The debates rage on as economic development incentives in the Kansas City area continue to divert millions of dollars from crucial public services into private pockets.
But effective ways to deal with these issues have come into sharper focus in recent months. They can be settled with bold leadership at the state and local levels.
▪ As new numbers indicate, the economic development border war between Kansas and Missouri over jobs in this region is a financial folly for taxpayers.
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Bill Hall, president of the Hall Family Foundation, has helped track the comings and goings of companies and their employees across the state line. The most recent numbers, he said this week, reveal that more than $250 million is being spent to create few new net jobs in the metro area.
About $156 million has been doled out in incentives through Promoting Employment Across Kansas to woo 5,528 jobs from Jackson County to Johnson or Wyandotte counties.
The Missouri Works program has allocated an estimated $100 million to move 3,863 jobs from Johnson and Wyandotte counties to Jackson County.
Missouri and Kansas — which is in especially dire financial straits after a failed income tax-cut plan backed by Gov. Sam Brownback — are allowing companies to hold on to hundreds of millions of tax dollars, even though they simply have moved their operations a few miles.
This practice must be swiftly brought to an end, with the leadership most notably of Brownback in Kansas. The Missouri General Assembly already has endorsed a deal that would prohibit the use of state incentives to attract businesses from one border county to another across the state line. Critics in Kansas complain that Big Brother Kansas City will step in and use local incentives to decimate the suburbs, a questionable claim given Mayor Sly James’ contentions that he wants all metro cities to keep more of the tax dollars they deserve. Brownback can end this impasse.
This week, Missouri Sen. Jason Holsman discussed a dismal and ultimately expensive alternative to settling the border war: He could file a bill specifically designed to recruit employers to Missouri.
Officials in both states also need to ignore most threats by businesses that they’ll go outside this region if their demands are not met. As development lawyer Michael T. White noted at a legal conference Thursday, in his decades of experience, “Very few companies move beyond their employee base.”
▪ The new Kansas City Council must take the lead in trying to rein in future incentives.
No one is naive enough to think Mayor James and other elected officials will end or even severely restrict tax breaks. But more than any other council in the last 15 years, this one has some opportunity to ratchet down public subsidies while still keeping the city open for business.
One positive future result would be the flow of more tax revenue to schools and libraries to provide better services to residents. In addition, this approach could help make the distressed East Side a bit more attractive for projects that are truly worthy of receiving incentives. This should be a priority for James given his second-term goal of boosting East Side jobs and neighborhoods.
Again, living in the real world, we realize this will be tough to do. On Thursday, the City Council backed incentives requested to build a new headquarters for the BNIM architecture firm in the Crossroads Arts District. The project is worthwhile. It promises an environmentally efficient building that also retains employees in Kansas City.
However, the BNIM project also goes to the heart of an issue the council must get a better grip on in coming months: When should the city back away from offering full-course tax breaks in parts of the city that are bustling, such as the Crossroads and downtown?
This council needs to shake up the status quo at City Hall. Members would well-serve residents by delving into the details of incentive-laced projects.
One point that often gets ignored when tax breaks are discussed is that subsidies can be given out for shorter than the maximum years often requested by developers. In addition, elected officials need to insist on better information on whether blight really exists on a project site and whether the redevelopment truly meets the “but-for” test, which can overstate the need for public funds to make a deal feasible.
▪ Finally, dozens of elected officials in suburbs on both sides of the state line — from Overland Park to Independence and other cities — have important roles to play to reduce excessive incentives.
They can be more guarded in passing out subsidies to shopping center owners, housing developers and corporations. Taxpayers deserve public officials, especially in strongly growing suburbs, to be more diligent and restrictive in these matters.
In addition, the Shawnee Mission School District and other taxing entities must be more involved in questioning projects that siphon millions of dollars from them. Unlike Missouri law — which gives too much power to a city in handing out many incentives — Kansas law gives school districts and counties the power to derail some subsidized projects unless better deals can be worked out to serve their students or constituents.
Ending the border war and getting stingier with tax breaks will help promote smarter redevelopment in this region.