In an incredibly rapid private-sector response to our April Fool’s Day gag about that wonderful 50-state jobs truce, 17 prominent Kansas City-area business executives issued a letter this week urging the governors of Missouri and Kansas to stop offering subsidies to companies that are jumping the state line to create “new” jobs (no kidding!)
According to the Kansas City Star, the letter was not initiated by the Greater Kansas City Chamber of Commerce. A spokesperson for Kansas Gov. Sam Brownback basically said that state would press on. Missouri Gov. Jay Nixon is currently trying to convince AMC Entertainment not to jump the state line.
The paper also reported that the job-poaching wars have gotten worse since Kansas enacted a subsidy that allows employers to keep the personal income taxes of their employees (yes, you read that right), but then Kansas reportedly did that to defend itself against a similar Missouri giveaway…
Aside from the K.C. business leaders naïvely referring to their “unique bi-state community” (they’ve apparently not heard about New Jersey and Connecticut pirating New York City, or various Western states plundering Southern California, or northwest Indiana raiding Chicago, or [insert your favorite border job-war here], the letter is a lucid statement of the problem (if not a real solution). I especially like their point: “The losers are the taxpayers who must provide services to those who are not paying for them.”
And contrary to the tone of a similarly naïve piece about Kansas City-area job wars that recently ran in the New York Times, there is hardly anything new about this problem. Indeed, some people would date it to the 1937 birth in New York City of the Fantus Factory Locating Service, the grand-daddy of the secretive, powerful site location consulting industry.
Read this letter!
Apr. 11, 2011
Letter from KC area business leaders to Missouri, Kansas governors on ‘economic border war’
This letter to Kansas Gov. Sam Brownback and Missouri Gov. Jay Nixon was signed by 17 of the area’s top business executives: David Beaham of Faultless Starch/Bon Ami; Michael J. Chesser of Great Plains Energy; Ellen Z. Darling of Zimmer Real Estate Services; Peter J. deSilva of UMB Bank; David Gentile of Blue Cross and Blue Shield of Kansas City; Greg M. Graves of Burns & McDonnell; Donald J. Hall Jr. of Hallmark Cards; Michael R. Haverty of Kansas City Southern; Daniel R. Hesse of Sprint Nextel; L. Patrick James of Quest Diagnostics; A. Drue Jennings, formerly of Kansas City Power & Light; Mark R. Jorgenson of U.S. Bank; Jonathan Kemper of Commerce Bank; Thomas A. McDonnell of DST Systems; Michael Merriman of Americo Life; Robert D. Regnier of Bank of Blue Valley; and Kent W. Sunderland of Ash Grove Cement.
Dear Governor Brownback and Governor Nixon:
The Kansas City community is experiencing an economic border war. State incentives are being used to lure businesses back and forth across the state line with no net economic gain to the community as a whole and a resulting erosion of the area’s tax base. We are asking that you direct your Departments of Commerce to develop parallel legislation to reduce this unproductive use of tax incentives. While your departments work on this legislation, we ask that you both mutually agree to a bilateral halt to the issuance of incentives for business relocations between the two states within the Greater Kansas City area. We recognize that previously offered commitments should be honored and retention efforts and job training efforts should go forward. Let us give you more detail.
Both states offer competitive incentives for attracting new businesses. We support these incentives. We know they are necessary to compete with other states. We believe these incentives were intended to attract businesses and new jobs from outside the state or region. However, because of our unique bi-state community, too often these incentives are being used to shuffle existing business back and forth across the state line with no net economic benefit or new jobs to the community as a whole. At a time of severe fiscal constraint the effect to the states is that one state loses tax revenue, while the other forgives it. The states are being pitted against each other and the only real winner is the business who is “incentive shopping” to reduce costs. The losers are the taxpayers who must provide services to those who are not paying for them.
There are companies taking out short-term leases in hopes of taking advantage of the incentives more than once. This shuffle is a two-way street as one state lures businesses and the other responds in kind. Neither state will benefit as the stakes in this “economic arms race” continue to escalate, and we squander available tax incentives by fighting amongst ourselves.
Further, the effect of this economic border war is not only erosion of the tax base but a decrease in property values, and the chilling of community relationships on other important metropolitan issues.
We applaud an aggressive economic development effort by both states. However, we should measure success by new businesses and jobs from outside this area and the state, not from across the street. We need to compete with others … not each other.
We believe the directors of the Department of Commerce should examine the definition of “new jobs” for the granting of incentives. “New jobs” should be redefined to exclude jobs attracted to the states from counties bordering the state line in the Greater Kansas City SMSA and counties contiguous to those counties.
Greater Kansas City is unique in having a community equally divided between two states. Our community is interdependent. To compete we must cooperate. The use of these incentives is vital to attract new businesses to our region. We can’t grow this community if we’re using our incentives to steal from each other instead of attracting real new economic growth.
We ask that each state examine how incentives can be better used to grow our economy, and while that is being done, declare a moratorium on the use of incentives for relocations between states within the Greater Kansas City area. We do encourage continuing programs for job retention and job training that advance or maintain economic activity.
Thank you for your consideration.