Breaking down the jobs development fund on Wichita’s sales tax plan

Gary Chandler used to work in the warehouse at Beechcraft, but he wanted to do something more.

The 27-year-old is one of 40 students who are training at Wichita Area Technical College with grant funding through a partnership of the Kansas Department of Commerce, Workforce Alliance of South Central Kansas and Spirit AeroSystems.

Those who complete the two-month program have jobs lined up with Spirit.

“I think it’s important for the city to get people out there and trained in different fields so we can have success,” Chandler said. “I hope more opportunities open up. … This is another notch in my belt.”

Similar training is part of the city’s plan for the job fund through the 1-cent-on-the-dollar sales tax, which will be on the November ballot. The fund would include money for training, infrastructure and incentives for companies.

The overall goal of the jobs fund: Create 20,000 jobs in the next five to seven years to replace the net 20,000 jobs lost in the recession.

Wichita’s greatest asset is its workforce, said Jeremy Hill, director of the Center for Economic Development and Business Research at Wichita State University.

“Those aerospace production workers have some great skills sets that can be translated into other sectors. So if we want to attract new industry, we have to have the environment and the labor. … Unless we figure out how to engage our labor force in some other meaningful way, we are going to continue to fall down.”

The sales tax would collect nearly $400 million over five years to go toward a new water supply ($250 million), job development ($80 million), transit ($39.8 million) and street maintenance ($27.8 million).

According to city documents, the job development fund, the most contentiously debated portion of the sales tax, would be divided into three areas:

▪ Forty percent, or about $32 million, would go toward infrastructure for things like Wichita State’s new innovation campus.

▪ Another 40 percent would go toward workforce training, including re-training for production workers and grants to local colleges and training institutions.

▪ The last 20 percent, or about $16 million, would be used to offset business costs for moving or expanding locally or investing in things such as Wichita State’s National Institute for Aviation Research.

Workforce development

The workforce development portion of the jobs fund would be helpful for students and those looking to enter the workforce in a new industry, said Tony Kinkel, president of Wichita Area Technical College.

When he became president at WATC four years ago, more than 50 students in an aviation maintenance technical program received help with tuition through federal Workforce Investment Act funds. Since then, that funding has dried up, Kinkel said.

The jobs fund could provide about $6.5 million each year over the five years of the sales tax for that kind of training through local colleges, without students having to take out student loans or companies having to pay the bill for training.

“It could provide motivation for local manufacturers and suppliers to invest in that new technology or projects to advance their workforce,” said Kent Irick, WATC dean of aviation.

“If that funding can help students become better prepared in a timely manner and not at the expense of manufacturers, they can use those funds somewhere else that they would have spent on training. To me, that would be a big boost for the Wichita economy and allow it to ramp up quicker.”

If businesses wanted in on the job development dollars for training or incentives, they’d have to meet a series of requirements, said City Manager Robert Layton.

Those requirements include the creation of primary jobs – jobs that produce things that are used outside of the community, or exports – and those that meet certain wage and salary criteria for workers. The requirements also include the company making a capital investment and a positive return on investment of $1.30 for every $1 of public funds spent.

The plan could lead some advanced manufacturers to retrain workers and expand their aging product lines, Hill said.

“We have a lot of second- and third-generation manufacturing plants,” Hill said. “Historically they have a pretty narrow product line that they served (mostly) to aerospace. … So there hasn’t been a lot of time or need to be highly competitive or looking for new markets to diversify their product lines. But over the last three to five years, they’ve re-thought about that and are trying to find these new product lines.”

“They’re at a point in time where they realize the overall demand for their products just shrunk and they have to think about new products. They’re at a point where you give them a little more resources, they’re going to grab it.”

But it won’t lead to jobs overnight.

“It’s going to take a while for markets to be developed, for products to become available, for contracts to come in, and for hiring to follow,” Hill said. “It’s incremental; it’s not going to be fast.”

Among the hundreds of millions of dollars it will take to build the proposed innovation campus at Wichita State, at least some funding could come from the sales tax. Officials have discussed the possibility that if the projects qualify, the funds could cover infrastructure like sewers and roads on the campus or for other businesses.

Infrastructure funding could also go toward upgrading runways and railroad spurs, according to city documents.

Jobs commission

If the sales tax passes, the City Council would appoint a five-member jobs commission to oversee the jobs fund. The commission would be responsible for the evaluation of projects and would use the results of three economic analysis models run by the WSU research center to aid in its decisions.

The commission would be made up of three private sector leaders and two public sector leaders. Anyone could be nominated for the commission; members would be appointed by the City Council.

Private sector leaders also would be recommended by several business organizations, including the Wichita Metro Chamber of Commerce, Young Professionals, Wichita Independent Business Association, Wichita Area Builders Association, Wichita Association of Area Realtors, Wichita Black Chamber of Commerce, Small Business Administration, South Wichita Business Association, Non-profit Chamber of Commerce, Business and Education Alliance and the Building Trades Labor Unions.

Overseeing the jobs commission would be a citizen oversight committee made up of 12 to 15 council-appointed members. The committee also would oversee the water plan, transit plan and pavement maintenance plan and review all expenditures, Layton said.

An independent audit also would be performed over the job fund and the auditor would report to the City Council.

Those on the jobs commission would not be allowed to grant funding to businesses they are affiliated with, Layton said, and the City Council would not have the authority to override individual decisions made by the jobs commission.

“We wanted to take that out of the political arena,” Layton said.

Layton said the jobs commission and citizen oversight committee would be subject to the Kansas Open Meetings Act and the Kansas Open Records Act.

Criteria for companies, eligibility

Three economic analysis models would be used by the jobs commission to determine if a project would provide value for the community.

A fiscal impact model would try to determine whether community investment would return more money in additional tax revenue to local governments. Another model would measure economic impacts like spending. And a new layoff model being developed by the WSU research center would determine whether it’s worth it to offer incentives to companies that threaten to leave. The layoff model would “examine the impact of potential layoffs, including the cost of services provided to people laid off,” according to city documents.

“When a company leaves, we can better calculate the loss to that community, or when a company threatens to leave for a better offer, cost of the people left unemployed and lost wages,” Hill said.

“That might give the city better decision tools to say, ‘OK, before we were just looking at the added value. Now we’re going to see if they leave, what the cost is to us.’”

Although the commission will have models to look at to help in the decision-making process, ultimately the members will decide whether or not to award incentives, Hill said.

The jobs commission “could make good decisions and then we’ll see it in the numbers, or they can make bad decisions and then we’ll see it in the numbers,” Hill said.

This story was originally published October 23, 2014 at 8:48 AM with the headline "Breaking down the jobs development fund on Wichita’s sales tax plan."