August 13, 2019; Kansas City Star (Kansas City, MO)
At NPQ, we have often written about the wasteful expenditure of an estimated $80 billion a year in tax abatements used to entice companies to move from one community to another.
But now for some good news. This Tuesday, Missouri Governor Mike Parson (R) and Kansas Governor Laura Kelly (D) “celebrated what they said is an end to the longstanding economic border war and pledged to usher in a new era of cooperation between the two states,” reports Kevin Hardy in the Kansas City Star.
As Hardy puts it, “The pair signed an agreement pledging to end the use of tax incentives to lure companies across the state line that do not create new jobs for the region. They said that practice has cost the states hundreds of millions of dollars with little to show for it.”
Tax abatements will not end, but cities in the Kansas City metropolitan area will no longer be allowed to use them to poach companies from each other. University of Missouri St. Louis political scientist Kenneth Thomas, in a Good Jobs First blog post, notes the precedent-setting nature of the agreement. “This is not a voluntary agreement, but one with the force of law, a first in the country’s history.”
Parson, speaking to about 300 people who gathered at a governor association summit, enthused, “Sometimes commonsense does prevail. Because you don’t have to be a scientist to figure out this was a bad deal for both states.”
How bad? The local Hall Family Foundation estimated that since 2010, Missouri had spent $184 million to move businesses from Kansas and Kansas $151 million to move businesses from Missouri, diverting resources from education, health, and social services. Back in 2013, a report from the nonprofit Good Jobs First detailed how this occurred:
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A sample of companies that have moved to Kansas from Missouri in recent years includes JPMorgan Retirement Plan Services, which received $15.3 million to relocate 800 jobs from Kansas City to affluent Overland Park in 2009. The following year, KeyBank Real Estate Capital moved 300 jobs from Kansas City to Overland Park with a $15 million subsidy package from the state. In 2011, biotech company Teva Neuroscience received $40.7 million from Kansas in exchange for an agreement to move its 400 employees from Kansas City to Overland Park as well. The same year, movie theater chain AMC Entertainment received $47 million in tax subsidies to move its corporate headquarters from Kansas City to Leawood, Kansas. It took 400 jobs with it across the state border…
Some of the companies recently subsidized to move from Kansas to Missouri include the Applebee’s restaurant chain headquarters, which moved from Lenexa to Kansas City, securing $12.5 million from Missouri for 390 jobs. In August 2012, less than a year after receiving the relocation subsidy from Missouri, the company eliminated 47 jobs. Missouri also subsidized North American Savings Bank to relocate in 2011. The financial institution received $5.8 million in state incentives and about $111,000 in local subsidies to relocate 204 jobs from Overland Park to Kansas City that year. In 2012, Velociti, a tech firm, moved its headquarters and 60 jobs from Kansas City, Kansas to Riverside, Missouri to receive a subsidy package valued at $1.6 million. Freightquote, a shipping company, also moved its headquarters and 1,225 jobs from Lenexa, Kansas to Kansas City, Missouri in 2012. The 12-mile move landed the company a city and state tax incentive package valued at $64.3 million over 23 years.
At the governors’ gathering, Amy Liu, who directs the Metropolitan Policy Program at the Brookings Institution, noted that the Missouri-Kansas border war had become a “poster child of how not to create jobs.”
The agreement follows careful steps: Parson, on June 11th, signed legislation that sought to end the economic border war. Kelly followed with an executive order on August 2nd. The agreement, Hardy notes, limits future incentives for companies in Jackson, Clay, Platte, and Cass counties in Missouri and Johnson, Wyandotte, and Miami counties in Kansas.
Other actors also seem to be getting in line with the new normal. This past Monday, the development committee of the Port Authority of Kansas City (Missouri) board “unanimously approved a measure intended to mirror its incentives with those available in Kansas.” Meanwhile, newly inaugurated Kansas City, Missouri mayor Quinton Lucas has drafted an ordinance to limit local property tax abatements to 10 years for companies moving into Kansas City from Kansas border counties. As Hardy explains, “That levels the playing field because Kansas law allows local governments to offer abatements of up to 10 years.
In Missouri, cities can offer abatements of up to 25 years.” Lucas told Hardy that other Missouri-side suburban mayors plan to follow suit.
The agreement, adds Hardy, takes effect August 28th. —Steve Dubb