Weary of attracting industry and then watching the workers make their homes across the state line, lawmakers from three southeast Kansas counties want to join a program that provides tax breaks and student-loan aid for people who move to rural parts of the state.
Four lawmakers have pre-filed a bill for consideration in the January legislative session to declare Montgomery, Labette and Cherokee counties “rural opportunity zones.” If the bill passes, those three would be the most populous counties in the ROZ program by a substantial margin.
Championed by Gov. Sam Brownback, the program is an effort to stem depopulation of rural areas caused, in part, by the decline of the family-farm economy that once supported a myriad of small towns.
To entice people to move to rural areas, ROZ designation gives newcomers a five-year exemption from state income taxes. In ROZ counties that are willing to match state money, college graduates can get as much as $15,000 over five years to pay off their student debt.
Montgomery, Labette and Cherokee counties rank 17, 27 and 28 out of the 105 Kansas counties in terms of population, according to the latest U.S. Census population estimate in 2012.
Montgomery County has 34,459 residents, more than twice the population of Neosho County, which at 16,406 is the largest county now in the ROZ program.
Labette County has 21,284 residents, barely edging out Cherokee County’s 21,226.
That’s fairly large by rural Kansas standards. Sixty-four counties have fewer than 10,000 residents and the smallest, Greeley County, barely tops 1,200.
Rep. Jim Kelly, R-Independence, acknowledges that Montgomery, Labette and Cherokee counties are large compared to the ones that are now ROZs. But he said they share common problems, including falling population and lower-than-average household income.
Possibly the biggest issue for the area is the number of people who cross the state line to work in Kansas businesses, depriving the counties and state of sales and property tax revenue from income generated in Kansas, he said. All three counties are on the Oklahoma state line, and Cherokee County also meets the state line with Missouri.
More than 29 percent of the workforce in Cherokee County sleeps in Oklahoma or Missouri. About 12.4 of Montgomery County and 6.4 percent of Labette County workers commute across the state line, Kelly said.
A banker by profession, Kelly has been involved for more than 40 years in efforts to attract industrial businesses to the southeast corner of the state. There have been some successes: John Deere, Amazon and Cessna Aircraft are among the companies that have established a local presence in manufacturing or warehousing, or both.
However, a lot of the workers “look at Oklahoma and decide it’s a better deal for them,” primarily because of lower property and vehicle taxes on the other side of the state line, Kelly said.
If the three counties became ROZs, the five-year exemption on income taxes would balance out the cross-border tax advantage for new hires to the southern Kansas industries. The college debt money help might attract medical-care and other professionals, Kelly said.
“For lack of a better term, it provides a ‘hook’ for those people to locate in Kansas,” Kelly said.
Kansas and its counties would reap immediate benefits from property and sales taxes that are now lost across the border. After five years, the factory and warehouse workers would have to start paying income taxes as well, he said.
Kelly said the hope is that by then, the workers and their families would be so settled in Kansas that they wouldn’t bother to relocate, even if taxes remain a little lower across the state line.
Sponsoring the bill with Kelly are Reps. Michael Houser, R-Columbus; Richard Proehl, R-Parsons, and Virgil Peck, R-Tyro.
To make their hopes reality, they’ll need some help from lawmakers in urban areas of the state, like John Carmichael, D-Wichita, recently selected to replace retired Rep. Nile Dillmore.
Carmichael said he’s keeping an open mind on the issue and wants to hear the pros and cons before making a decision.
“We have to balance the opportunity for development in rural counties with respect to adequately funding state government,” Carmichael said.