By John Snyder
Many articles have been written over the years about the availability of economic incentives in Missouri and Kansas to entice companies to locate and expand in the greater Kansas City area and to incentivize real estate projects to be developed on both sides of the state line. Such economic incentives include tax-increment financings (TIFs), real estate tax abatements, various tax credit programs, and self-imposed tax assessments (TDDs, special-benefit districts, or community-improvement districts). Although the economy is starting to rebound, the need for these economic incentive tools continues.
The state governments for both Missouri and Kansas continue to suffer from budget shortfalls, and most local municipalities are in the same boat. The recent decline in real-estate values has adversely affected the tax base. Some might look at these problems and want to cut back on economic incentives.
Some lawmakers are looking to reduce or eliminate certain tax credits. Some cities are re-examining their economic development policies in response to the economic downturn. These decisions seem short-sighted in light of what other states and cities are willing to offer.
To only focus on the “border war” between Missouri and Kansas is looking at this issue too narrowly. Certainly, some companies in the past have crossed state lines in order to expand their business. For example, AMC Theatres moved to Kansas and Freightquote moved to Missouri. Each company made a decision based upon what its leaders believed was in the best interest of their organizations, their employees and their ownership groups. Many factors go into such a decision, including work-force attributes, customer location, real-estate availability and multiple economic and financial considerations.
This, however, is not an issue unique to Missouri and Kansas; it’s a national concern. Certainly, Missouri and Kansas need to work together at times (such as with regional transportation), but other states and municipalities are constantly fighting to recruit our companies and people.
Michigan has been successful in the automotive-related industry in attracting companies from Kansas City and other regions; the flip side of that has been this region’s ability to attract auto parts suppliers from out of state. Another example would be when Boeing relocated its corporate headquarters from Seattle to Chicago. Economic Development agencies in the Kansas City area are constantly fighting to attract new businesses to relocate here, but they find that competition can come from anywhere in the country.
During the recession in particular, our competition—other states and cities—viewed economic incentives as becoming even more important, as fewer and fewer opportunities were presenting themselves in the marketplace. This view will only increase in the future. It becomes critical, then, that the state of Missouri and the state of Kansas not only have the tools to attract new businesses, but others that will help retain existing ones in the region. Retention of current companies, and facilitating job growth for existing companies, is just as critical as recruiting new ones.
As the real estate market and the broader business economy continue their slow recovery from the recession and its aftermath, it becomes increasingly important that cities and developers continue to work closely together for creative solutions to attract and retain our companies. The current state of the economy can create great opportunities for the Kansas City region.
The coasts were hit extremely hard by the recession and our local economy has not suffered the same. The state of Missouri, the state of Kansas and the local municipalities have a golden opportunity to attract new businesses, but they will need to be aggressive and think outside the box, and beyond the border that separates them. Of course, state and local government must also be prudent in utilizing such economic incentive tools.
The greater Kansas City area has a lot to offer and increased economic incentives will be vital to keep up. Flexibility, creativity, and forethought are the keys to a successful public-private partnership.
John Snyder, a member of the 2005 class of 40 Under Forty, is managing partner for the Kansas City office of the Dentons law firm.