Missouri taxpayers spent around $151 million over the last decade luring companies from Johnson and Wyandotte counties in Kansas a few miles across the state line to Jackson County.
And according to research by the Hall Family Foundation, Kansas reciprocated by spending $184 million enticing border-hopping companies to flee Jackson County for Johnson and Wyandotte.
It’s an economic border war that’s raged for years in the Kansas City metro. And to its critics, it’s long past time for a truce.
“We’re using [economic development incentives] to divide the pie,” said Bill Hall, president of the Hall Family Foundation and longtime Kansas City metro area civic leader, “not increase the pie.”
Missouri lawmakers have been most active in seeking an end to the competition, once again pushing for legislation this year that would prohibit companies from earning state incentives for simply crossing the state line into the Kansas City metro.
Missouri first approved a bill prohibiting the use of state incentives to poach businesses in Douglas, Johnson, Miami or Wyandotte counties in Kansas in 2014.
But to go into effect, the law required Kansas’ governor to enact a similar ban on incentives to lure businesses away from Cass, Clay, Jackson or Platte counties in Missouri.
Kansas, under then-Republican Gov. Sam Brownback, balked at the plan. He came back with a proposal of his own two years later, but it ultimately yielded no agreement.
The Missouri law expired in 2016. A bill filed this year by Sen. Mike Cierpiot, R-Lee’s Summit, would renew it through 2021 to open the door for further discussion.
“I don’t understand why reasonable people can’t sit down and figure this out,” Cierpiot said. “It’s just bad policy.”
According to the Hall Family Foundation research, the combined $335 million spent by Missouri and Kansas since 2010 resulted in a net of about 1,200 jobs to Kansas.
Skeptics of state incentives have raised concerns that, under the existing system, companies can get millions of dollars in tax breaks to move a few miles, from Jackson County to a Johnson County suburb, or vice versa. And often for adding a relative handful of legitimately new jobs.
If a company has, say, 100 jobs, and pledges to add 10 more over time, the state getting the company claims 110 new jobs. But it really only amounts to 10 “net new jobs” for the metro area because the 100 jobs already existed.
And with a move of such a short distance, those employees wouldn’t be likely to relocate or add to the tax base.
In 2018 alone there were several high-profile moves.
Kansas authorized $3 million in tax breaks to move about 60 jobs at HCA Midwest Health four miles from Kansas City to Overland Park.
Meanwhile, city and state incentives valued at more than $1 million prompted ServiceMaster DSI to relocate about 100 employees from Illinois and Kansas City-area offices to a new headquarters in Shawnee.
Kansas’ new governor, Democrat Laura Kelly, left the door open to a possible truce, saying in a statement to The Star: “Everybody agrees that it doesn’t make sense to spend millions of dollars to move businesses two miles across the state line, but the devil is in the details. We will be looking at this issue and reviewing the legislation to determine if it is in the best interest of Kansas.”
In the Kansas City metro area, officials involved in economic development efforts had mixed reactions to the need for an agreement.
The Kansas City Chamber of Commerce applauded Cierpiot’s bill.
“For years, the KC Chamber’s position on the border war is that tax incentives should be provided to a company moving across the state line only if that move results in the creation of net new jobs for our entire Kansas City region,” said Joe Reardon, President & CEO of the Greater Kansas City Chamber of Commerce. “Our competition is not within our region. We’re competing instead with places like Denver and Dallas and Dubai.”
Bob Langenkamp, CEO of the Kansas City Economic Development Corp., said he was part of extensive talks several years ago, trying to reach an agreement acceptable to both sides of the state line. Those talks did not succeed, but Langenkamp said it’s possible they could now resume.
“We knew a bill was going to be filed,” Langenkamp said. “Mayor Sly James (of Kansas City) and I were both involved working with the bi-state committee trying to address this issue several years ago, and I anticipate we will be very interested in working on it going forward.”
Overland Park Mayor Carl Gerlach said he sat in a lot of meetings years ago to talk about ways to address the economic development border war. He said he would be willing to do so again, if there’s a way to reach a mutually beneficially resolution.
But he said he didn’t think the granting of state incentives for companies jumping the state line was a big deal anymore.
“It hasn’t been an issue for quite a few years,” Gerlach said, adding that it’s complicated and nuanced, with companies deciding whether to relocate across the state line for a variety of reasons.
“There are other reasons than just the border war that companies move, such as for employees and for the right-sized space,” he said.
Blake Schreck, president of the Lenexa Chamber of Commerce, questioned how urgent the problem is now, given that the economy is healthy and both sides of the state line are flourishing.
He said there was angst several years ago about whether suburban growth was happening at the expense of the urban core.
“The urban core is killing it right now,” he said, “and the economy is strong.”
Some cited the example of Freightquote, which received Missouri incentives in 2013 to move from Lenexa to Kansas City. But Schreck pointed out that Lenexa was able to rebound and get the former Freightquote building leased back up.
“We’re all growing and doing fine, so it hasn’t been a huge issue,” he said.
Schreck said that getting to some kind of bi-state agreement to award incentives only for “net new jobs” could be a victory for both sides.
“I would anticipate we’ll take a crack at it sometime this year,” he said.
Ciepiot’s bill is widely expected to sail through the legislative process.
It will likely be assigned to the Senate economic development committee, which Cierpiot chairs. And when it initially passed in 2014, only five of Missouri’s 197 legislators voted against it.
Among those who voted in favor of the border war truce bill was then-Missouri Sen. Mike Parson, a Republican who took over as governor in June.
An agreement couldn’t come soon enough for Bill Hall, who has spent years studying the bi-state job numbers and has repeatedly advocated for a cease-fire in the incentives border war.
While Schreck said it’s not an urgent issue because the economy is good, Hall said that’s exactly the time to resurrect these talks.
“The economy is not always going to stay good,” Hall told The Star. “This is the perfect time to deal with it because emotions aren’t as high and more reason can be brought to it, because people aren’t fighting for every last job.”