Tag: economic development

Kelly, Legislature wrestling economic and political forces on $4 billion development project

WSU study: Expect $2.5B annual impact if manufacturing giant lands in Kansas

by Tim Carpenter, Kansas Reflector

Topeka — The clock is ticking on consideration by the Kansas Legislature of an extraordinary economic development incentive plan recommended by Gov. Laura Kelly to improve prospects of landing a major manufacturer expected to inject $2.5 billion annually into the state’s economy.

Kansas survived a review process that began 10 months ago to become one of two state finalists for the project — no company name, yet — that a Wichita State University study showed could create thousands of jobs through corporate investment of $4 billion and a package of government incentives. It would deliver an estimated 4,000 direct jobs and have a total employment impact of 7,800 jobs tied to $440 million in annual labor income. There could be a temporary expansion of 16,500 jobs.

The manufacturing plant’s estimated output at full production — think of an operation consuming 3 million square feet of building space — would be $1.8 billion annually, according to modeling by WSU’s Center for Economic Development and Business Research.

Parts of the WSU report were redacted to conceal identity of the prospective company, but the document noted Kansas had an established business sector in the targeted manufacturing field with the second-highest concentration of employment and wages in the nation.

For those engaged in guess work, Kansas officials said the target of the competition wasn’t Boeing and the rival state wasn’t Missouri.

“We finally have a chance to not only catch up to our competitor states, but beat them and supercharge the rate of growth in our state by landing this whale of a project,” said David Toland, who serves as lieutenant governor and as secretary of the Kansas Department of Commerce.

The Kelly administration recommended the Legislature efficiently finish work this week on an economic incentive bill aiming financial support at companies making a minimum investment in Kansas of $1 billion over a five-year period. The Attracting Powerful Economic Expansion Act, or APEX, would feature comparable tax benefits for suppliers with $10 million or more in annual sales to the manufacturing giant.

“It’s a much larger opportunity than anything the state has seen in its history as far as it being a realistic possibility for the state to win it,” Toland said in an interview. “We’ve been encouraging a clean bill that moves swiftly and gets to the governor’s desk this week so we can put forth an offer that will beat our competitor.”

The state’s final bid would need to be submitted in the first week of February, Toland said, so the company could make a site selection later in the month.

Incentive bill on the clock

The legislation would offer the megaproject company a 15% investment tax credit, reimbursement of up to 10% of payroll costs for up to 10 years and a 100% sales tax exemption on construction materials. A separate 50% property tax incentive would be available to the manufacturing company and up to five of its supplier companies if participating in a foreign trade-zone program, assuming local governments consented.

In addition, up to 50% of new employee training and education costs up to $5 million annually would be reimbursed to both manufacturing and supplier companies.

The supplier companies would score a 15% investment tax credit, retain a maximum of 65% of payroll withholding tax for 10 years and also qualify for the training reimbursement as well as the partial property tax exemption and full sales tax exemption on construction.

The package crafted by the Kelly administration was introduced last week in the Senate Commerce Committee. It would target employers in advanced manufacturing, aerospace, logistics, food, agriculture and technical services. Hearings in the Senate committee revealed support for the bill from the politically influential Kansas Chamber and backing among local chambers of commerce.

Eric Stafford, the main lobbyist for the Kansas Chamber, said expansion of gross domestic product in Kansas had lagged competitor states for years. The state also has endured a decades-long decline in population as young adults moved to other states for better jobs, he said.

“Many of us have talked over and over and over about wanting to grow the state and wanting to attract investment,” he told members of the Kansas Senate. “You have a great opportunity to grow. Hopefully, this is a good catalyst of things to come in the future.”

Pointed comments from conservative lawmakers about the bill exposed reservations about writing a large check to lure the company to Kansas.

Sen. Virgil Peck, R-Havana, said he was concerned the Legislature was being pressured to vote on Senate Bill 347 abruptly. He couldn’t recall such a compressed timeline for major legislation in his 14-session career at the statehouse.

“Is there a program that would be too much for the Kansas Chamber?” said Sen. Mark Steffen, R-Hutchinson. “Or, are they all acceptable to the Chamber?”

Stafford said a key metric would be return on the investment made on behalf of taxpayers. The state’s existing economic development tools are effective, he said, but insufficient to compete with other states to attract businesses willing to drop billions of dollars on a production plant. In a perfect world the states, counties and cities wouldn’t be in a bidding war for jobs, he said.

“We don’t live in a perfect world,” Stafford said. “Until all 50 states agree to disarm … we need to have incentive packages available for economic development investment purposes that are attractive and competitive.”

‘An unfair advantage’

In the Capitol, election-year politics play a role in consideration of important legislation. There are questions about whether passage of the bill could be jeopardized by lawmakers unwilling to risk giving Kelly a re-election boost in November.

Instead of rejecting the bill outright, it’s also possible the House and Senate could bundle megaproject legislation with tax reforms the Democratic governor might find distasteful. A veto by Kelly could create an unbreakable logjam that failed to adhere to the company’s site-selection deadline.

Dave Trabert, representing the Kansas Policy Institute, said the organization opposed the Kelly administration’s economic development legislation because it would hand hundreds of millions of dollars to the megaproject and associated businesses. The subsidies would be unfair to other Kansas businesses, he said.

“A subsidized business can offer better prices and pay higher wages, which gives it an unfair advantage,” he said. “Subsidies are part of the reason Kansas has the highest effective tax rates on mature businesses.”

Trabert said local and state government had approved wave after wave of subsidies to Kansas businesses for years, but the state still trailed the nation on job creation and GDP. The bill would give the state Department of Commerce too much discretion and too little protection for taxpayers, he said.

“After two years of overbearance by government officials in their handling of the COVID situation,” Trabert said, “Kansans need a lot more protection and a lot less discretion from government.”

Trabert was the only person to register opposition to the bill during the Senate Commerce Committee’s hearing, while 16 economic development organizations endorsed the legislation.

Eric Brown, president of the Salina Area Chamber of Commerce, said movement of large companies to bring manufacturing capacity to Kansas from overseas could benefit existing manufacturing companies by avoiding supply problems that emerged during the COVID-19 pandemic.

He said Salina would welcome the opportunity to be a potential partner location for suppliers trailing the megaproject.

“As the country looks to repatriate supply chain and manufacturing, it is imperative that the state of Kansas looks to position itself as a viable state to host these high-skilled and good paying jobs,” said John Jenks, director of policy for the Kansas City Area Chamber of Commerce. “The KC Chamber has been a staunch supporter of fiscally responsible and data-informed uses of incentives and believes this bill fits the model.”

Matthew Godinez, executive director of the 12-county Southeast Kansas Regional Planning Commission, said the organization supported the APEX legislation.

“APEX is a measure that strikes a reasonable balance between competitiveness, accountability, transparency and doing what is best for the economic future of Kansas,” he said

Kansas Reflector stories, www.kansasreflector.com, may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0.
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Economic development projects here received boost from state

The Urban Outfitters development, near 118th and State, is one of several economic development efforts in Wyandotte County. This photo is from early May. (Photo by Steve Rupert)

by Mary Rupert

Wyandotte County has been a big beneficiary of economic development efforts in Kansas, according to Gov. Laura Kelly.

The state intensified economic development efforts in the past few years, moving up in state rankings for its efforts and recently receiving the Gold Shovel Award from Area Development magazine, she said on Tuesday. Only eight states received the award, and Kansas was the only small state that received this economic development award this year, she said.

“We set a record for new capital investment in 2020,” Gov. Kelly said. “We brought in over $2.5 billion in capital investment, more than ever before. And we are on target to beat that record in 2021.”

The award was a recognition of the work the Kansas Department of Commerce has done with the local communities, she added.

Gov. Kelly said they have closed the deal on about $6 billion of capital investment projects in Kansas since she took office in 2019. In addition, they have brought in about 26,000 jobs to the state, she said.

Wyandotte County has been a major beneficiary of the state’s economic development efforts and local efforts, she said.

Since 2019 they’ve closed on about 33 or so new projects with over 3,500 jobs associated with those in new capital investments, she said.

In the past year or two, despite the pandemic, Wyandotte County has seen some big projects announced, such as Urban Outfitters, an Amazon warehouse, the Turner Logistics Center and the redevelopment of the former Schlitterbahn water park into the planned Homefield complex. There have been many other smaller projects in Wyandotte County, and together they make a huge difference, Gov. Kelly said.

A lot of these and other projects here have had assistance from the state in various incentives. For example, parts of the Homefield amended project was going through state approval as recently as last week, according to Unified Government officials.

The governor said the return on investment is huge from all these projects.

“Kansas really does get a lot more back than we give,” she said. “It’s imperative that we make investments to grow our economy. You can’t do it any other way.”

After the tax experiment of the Brownback years, the Commerce Department was decimated, she said, with not enough staff to recruit and work with businesses. Gov. Kelly redirected resources in 2019, re-establishing programs such as the international trade commission and office of rural prosperity, focusing on more economic development.

“That investment pales in comparison to the return on the dollar,” Gov. Kelly said.

Medicaid expansion

One of the governor’s goals in office was to expand Medicaid. That didn’t happen this year in the Kansas Legislature, as lawmakers adjourned without taking a vote on it. Expect to see it again next year.

“I will not give up. It is absolutely imperative that we expand Medicaid,” Gov. Kelly said.

In Missouri, residents voted to expand Medicaid, only to see a decision not to fund it from the legislature, and then a court case over it, according to news reports.

Kansas is now the only state in the Midwest that has not expanded Medicaid, she said.

“That is not only bad for our people and businesses, it makes it very difficult to recruit and retain medical professionals,” Gov. Kelly said.

If medical professionals are located anywhere near the border, many of them will go to one of the states that has expanded Medicaid, she said.

Medicaid expansion also is very helpful to rural hospitals, many of whom are close to closure and need the expansion to keep their doors open, she said.

“Not to mention that we’ve left over $5 billion in Kansas taxpayer money sent to Washington, D.C., and disbursed to 38 other states that have expanded Medicaid, rather than coming back to Kansas to take care of our people and grow our economy,” Gov. Kelly said.

Unemployment system

The unemployment system in Kansas was swamped when the pandemic hit, with hundreds of thousands of people applying for benefits and some unable to get them.

Gov. Kelly said the computer system in place at the start of the pandemic dated back to 1977, the year that Elvis died, and while it could handle the usual 7,000 to 10,000 applicants, it was swamped by hundreds of thousands of applications in the pandemic.

The governor said the modernization process for that system had started with the Parkinson administration, but it was pulled by the Brownback administration, which stopped the project. When Kelly became governor, she started working toward modernization, and then the pandemic hit, she added.

“We had to stop working on modernization to respond to the surge in applications and just do patchwork,” she said.

Not only did the number of people who applied for unemployment benefits increase, but also a new federal program with some changes had to be added at the state level. Hundreds of people were brought in to work in the agency to respond to the claims.

Gov. Kelly said the state now has a modernization system in the works that is being fast-tracked and may be completed in a few years. Normally, it would take about four to five years to revamp the computer system, she said.

Transportation plan

Gov. Kelly’s administration also passed the fourth comprehensive transportation plan. Instead of selecting all the projects and putting them in the pipeline for the next 10 years, they are putting them on a basis of just a few years. In the past, sometimes local community needs changed during the 10 years.

Local communities are able to leverage their dollars with the state’s dollars, and they’re able to get more projects in the pipeline, she said.

One of her goals when elected was to close the “Bank of KDOT” by fiscal year 2023, she said. “We are on track to do that,” Gov. Kelly said.

In the past, transfers to the highway fund were not being made by the state, and dollars intended for transportation projects were not always used for them, but were borrowed for other uses.

When she was in the Senate, they overturned the Brownback tax experiment, and then they changed that “Bank of KDOT” practice, she said.

“Since I’ve been governor, I’ve been able to put together three budgets that fund our schools, fund our roads and fund other vital state services,” she said.

Development agreement for bridge entertainment and trails project over the Kaw River receives preliminary UG approval

A development agreement was approved Monday night for a bridge over the Kansas River that is proposed to become a destination and entertainment site, as well as a hiking and bike trail. An architect’s drawing by Gould Evans shows the bridge. (Illustration from UG Committee agenda)
An event space is planned for the top deck of the bridge. An architect’s drawing by Gould Evans shows the bridge. (Illustration from UG Committee agenda)
A public trail, right, would run along the lower deck, with food and bars on the left. An architect’s drawing by Gould Evans shows the bridge. (Illustration from UG Committee agenda)
The bridge over the Kansas River, above, connects Kansas City, Kansas, on the left, with Kansas City, Missouri, to the right. (From UG Committee agenda)

An agreement for the redevelopment of the Rock Island Railroad Bridge over the Kaw River received preliminary approval on Monday night at a Unified Government committee meeting.

The Economic Development and Finance Committee voted unanimously in favor of the project.

The bridge will be renovated into an event space with restaurants, and it also will be a walking and biking trail connecting Kansas City, Kansas, to Kansas City, Missouri, according to UG officials.

The project has been discussed for a few years, with some changes made to the original proposal.

Katherine Carttar, UG economic development director, said the redevelopment of the bridge is part of a larger plan to reinvent the riverfront and provide access to the river.

She said other cities that have invested in riverfront projects have seen a lot of return on their investment.

“We have a beautiful river and are unable to access it at this time,” she said.

There is currently a multifamily housing project nearby, on the Kansas side, as well as the $500 million levee improvement project, she said. With the levee improvements, there will be 20 miles of levee trail available to hikers and bikers. The bridge will connect Kansas trails with Missouri trails.

The bridge in question was built in 1905 and hasn’t been used since the 1970s, Carttar said. She credited Michael Zeller and his Flying Truss team for thinking outside the box and coming up with a plan to use the bridge in a creative reclamation, getting rid of blight in a creative way.

Zeller said at the meeting originally he thought the railroad bridge was a good place to put an event space. Later, after talking with UG officials, he made changes in the plans to include a hiking trail and bike trail on the bridge. Now the bridge will be both a trail and a destination, according to Zeller.

Zeller said heavy steel cantilevers will be added to both sides of the bridge.

On the south side will be an entertainment district. The lower level of the bridge will include a trailhead with restrooms, fountains, bike racks, seating, and an open public space where people may wander in and out, get lunch or coffee, he said. Currently, they are looking at a food hall concept with different types of food available.

The top deck will have an event space available for rental, restrooms, a coffee shop and bar, he said.

There are plans for a community kitchen, and he has been talking to some independent restaurant operators in Kansas City, Kansas, about providing the food, he said.

They also are working with groups that would teach children how to canoe on the river, he said. They’re also discussing a staircase to the waterfront, and there would be a kiosk that would rent small craft.

There will be a community zone at the western entrance, with a kitchen, and space for organizations that serve youth, he said. That side would be where people could go hiking, boating and camping, according to Zeller.

“Bridgette Jobe (Kansas director of tourism) has been calling this bridge the front door to Kansas,” Zeller said. The bridge is 100 feet from the state line, about a minute’s walk from the HyVee Arena in Kansas City, Missouri, he said.

Zeller said there are future phases planned for the project, such as a zip line across the state line and river. The seventh to eighth year, they’re planning a sit-down restaurant on top of a heavy-duty lift gate. More gardens, arts and activities will be included in the future, he said.

He said an analysis was done by an independent firm that concluded this project could achieve its goal of serving as a keystone for trails on both sides of the state line. The project should create 65 jobs and draw 360,000 visitors.

More than that, it is expected to be a catalyst for the riverfront area, he said. Zeller said it could become America’s first landmark destination bridge. As an attraction, the bridge could become one of the things that people will think of when they say “Kansas City,” Zeller said the analyst stated.

Carttar said they see this project as a catalyst to encourage future development on both sides of the river. Also, this provides a way for local residents to get outdoors, be active and improve their quality of life and their health by going on a trail, renting a canoe or kayak, according to Carttar.

Carttar said the study done a few months ago conservatively estimated about 250,000 annual visitors to the bridge.

The project would cost a total of $4.975 million, with $2 million of it from the UG, Carttar said. She said it would really be an investment in the UG’s riverfront development. The UG’s $2 million would come from tourism funds from the tax on hotel rooms in the county.

She said the consultant estimated that if the UG put a TIF district in place, with incremental property and sales tax, with a 2 percent community improvement district, it would raise sufficient money for the project. They anticipated it would be about 12 to 13 years when it would be fully repaid, she said.

According to the development agreement, up to $75,000 of the $2 million would be available to the developer early in the project for engineering and the site plan. The rest of the $2 million would be the last of the funds to be given to the developer, and the developer would have to meet conditions in order to receive the funds, according to Carttar.

Carttar said the UG would get its investment back, over the years, through revenues, rent and taxes.

Kansas City, Missouri, currently owns the railroad bridge, and the UG has an agreement with them to transfer the bridge to the UG for $1, according to Carttar. She said the UG wanted to own the bridge and to have control of the bridge in case anything were to happen in the future.

The UG would rent the bridge to Flying Truss for 33 years, with a 33-year option to renew, she said. The rent would start at under $10,000 a year and increase over time, she said. Flying Truss would operate the bridge and sublease to restaurants, according to Cartttar. The agreement calls for Flying Truss to be responsible for maintenance, with the contractor taking maintenance responsibility for the public trail and trailhead on the bridge, she said.

Under the agreement, the UG would be able to use the bridge for programs throughout the year.

According to Todd LaSala, an outside attorney for the UG, the development agreement says if there are shortfalls, the developers will write the UG a check. The UG expects to get about $10,000 a month from revenues, he said. Also, the developer will maintain the bridge, pay taxes on it, and insure it, he said.

Commissioner Jim Walters asked about a clause in the agreement that says the UG is responsible for some improvements, including the design and construction of parking improvements on the west side, trail connections to the bridge and ADA-accessible ramps on both sides of the bridge. According to Carttar, the UG would pay for these improvements, and at this time, there was no estimate given of their exact cost, although Carttar said it would be less tha a million dollars. The costs are in addition to the UG’s $2 million, according to Carttar.

Commissioner Gayle Townsend requested that the project have minority and women-owned local businesses involved.

While there is a clause in the agreement for construction firms to have minority and women-owned businesses, there isn’t a clause requiring it for any vendors that may be there.

Commissioner Townsend said she would like to see local restaurants such as Wilson’s Pizza, from the northeast area be vendors there. She said she would like to see more teeth in the agreement to make sure there are minority and women-owned businesses.

The minority and women-owned business clause is not in the agreement, and LaSala said it could be difficult as the restaurants will sublease from the developer. The UG is a step removed from it, he said. Zeller said he had held preliminary meetings with some business owners in these groups.

Commissioner Harold Johnson agreed that it is important to him, also, that there be minority and women-owned local business vendors there.

Commissioner Townsend said it’s important to her to have minority and women-owned vendors as lessees on the bridge because she thinks the bridge project is really going somewhere, and it’s important to have Wyandotte County vendors on that bridge. She said some teeth is needed in the agreement.

Commissioner Tom Burroughs said he has invited Lt. Gov. and Commerce Secretary David Toland to look at the bridge project in April. Burroughs said he would like to find additional investment partners so they can expand the project for the future phases.

Several residents expressed support for the bridge project, including Edgar Galicia, executive director of CABA.

“This is a destination site but it’s just the beginning,” Galicia said.

The Central Avenue area is near the project and he said he would like to see growth from this project connect to the Central area.

Mike Pearce of Slap’s BBQ, 553 Central, told the committee that he hoped this project could pull people across the river who would patronize local businesses.

Benjamin Walker, a Realtor and Armourdale resident, said the bridge would be a catalyst. Also the project would help preserve nature and history, while also giving youth in the community a place to go.

Daniel Serda said the bridge project should reinforce to everyone how integral the stockyards were to the growth of the region. Without them, they wouldn’t have the major city there is today, he said. Without industries in Armourdale, there wouldn’t have been a major city.

Serda said projects like this in other cities have generated from six to 40 times the local government investment. Investments like this dramatically increase the value of surrounding real estate, he said. He also said the project, with its trails and canoes, would be beneficial for kids.

The project also received support from Armourdale Renewal Association officers and Armourdale residents.

Bridgette Jobe, Kansas director of tourism, sent a letter of support, saying she envisioned the project as “the vibrant front door to KCK.” She said it was likely that during every NASCAR race at the Kansas Speedway, pictures of it would be broadcast. Also, the division of tourism is supporting it with a grant to assist in development.

Commissioner Burroughs said he received communications from the Wyandotte County Economic Development Council in support of the project.

Phil Donnellan, with the Kansas City Rowing Club, supported the project and said he thinks the project would be a catalyst to bring people to the river as a destination and part of the trail. One day, he said, they would like to build a boathouse on the river. The club holds annual races but he said they may be able to hold more competitions with the food available on the bridge.

The issue is scheduled to be heard again at the full UG Commission meeting May 13.

Agreement details are included in the detailed UG agenda for the March 29 EDF meeting, at https://www.wycokck.org/Clerk/Agendas.aspx.

The meeting can be viewed on YouTube at https://www.youtube.com/watch?v=BoPiSH_nA5A
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