said. “And anytime you have bad faith, it certainly does jeopardize things. We went into this thing with great hope.”
Setting aside the border war, Hall said the city should not renew a longstanding incentive package simply to keep the company in town.
“It’s corporate welfare at its worst,” he said.
Taxing jurisdictions that rely heavily on property tax revenue, including the Kansas City Public Library and Kansas City Public Schools, opposed the deal, claiming it disproportionately hurts their revenues compared to that of the city.
Shannon Jaax, director of planning and real estate services for the school district, criticized the border war’s “zero-sum game.” She said the original incentives were granted to create jobs with the assumption that the business would then start paying its “fair share.”
She doubted that a similar deal would be made in the Northland, where school districts are generally spared from losing potential revenue to development deals.
“What we have instead is a company with $1 billion in annual net profit that is shopping for another incentive package, pitting Kansas against Kansas City,” Jaax said.
An earlier version of this story incorrectly quoted Kerrie Tyndall. She said the revenues the city would gain because of the project do not offset the requested financial incentives.
This story was originally published June 17, 2020 at 5:32 PM.
