The Fight for Jobs Intensifies Between Kansas and Missouri

Nowhere are tax incentives more complicated -- and some say pointless -- than in Kansas City.
by | May 12, 2016
Kansas City (FlickrCC/Tyler Thompson)

In major metropolitan areas, using tax incentives to lure businesses from one part of the region to another can sometimes seem like a big family fight. In the Washington, D.C., area, for instance, several jurisdictions are vying to become the new headquarters of the FBI, which is currently located in the district. If the FBI moves outside of D.C., Maryland or Virginia can claim "new" jobs. But the net gain to the metro area is negligible, save the temporary work created by new construction.

In nowhere does this chess match seem more futile than in Kansas City, which sits in both Kansas and Missouri. The two states have long competed with each other to woo businesses across the state line. AMC Theaters, Applebee's and JP Morgan Retirement are just a few businesses that have crossed the border in recent times. So much money is involved that the tax incentives battle has been dubbed the Kansas City Border War.

But recently there's been a concerted effort to call a cease fire. In 2014, the Missouri General Assembly passed a bill that effectively ended the state's tax incentive program in Kansas City after a group of 17 businesses in the two-state region lobbied both governors for it. For the law to go into effect, though, Kansas has to approve a similar bill. The state has until Aug. 28 to do so; otherwise, the "deal" is dead.

If Kansas were to match the proposal, it would "definitely [set] a precedent in other states" where job piracy across state lines has been an issue, said Greg LeRoy, head of Good Jobs First, which tracks tax incentives. LeRoy not only cites the Washington, D.C., metro area but also the New York City metro area, the Chicago and Northwest Indiana area, and the Boston metro area.

 

But so far, things aren't looking good for the deal. Kansas sent back an offer to Missouri last month that was seen by many as a half-hearted effort. Rather than agree to end incentives in Kansas City, Kansas said it would withhold offering incentives in cases where jobs were simply being transferred across the state border. And the state wouldn't offer incentives for business moves that amounted to less than $10 million in new construction and moving costs.

"That means that any sort of substantial construction project in Kansas would still get [tax] incentives," said LeRoy. "So that's not much of a counteroffer at all."

The proposal has been openly rebuffed by Missouri legislators and the 17-member business coalition that started calling for a truce back in 2011. Hallmark Cards has been leading the charge on the effort, and a spokeswoman for its charitable arm told the online news organization Next City this month that the group is now concerned Missouri will give up and simply double down on border war tax incentives.

"It could be a giant step backward," Angela Smart said. "We've heard that for every dollar Kansas spends on incentives in the region, Missouri is going to spend $1.50."

If that were to happen, it could lead to unprecedented competition in a city where many find it hard to believe things could actually get worse. Since 2009, about 5,700 jobs in the Kansas City area -- thanks to tax incentives -- have moved from Missouri to Kansas, and nearly 4,000 jobs have moved from Kansas to Missouri.

Much like Kansas City's cease fire, some metropolitan areas have tried to tackle the incentives problem head-on. A 2014 Good Jobs First report highlights programs in Dayton, Ohio, and Denver that mandated transparency and cooperation between neighboring counties when it came to incentives. They also called for their state economic development programs to ban offering state incentives in situations where a company relocates within the metro area at the protest of the home community.