Costly border war fails to expand jobs areawide
The Kansas City Star
The Kansas City area’s destructive economic development border war continued in 2012, diverting millions of public dollars to private companies for almost no net new jobs in the region.
With effective leadership from governors Sam Brownback in Kansas and Jay Nixon in Missouri — and from others on both sides of the state line — this fiscal foolishness needs to be dramatically reduced in 2013.
The deals this year created a few private business winners, as elected officials granted breaks to those that will pay lower taxes than required of most everyone else. They included AMC Entertainment (moving from Kansas City to Leawood) and Freightquote (moving from Lenexa to Kansas City).
But these and other deals created a whole lot more losers. They are the residents and businesses on both sides of the state line forced to pay more than their fair share of future taxes because of the special breaks for selected corporations. The diversions also will reduce the money available for services such as schools, social services, public safety and roads.
This insistence on swapping companies across state lines is occurring as it has become clear that the Kansas City Area Development Council has been unable to attract large numbers of other, truly new employers to the area.
The Star’s recent review of job growth in the Kansas City area and 17 others, including 10 that are considered our Midwestern benchmarks, showed we were an abysmal 16th in percentage growth in total nonfarm employment from July 2009 to July 2012. Growth was only a half of 1 percent.
On a longer term basis, a study released this year by the U.S. Conference of Mayors said the Kansas City metropolitan area ranked a dismal 214th in average annual growth rate between 2002 to 2011 out of 363 regions. That was far behind Des Moines, Oklahoma City, Omaha and Denver.
So what might swing the pendulum toward a more sane fiscal economic development policy in 2013?
The biggest factor would be positive contributions from Brownback and Nixon. In recent months neither has publicly moved to reduce income tax breaks that are draining their states of much-needed funds. But given the budget problems of both states, the governors may increasingly be forced to act to rein in overly lavish incentive programs.
Because neither side wants to look like it’s backing down from this competition, the governors should work together on solutions that would effectively give much lower state rewards to any business that moves just a few miles one way or the other across the state line.
Meanwhile, mayors such as Sly James in Kansas City, Carl Gerlach in Overland Park, Mike Boehm in Lenexa and others ought to craft city policies that reduce local subsidies for these kinds of corporate moves.
This topic needs to receive more attention in corporate boardrooms and by local civic leaders. Bill Hall of the Hall Family Foundation has put together the best information so far on just how much this ongoing debacle is costing the region. After figuring in taxes forgone by Missouri and Kansas to gain only a few net new jobs in recent years, Hall’s numbers show Kansas is giving up more than $250,000 in income taxes for each additional employee it has gained from Missouri.
In other words, Kansas is winning more battles while still losing this border war.