Will Kansas City Subsidize WMD Plant?

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Uncle Sam giveth and Uncle Sam taketh away.

That’s the principle at work in an unusual situation in Kansas City involving local subsidies and nuclear weapons production.

For the past half-century, Honeywell International (and its predecessor companies AlliedSignal and Bendix) has operated a huge facility (photo) in KC that makes the non-nuclear components of nuclear weapons. When the Cold War was still in full swing, there were some 8,000 people employed at the three-million-square-foot plant, which is owned by the federal government. The well-paid workforce, represented by Machinists Local Lodge 778, is now down to about 2,100.

Although the Pentagon has rejected calls that it get out of nuclear weapons entirely, the federal government is seeking to produce its weapons of mass destruction more efficiently. That includes downsizing the KC plant. In 2006 the Department of Energy’s National Nuclear Security Administration extended Honeywell’s contract through 2010 but said it wanted to relocate the operation to a smaller site.

Rather than finding a new government-owned facility, the General Services Administration (in effect Uncle Sam’s real estate broker) decided to have a private developer finance and build the new plant (expected to cost $500 million), which would then be leased to the Energy Department for Honeywell’s use. GSA touted this arrangement to local officials as a way to put the new plant on the property tax rolls (the existing one is tax-exempt), thereby generating an estimated $5.2 million for local entities including the school district.

Up to this point, the plan sounded reasonable (putting aside any misgivings about nuclear weapons production). But then it was proposed that about half of the tax revenue be diverted to help pay for some $40 million in road and utility improvements needed at and around the site—in other words, an arrangement like that of tax-increment financing deals. A GSA spokesperson told me, however, that he was told not to call it a TIF.

It’s not clear who initiated the TIF-like plan. A May 6, 2008 article in the Kansas City Star (no longer on web) implied that GSA proposed diverting the tax revenues, but the GSA guy I spoke to could not confirm that. Wherever it came from, the proposal is moving forward. A public entity called the Planned Industrial Expansion Authority recently gave its blessing, despite the opposition expressed by several speakers at a public hearing. Among the most vocal opponents are antiwar activists allied with groups such as the PeaceWorks Kansas City, who have been fighting the plant itself (old and new), not just the diversion of tax revenue. I’ve been told that the Machinists Local, concerned to protect the jobs of its members, is supporting the plan, but the union has not returned my message asking for details. The proposal now heads for the City Council.

While it was considerate of GSA to put the new plant on the property tax rolls, taking away half of the newfound revenue seems stingy. It comes across as an unnecessary gift for a developer which has not yet been chosen. Given the prevalence of abuses in subsidy programs such as TIF, it is dismaying to see the federal government playing a similar game with its TIF-like plan in Kansas City. It is even more disappointing to see local officials playing along.

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