Kansas and Missouri appear to be heading toward a collision over an agreement that would end the practice of businesses using tax breaks to bounce between the two states.
Kansas insists that Missouri agree to a level playing field for local development incentives if it’s going to end the border war over businesses using tax breaks to hopscotch back and forth across the state line. Missouri doesn’t seem to agree, however.
Kansas Gov. Laura Kelly’s administration has told Missouri development officials that it wants a cap on local property tax abatements similar to the limits on property tax abatements that local governments in Kansas can offer.
“The Kelly administration remains committed to reaching an agreement with Missouri on ending the border war,” Commerce Secretary David Toland said in an interview.
“We have to ensure, though, that agreement doesn’t just cover the incentives that are provided by the state,” he said, “but also that it addresses the disparity between what Kansas local governments are authorized to issue in terms of property tax abatements, which are 10 years, and what Missouri local governments can do, which are 25.”
The governor is expected to sign an executive order in the next couple days that will include a provision addressing the property tax abatement issue.
“All we want is a level playing field,” Toland said.
In early June, Missouri Gov. Mike Parson signed legislation prohibiting the state from extending tax breaks to businesses relocating to Missouri border counties from Kansas border counties.
The bill specifically identifies the Kansas border counties as Johnson, Wyandotte and Miami. In Missouri, the bill applies to Jackson, Platte, Clay and Cass counties.
It was hoped that passage of the legislation in Missouri would end a longstanding practice of companies border jumping with the benefit of tax incentives.
Estimates indicate that Kansas and Missouri have spent more than $300 million during the last decade luring businesses back and forth across the state line.
The legislation depends on Kansas following suit, which would depend on the governor signing an executive order patterned after the Missouri bill.
However, local economic development leaders in Kansas say the issue is far from over, pointing out the state incentives are just part of the equation that needs to be worked out.
They are worried that Missouri would still be at a recruiting advantage with the local incentives even if it agrees to forego using state tax breaks to attract businesses.
That concern is heard in Topeka, where Kelly has specifically said she wants parity at the local level between the states.
“The states can make an agreement, but we need to make sure that the playing field is level on the local level, and so we’re working those out,” Kelly in a recent interview on KCUR’s “Up to Date” with Steve Kraske.
However, Missouri economic development officials say there’s nothing that either state can do about local incentives without changing state law.
“We’ve been discussing this border war agreement with Kansas since February, and this is the first time the issue of local incentives has been brought up,” said Holly Koofer-Thompson, spokeswoman for the Missouri Department of Economic Development.
“Neither governor can compel localities to change without a change in state law,” Koofer-Thompson said in an email. “The real issue is state incentives. We should focus on that first.”
State law allows Missouri local government to provide a 100% abatement for 10 years and 50% for another 15 years, something that could grow to 100% if it’s layered with other tax incentives.
In some cases, however, cities such as Kansas City have limited the abatement to 75%. Kansas City did that in 2016.
The property tax abatement in Kansas is valued at up to 100% for up to 10 years, although local officials say the percentage can change depending on the scope of the project.
“We all agree that moving a company half a mile and providing incentives to do that doesn’t make any sense, but the devil is in the details,” Toland said.
“A very important detail is this issue at the local level,” he said. “There is this significant disparity between the two sides at the local level.”
Toland said he discussed the issue last week with Rob Dixon, director of the Missouri Department of Economic Development.
“They are aware of our position on it,” Toland said.
“The ball is in Missouri’s court,” he said. “If they are sincere about having a level playing field — and we believe they are — then we hope they will sign this agreement that will cap the authority of local governments to issue property tax abatements at 10 years for both sides.”
Missouri doesn’t seem ready to move off its position, noting that it passed legislation several years ago that former Gov. Sam Brownback’s administration didn’t move on.
“Missouri has already taken action to end the border war, and we’ve done that twice now,” Koofer-Thompson said. “We hope Kansas will join us in putting a stop to this wasteful spending of taxpayer dollars.”
