Most Wichita-area residents breathed a sigh of relief in December when former Gov. Mark Parkinson, along with city and county officials, inked a $45 million deal for aviation manufacturer Hawker Beechcraft to maintain 4,000 jobs in Wichita.
The deal was cut after months of community drama in which company officials threatened to uproot the 75-year-old Wichita company and move it, lock, stock and barrel, to Louisiana. The company had also demanded that union contracts be set aside and vowed to send pieces of the company to Mexico. These threats came after Hawker had cut its Kansas work force by one-third over the prior two years in response to the economic downturn.
Welcome to the new world of economic development — playing brinkmanship with jobs.
This tactic is led by a new breed of hired guns, mostly outsiders and consultants who have little or no attachment to the targeted community. On behalf of corporate clients, they specialize in playing states and communities against one another — threatening state and local officials with plant closures or moves to another state. In the process taxpayers, employees and anyone else available are squeezed for all they are worth.
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The work of economic development used to be simpler: applying a limited set of incentives to attract new businesses and new jobs or encourage existing businesses to add jobs.
In my short stint as Wichita's interim city manager in 2008, I had no difficulty recommending to the City Council and state officials a substantial package of incentives for Cessna Aircraft to build a complete new airplane in Wichita and create 1,000 new jobs. The joint initiative of the state of Kansas, Hutchinson, Reno County and South Hutchinson to land global giant Siemens in Hutchinson, with 400 new jobs in a completely new industry of wind energy, applied this approach.
But the Hawker Beechcraft deal is different, focused on saving existing jobs, not creating new jobs. The result diverts millions in limited taxpayer funds, primarily state income-tax revenues, from state coffers to a company's benefit, simply to have an existing business stay put.
State lawmakers first opened the door for applying income-tax revenues to "job retention" in 2000 under a program called IMPACT (the Investment in Major Projects and Comprehensive Training Act). It set a high threshold for eligibility and placed strict limitations on the use of funds.
Since then, lawmakers have repeatedly loosened requirements and given more encouragement to this game of brinkmanship.
Originally, the law required an eligible company to make a capital investment of at least $250 million and maintain 1,000 jobs in the state. Today no capital investment is required, and the job bar has been slashed to 250 jobs in metropolitan areas and 100 in non-metropolitan areas.
The Kansas secretary of commerce has to sign off on these deals, and to date has approved only nine, according to Department of Commerce officials. The winners are large corporate organizations with familiar names — Bombardier Learjet, Sprint, Applebee's Services, Boeing, Goodyear, and Black and Veatch, in addition to Hawker Beechcraft — all located in either Johnson, Sedgwick or Shawnee counties.
But the barn door has been flung open, as well more than 500 Kansas businesses are now eligible for state assistance — a tenfold increase since 2000. Word gets around in the world of economic development, and demands will escalate.