End the economic border war that is wasting KC area taxpayers’ dollars

Unfortunately, efforts to end the economic development border war over tax incentives and companies hopping the state line have not succeeded.
Unfortunately, efforts to end the economic development border war over tax incentives and companies hopping the state line have not succeeded. deulitt@kcstar.com

Missouri state Sen. Ryan Silvey sounds prepared for battle because the economic development border war is on the verge of getting even nastier in the Kansas City area.

“I think my colleagues are ready to strike,” the Kansas City Republican said in an interview this week, days before a proposed agreement between Missouri and Kansas to curb the poaching of jobs from each other runs out Sunday.

Here we go again.

For years, governments on both sides of the state line have offered tax breaks to private companies, trying to woo them to set up shop in either Kansas or Missouri. Businesses have hopped the state line but avoided paying their full share of taxes to support public services in their new communities.

Economic development stoked by taxpayer incentives is nothing new in this region, but the border war has had a significant downside: It has not created anything close to enough new employment to justify the public subsidies.

It also has distracted local economic development officials from more productive duties of getting new businesses to come to the Kansas City area.

Bill Hall, president of the Hall Family Foundation, has helped track the dismal job numbers for years. As he reiterated in an interview this week, “It is a zero-sum game.”

According to Hall’s figures, Kansas has gained a few hundred more jobs than Missouri has in this back-and-forth deal, but the practice is costing taxpayers tens of millions of dollars on both sides of the state line.

Local economic development officials and politicians such as Kansas City Mayor Sly James often have decried the negative effects of the border war, especially the excessive cost to taxpayers.

No one is against competition and promoting a city or state’s amenities, goes this line of thinking. But lavishing tax dollars on private companies that are merely moving only a few blocks in some cases doesn’t do much for the metropolitan area.

The latest head-shaking event in this battle occurred in early August.

The Kansas Department of Commerce sent out a letter to some businesses in Kansas City, trying to recruit them. As The Star reported, the agency’s mailing absurdly included the offices of the Downtown Council of Kansas City, specifically set up to market and promote downtown.

Silvey said he and some of his colleagues were irritated by the letter, saying it was viewed “as a pretty aggressive act.”

Hall said it was a “step-up of the game.”

Over in Kansas, even some local economic development officials were appalled. They saw it as a naive bid by the Commerce Department to ramp up the fight with Missouri at a very inopportune time. State officials downplayed the letter as just a matter of making sure the word was getting out about what Kansas could offer to businesses in the Show-Me State.

In the past, The Star has supported an essential cease-fire in the border war. Logically, both Kansas and Missouri should refuse to award state tax breaks to companies that are merely moving across the state line while not adding significant numbers of jobs to the metropolitan area.

After years of trying, Missouri in 2014 passed a bill that moved in that direction. Gov. Jay Nixon and the General Assembly gave Kansas Gov. Sam Brownback until Aug. 28, 2016, to agree.

Brownback earlier this year finally responded, going along with much of the Missouri offer but adding caveats that would have allowed public incentives in certain cases.

The General Assembly rebuffed Brownback’s approach as not going far enough.

Silvey this week said that, starting when the General Assembly comes back in January, Missouri will look at “ramping up our responses.”

That could include opening a recruitment office in Kansas City so the Missouri Department of Economic Development could try to poach businesses from the Sunflower State. That sounds draconian.

As even many Kansas-side officials acknowledge, that state’s huge budget problems could restrain Brownback and the Legislature from competing with an even more aggressive bid by Missouri to steal businesses.

However, it makes no financial sense for Missouri taxpayers to take this wasteful route. And who knows? Brownback and his colleagues could still keep giving away the state’s future tax base in a desperate bid to hang on to jobs.

Behind the scenes, local economic development officials who best know this subject should continue to try to broker a fair deal they can bring to elected leaders in early 2017 in both states.

A new governor in Missouri, along with a more moderate Legislature in Topeka, could and should be willing to once and for all end this border war.