Kansas and Missouri have now agreed to halt an economic border war they waged for years in an effort to lure businesses across state lines, but the ceasefire hinges on whether cities in the Kansas City area will go along.
Kansas Gov. Laura Kelly signed an executive order Friday telling her economic development officials to stop using incentives to lure existing Missouri jobs in Kansas City-area border counties. The economic carrots can now only go toward jobs that businesses create by moving.
Kelly’s order comes after Missouri Gov. Mike Parson signed a bill in June holding his state to the same restrictions.
Now, officials on both sides of State Line Road are watching to see whether local governments will follow suit. Kelly’s order asks cities and counties to comply with the agreement, but they aren’t bound by it.
“We are confident our two states can agree this executive order benefits Kansas and Missouri in a fair and equal way,” Kelly said at a news conference.
In a news conference later Friday, Kansas City Mayor Quinton Lucas commended the two states’ work on ending the border war and pledged to do the same on the local level. He noted residents across the metro refer to themselves as Kansas Citians whether they live in the city proper or not.
“Lots of people cross lines every day,” Lucas said. “They may live in Grandview and work in Kansas City or live in Blue Springs and work in Olathe. That’s the way most of us see it. And we call ourselves Kansas Citians because we care about and love this region.”
He added: “It’s time for those of us who are elected officials and economic development officers to recognize that, too.”
Lucas announced he would introduce an ordinance for City Council consideration that would limit the length of property tax abatements — often used as incentives for businesses setting up shop on both sides of the state line — to 10 years to correspond with the Kansas cap. In Missouri, those abatements can run up to 25 years.
The difference potentially places Kansas at a disadvantage.
Jon Stephens, executive director of Port KC, welcomed Kelly’s order and appeared open to lowering the abatement cap.
“I personally see no problems with limiting of property tax length of term particularly when businesses are moving within the region, within the Kansas City region,” Stephens said.
The Hall Family Foundation, which has done extensive research on Kansas City’s border war, found that the vast majority of incentives given to companies hopping the border are for jobs programs offered at the state level, according to its vice president Angela Smart. Property tax abatement dollars are comparatively a “very small, very minor” piece, she said.
Smart said in recent years, only one company — Freightquote.com, the nation’s largest online freight shipping provider — has taken up Kansas City’s offer of a full 25-year property tax abatement. Promising more than 1,350 jobs and $44 million investment, the company relocated its headquarters from Lenexa to Kansas City in 2012. Missouri offered the company $33 million in state tax incentives.
“It’s a little bit of surprise but we remain very optimistic that it’s not going to cause all the good work that everybody has done to go waste,” Smart said of Kansas City’s property tax abatement policy. “My gut tells me we can wait to worry on this one. There is nothing that seems insurmountable at this point regarding the local piece.”
Under Kelly’s order, Kansas officials will be prohibited from using state-level economic development incentives to draw businesses with jobs currently located in the Missouri counties of Jackson, Platte, Clay or Cass to relocate them to the Kansas counties of Johnson, Wyandotte or Miami.
The order says that economic incentives will only be offered for the net new jobs created by a business relocating from border counties. In other words, if a Missouri business with 100 jobs moves to Kansas and hires 50 additional people, it may only receive incentives for the 50 new jobs.
The bill Parson signed earlier creates the same requirements on the Missouri side.
When asked whether Kelly’s executive order satisfied the Missouri legislation, Parson’s office said it was reviewing the order. According to the legislation, the Missouri Department of Economic Development director would have to verify that the order met Missouri’s terms.
“We appreciate Governor Kelly’s partnership and work on ending the Border War,” Kelli Jones, the governor’s communication director, said in a statement.
The costs of the cross-border sniping have been steep. Over the past decade, Missouri spent about $151 million on incentives to attract companies from Kansas border counties to Jackson County. In turn, Kansas spent $184 million to bring companies from Jackson County to Johnson and Wyandotte counties, according to the Hall Family Foundation.
Lucas cited the moves by Applebee’s corporate headquarters as one of the more egregious examples of companies hopping the border for assistance.
“That’s the sort of thing that over all of that period, as we were losing tax revenue in both jurisdictions, we probably weren’t actually getting people who were moving from side to side,” Lucas said. “Instead, what we were getting was really just benefit to the corporation.”
Previous attempts to end the economic firefight failed. In 2015, Kansas Gov. Sam Brownback declined to stand down after Missouri Gov. Jay Nixon signed a similar bill.
But the two states have shown signs of renewed cooperation recently. They worked together to convince the United States Department of Agriculture to relocate hundreds of research jobs from Washington to the Kansas City area.
“I think economic development is at its best when there’s collaboration, when folks are working together,” U.S. Rep. Sharice Davids, D-Kansas, told reporters just before Kelly announced the order.
Kansas state Rep. Jan Kessinger, an Overland Park Republican, called Kelly’s order a good step that will allow the state to focus on attracting businesses by offering a skilled workforce, a good education and quality of life.
“We quit wasting our money trading jobs or creating more traffic on (Interstate) 435,” Kessinger said.
Ending the border war has been one of the the Greater Kansas City Chamber of Commerce’s biggest priorities, according to its president and CEO, Joe Reardon. He said the chamber will turn its focus to working with local municipalities to make sure the truce holds.