Business

Study: Wichita needs funds to lure industry

Back-office work is an area in which Wichita has succeeded in drawing industry growth.
Back-office work is an area in which Wichita has succeeded in drawing industry growth. File photo

Wichita needs a war chest full of money and fields ready for groundbreaking if it wants to lure new factories and offices, according to a new economic development study. The study, funded by the Greater Wichita Economic Development Coalition, examines how Wichita can improve its economic development effort in the coming decade.

One possibility being discussed is a sales tax, but community leaders stressed that they are just beginning to consider ideas to raise money.

Study authors David Brandon and King White of Site Selection Group of Dallas along with coalition president Vicki Pratt Gerbino spent Thursday and will spend today presenting the study to civic and business leaders.

Wichita lacks critical tools: a large pile of available money for incentives and an industrial park with sites ready to go, they said.

"You've got to be competitive," Brandon said.

Brandon and White didn't say how much money is needed or how it should be raised, but said that many competing cities have sales tax devoted to economic development, including Hutchinson, Junction City, Topeka, Lawrence and Manhattan.

At a presentation Thursday morning, County Manager William Buchanan estimated that the city of Wichita and Sedgwick County each spend about $1 million a year on incentives. That doesn't include the operating costs of the coalition.

A penny of sales tax in Sedgwick County generates about $80 million a year, he said.

If an economic development fund is established, it would be overseen not by the coalition, but by a newly created, public-appointed authority, said Gerbino. And if the company doesn't deliver, the authority can demand the money back.

It's a discussion that the community is just about to start, said Doug Stanley, the attorney with Foulston Siefkin who chairs the steering council that oversees the coalition.

But Stanley said he ultimately expects the community to approve a funding source.

"This has been a progressive community," he said. "We will have disagreements in philosophy, but we look forward."

Wichita Mayor Carl Brewer, who saw the presentation on Thursday, said that a sales tax would generate a war chest, but that now isn't the time to ask voters to approve one. The economic and political environment isn't favorable.

"For every action there is a reaction," Brewer said. "The timing has to be correct and the environment has to be correct. It's something we all have to agree on."

Brandon and White warned that sometime soon companies will go into a near frenzy of building as they expand capacity after three years of shrinkage.

Many communities pulled back during the recession, but the smart ones kept up their economic development.

"There is a moment coming when you need to be ready to go," Brandon said.

Targeted industries

The study has a list of targeted industries: aircraft, medical devices, alternative energy and back-office work such as customer service and payroll.

Wichita already has established aircraft and back-office industries and has worked for several years to build medical device and alternative energy industries.

The recommendations confirm that Wichita made solid choices in the industries to have and pursue, Brandon said.

These industries pay well and, except for aircraft, are set to grow rapidly and where Wichita can win.

"These are growth industries where we have a play," Gerbino said.

Wichita's big advantage is the technical skill of its work force and, to a lesser degree, its moderate business costs _ including, said White, its tax climate.

Kansas and Wichita are about in the middle of the pack as far as taxes. Raising or lowering taxes a little won't make much of a difference to industries looking at where to put a new factory because taxes are less important than the cost of electricity, location of railroads and highways, and the ability of the work force.

Brandon said Wichita is also hurt by the perception that it is a union stronghold — but he said that really isn't so.

"Once you get below Boeing and Spirit, it changes dramatically," Brandon said of wages.

Once you get below the other major aircraft manufacturers, it changes even more dramatically, he said. "There's no union difficulty."

Involving all players

The report also recommends that Wichita form an over-arching economic development group to pull in all the major players, from the universities to the unions to the business community to local government.

The idea is to create a coordinated and sophisticated economic development effort. Where, for instance, Wichita State University would quickly create research support for a new industry or union-company relations would run smoother.

Lynn Nichols, president of Yingling Aircraft, heard the presentation Thursday and said he generally was convinced by the study, but wants a closer look at some of the tough questions, particularly taxes.

"There is some further analysis that needs to be done," he said.

Gerbino said some communities push for growth and some don't. Those that want growth make sacrifices — approve taxes, give away land and tax breaks — to bring in new companies.

"I just keep asking myself: what is the will of this community to be competitive?"

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