Business Perspectives

March 20, 2014

An olive branch extended in the Kansas-Missouri ‘border war’

Message to Kansas: If the latest disclosure that a major Leawood firm may take the money and run to the Country Club Plaza isn’t a big enough wake-up call in our cannibalistic border war, what is it going to take?

Message to Kansas: If the latest disclosure that a major Leawood firm may take the money and run to the Country Club Plaza isn’t a big enough wake-up call in our cannibalistic border war, what is it going to take?

The same week that financial and accounting firm Cbiz and Mayer Hoffman McCann was reportedly considering moving its 400-plus employees to Missouri in return for pocketing its workers’ state income taxes for years, a task force of Kansas and Johnson County leaders was throwing cold water on the idea of a cease-fire.

In a signed column in the Star Business Weekly section, the Border Challenge Advisory Committee and its supporters, a group encompassing most, if not all, development and city elected leaders in Johnson County, sidestepped the moratorium idea and said what’s required is a “level playing field.”

It pooh-poohed the PEAK program that, along with the Missouri Works program, has been the main weapon in the border war, observing it was “just one of many factors” for companies’ jumping the state line.

And the authors referred to Missouri’s offering a 25-year property tax abatement compared with Kansas’ maximum of 10 years as a “major example” of why the playing field was uneven.

Excuse me, but I have covered the border war the past few years, and that’s not the way it has been playing out. PEAK and Missouri Works have been the major reasons why companies have moved. Period. A property tax abatement is, at most, icing on the incentive cake.

PEAK and Missouri Works are incredibly lucrative to companies because they let them keep their employee income taxes for up to 10 years. It’s tens of millions of dollars in extra cash those firms get to hold onto at no risk to the firm.

A company doesn’t have to worry about losing key employees, as would be the case if it were moving hundreds or thousands of miles to Dallas or Chicago or Seattle, because those workers get to stay put in their own homes in their own neighborhood.

Guess who loses?

Since 2009, when PEAK was enacted, more than $210 million in employee income taxes has been forfeited – millions that would have helped pay for services in Kansas and Missouri. Gee, I wonder how those tax losses are going to be made up?

And because of the tit-for-tat – I’ll trade you one Cbiz for your AMC Entertainment – neither state really has much to brag about.

Bill Hall, president of the Hall Family Foundation, has estimated that since the PEAK program began in 2009, Kansas had attracted 3,289 jobs across the state line and Missouri had attracted 2,824, leaving Kansas with a net of 465 jobs – at least before the potential Cbiz deal.

There does seem to be a very clear path, though, to ending this border war, and the map was included in the letter from the Border Challenge Advisory Committee.

The writers pointedly noted that Kansas Gov. Sam Brownback, through his secretary of commerce, has the discretion to offer incentives while Missouri’s programs are an entitlement. If a company qualifies in Missouri, it automatically gets the goodies.

Well, state Sen. Ryan Silvey, R-Kansas City, Mo., has offered an olive branch that’s won support from both houses in the Missouri General Assembly.

His bill would prohibit incentives for border-jumping businesses in Douglas, Johnson, Miami or Wyandotte counties in Kansas and Cass, Clay, Jackson or Platte counties in Missouri. It would go into effect, however, only if the Kansas Legislature or governor enacted a similar measure in the next two years.

If the Missouri bill passes and is signed by Gov. Jay Nixon, the ball would be in Kansas’ court. And, according to the Border Challenge Advisory Committee, Brownback has the unilateral authority to say yes to a truce.

Let’s hope he does.

The Kansas City-area border war has become the poster child for how silly incentive-based economic development can get. It was mentioned prominently in a New York Times series and is a regular feature in reports from the nonprofit Good Jobs First.

When the state-line-straddling Louisville, Ky., metro area was going through something similar, the development agencies in Kentucky and Indiana agreed in 2007 to what seems a very sensible joint policy:

“To inform each other of existing companies looking to move ‘across the river’ and recommend incentives for company growth based on net new job and capital investment growth to the economic area, not based on simply moving jobs and investment from one site to another within the … area.”


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