Business Climate and Economic Conditions
As the nation continues to shake off the effects of a grueling economic downturn that began in 2007, the business fundamentals of Greater Kansas City remain sound overall.
In some ways, those fundamentals make this region a clear winner when viewed head-to-head with many American cities of similar size—and some that are larger.
There are many reasons for that, including the region’s central location, its lower-than-average cost of living, its nearly unmatched transportation infrastructure and the quality of its work force. Another is the well-known economic diversity that frames the local economy, the cornerstone of which is a strong agricultural sector.
The roster of Kansas City’s leading businesses, based on revenues, feature some of the nation’s biggest names in grain shipping and handling, beef marketing, pork production and distribution of packaged groceries. And the means to move those goods to market, by rail and truck, fuel a strong transportation/logistics sector. Truly, this region is the nation’s breadbasket, and because people are going to eat regardless of the national economic figures, the Kansas City metropolitan area enjoys something of a buffer from wide economic swings.
But emerging industries are adding new depth to that diversity. One is the animal-health sciences corridor stretching from Manhattan, Kan., to Columbia, Mo., incorporating both of the ag-research-focused land-grant universities in this region, Kansas State and Missouri. The University of Kansas, as well, is just one institution at the fore of human health advances, with a number of start-up companies spinning off from that research focus.
Those developments reflect another, broader intangible factor that runs throughout the community: Its collective roll-up-the-sleeves approach to moving forward, despite some of the obvious divisions that can be created by a state line running through a metropolitan area.
Sound Fundamentals
That no-nonsense approach to doing business pervades the region. Take banking, for example. One reason that Kansas City, as a region, experienced less fallout during the run-up to the Great Recession, and the national stagnation that has followed it, has been a shared sensibility in lending strategies by banks in the region. Forbes magazine, in fact, dubbed the 10th Federal Reserve District a “zone of sanity” in 2009, noting the stability that followed from conservative lending practices in this region.
Following the financial-services sector crisis of late 2008, banks across the country were required to upgrade their financial fundamentals. In doing so, those in this region have been criticized for paying more attention to shoring up their balance sheets than to priming the construction and development pump so vital to long-term economic vitality. But in general, banks locally are flush with cash and are better prepared today to lend on projects that make sound fiscal sense. That is a quality that will frame business conditions in this region for years to come.
Another significant contributor to the business climate here is tax policy. It’s worth noting that Missouri has, at the behest of voters, adopted more stringent incentive packages in recent years, or at least tightened some of those on the books. And the state’s dire financial outlook in recent years has prompted the governor to conduct a top-to-bottom review of tax-incentive programs, with an eye toward maximizing the taxpayer’s return on investment in those programs.
The effects of this were noticeable, but—to date—not drastic. Missouri has tightened up on the use of eminent domain and one of the state’s most popular development incentives, tax increment financing. Both are still accessible, but their use must come closer to meeting the original intents for blighted areas and other applications.
Innovative Tools
Kansas has, over the past decade, shown the power of tax policy as an economic-development incentive through its innovative use of sales tax and revenue bonds, known as STAR bonds. That one tool alone has transformed Wyandotte County, once the region’s economic stepchild, into the largest tourist attraction in the state, and one that continues to reel in nine-figure development projects at its glittering Village West retail and entertainment district.
More broadly speaking, the national tax-monitoring Tax Foundation reports that Missouri’s state and local tax burden has consistently been well below the national average, and was again for 2011, the most recent full year for available statistics. Estimated at 9.2 percent of income, Missouri’s state/local tax burden percentage ranked 32nd-highest nationally, significantly below the national average of 9.7 percent. Taxpayers in Missouri pay $3,508 per capita in state and local taxes, and per capita state income is $28,029.
The same measure paints Kansas somewhat less favorably, yet still below national averages. Estimated at 9.6 percent of income, Kansas’s state/local tax burden percentage ranks 21st-highest nationally and 0.1 percent below the national figure. Kansas taxpayers pay $3,911 per capita in state and local taxes on per-capita state income of $28,507. Kansas ranked 32nd in the Tax Foundation’s 2010 State Business Tax Climate Index, which compares states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Missouri ranked 16th in that category.
Kansas’ corporate taxes consist of two categories with a top rate of 7.05 percent, kicking in at an income level of $50,000. Among states levying corporate income taxes, Kansas’ rate ranks only the 22nd-highest nationally.
Missouri’s corporate tax structure is comprised of a flat rate of 6.25 percent on all corporate income. Among states levying corporate income taxes, Missouri’s top rate ranks the state 35th.
Although local business climates vary dramatically, most communities in Greater KC offer excellent economic and business development offices that work with local and potential businesses. 