Economic leaders reach for other tools to drive growth

There's no doubt that the financial incentives that economic development officials could offer companies are much less today than they were a year or more ago.

Just last week, Kansas Gov. Mark Parkinson announced another round of cuts to the state's budget — including $2.4 million for economic development — because of falling tax revenue.

Even though they are playing with fewer dollars to entice site selectors and their corporate clients, local and state economic development officials said that doesn't mean they are completely hobbled from competing with other regions and states.

"There's a whole lot more to ED than just trying to find money for incentives," said Vicki Pratt Gerbino, president of the Greater Wichita Economic Development Coalition.

But one national site selector said financial incentives play a big part in attracting companies, perhaps even more so during a recession.

All economic development officials agree that there remain companies looking for states to relocate or expand in despite the recession.

"Everybody is seeing a lot of activity in terms of interest," Gerbino said. "Deals aren't necessarily being closed. But are (companies) looking because they have the time? You betcha."

One clear example of economic development getting done during a recession is in Hutchinson.

There, Siemens Energy is building a $50 million wind turbine plant that it says will employ 400 when fully operational.

"There are some industries that are doing just fine," said Joe Monaco, spokesman for the Kansas Department of Commerce.

Siemens was lured to build the plant in Hutchinson through a variety of incentives, including a bill passed by the Kansas Legislature this year that gives $5 million to wind energy manufacturers investing more than $30 million and creating 200 jobs. The incentive will be repaid from the workers' payroll taxes.

"That was one of the incentives that really cleared the way for Siemens," Monaco said.

Hutchinson, South Hutchinson and Reno County together also agreed to give Siemens $2 million in cash.

And Hutchinson will give Siemens 109 acres in the Salt City Business Park on the city's southeast side.

Though Siemens is a big win for Kansas' economic development efforts, Monaco said the number of deals "is slower than it has been in recent years."

And state budget cuts mean "a decrease in the financial incentives we'll have available. Certainly that's the case here. However, there are other tools we have."

Those other tools include marketing efforts inside and outside of Kansas.

Monaco and GWEDC's Gerbino said they can tout an available and skilled work force to companies, a low cost of living and a geographic location that makes the state attractive for logistics and transportation.

Monaco said the state can also utilize some "pro-business" legislation passed in recent years as part of the economic development toolbox. That legislation includes the phasing out of the franchise tax, reduction of unemployment insurance rates and the elimination of property tax on business machinery and equipment.

'A way to win'

But GWEDC's Gerbino said financial incentives are still key.

"At the end of the day... certainly we look for ways to incentivize projects," she said.

While that's harder to do in a recession, financial incentives take on greater importance, said site selection consultant Mark Sweeney.

"The competition if anything becomes more intense with a recession because there are fewer new capital projects," said Sweeney, senior principal of site selection firm McCallum Sweeney Consulting in Greenville, S.C.

Sweeney said he frequently hears economic development agencies using recession and budget cuts as an excuse to not pursue company relocations and expansions.

"I think it's actually dangerous for a community to think... everybody's in the same boat," he said. "Incentives are a way to win. It is one of the activities that government... can point directly to job creation."

Gerbino and Monaco said that if the Wichita area had the opportunity to land a new expansion or relocation project promising hundreds of new jobs — something on the scale of the now-shelved Cessna Citation Columbus project — officials could find the resources to pull an incentive package together.

Last year the state, county and city approved more than $70 million in financial incentives and tax breaks to Cessna to develop its newest business jet in Wichita. The Columbus program was to have created 1,000 jobs.

"I'm pretty sure we could find a way to get that deal done," Gerbino said.

But Gerbino said she'd like to see the establishment of a fund dedicated to economic development that would not be affected by recession.

"The one thing this community hasn't been able to do is have a dedicated funding source for incentives," she said.

Such a fund could be used to do things like buy land and build industrial parks to attract new companies to the area, she said.

According to a February study by Richard Caplan & Associates for Kansas Inc., Kansas is one of 20 states without such a fund.

South Carolina is one of the states that has such a fund in place, and Gerbino thinks that played a part in the state being selected to be the location for a second Boeing 787 assembly line.

" (They've) got a fund of $7 million on top of everything else, so they can do a lot of things," she said.