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Integra megaproject shaping up to be another Panasonic flop

In February of this year, Integra Technologies – a Wichita-based semiconductor producer – announced the development of a new facility in Bel Aire, Kansas. The megaproject is the second in Kansas’s much-ballyhooed APEX program that initially provided $1.27 billion for a new Panasonic facility in Desoto. But just like the Panasonic project, there are serious concerns about the economic return and transparency in giving billions of taxpayer dollars to a private company. While the Panasonic deal has gotten much of the publicity the “APEX” subsidy itself was never a one-time deal. It created an entirely new subsidy program that has the potential to give hundreds of millions of taxpayer dollars away for years to come.

Integras KORAS

A few weeks ago, KPI sent separate Kansas Open Records Act (KORA) Requests to the City of Bel Aire, Sedgwick County, and the Department of Commerce. Each request asked what government incentives were being given to Integra, the estimated financial impact of the Integra facility, current legal agreements like non-disclosures or zoning laws, and then guarantees of what Integra must do to keep their end of the bargain. This article will cover the response that Sedgwick County quickly sent, as Bel Aire and the Department of Commerce are still putting together a response.

The Incentive Agreement between Sedgwick County reveals some of the basic details of the facility: it’s anticipated to employ 2,500 at full operation. However, the agreement that Integra signed states that it will employ a minimum of 1,600 employees annually within the first six years.

The cost of the facility includes $211 million for the building, $713 million for semiconductor manufacturing equipment, and an additional $2 billion investment. In total, that’s $2.924 billion. Integra is committed to investing at least $1.5 billion in the first five years of the agreement. It’s important to note that these are costs that Integra will face and be the entity responsible for handling. The amount of subsidies that Integra should receive through the APEX program is information the Department of Commerce would have.

A large part of why Integra is pursuing the plant is to receive funding from the CHIPS Act, a federal bill that provides funding to domestic semiconductor production (that isn’t without its own spending issues). Because of this, Integra has to submit proof that they were awarded CHIPS funds by December 31st, 2023. It’s unclear whether the amount of subsidies that the plant receives depends on if Integra can acquire CHIPS funding, and if so, how much.

Some of the other things that Integra is planning to receive include workforce training from WSU Tech, a new tax increment financing (TIF) district from the City of Bel Aire that includes the new facility, and improved roads and highways around the facility.

Going off the minimum employment numbers of 1,600 and financial investment of $1.5 billion, that’s $937,500 per job with the bill being footed by Kansas taxpayers. By comparison, in the month of September 2023 alone, Kansas gained 4,000 private-sector jobs. $1.5 billion is a massive price tag for job creation that is a drop in the bucket of Kansas’s 1,191,800 private-sector workers.

More thorough information is going to be helped by Bel Aire and the Department of Commerce as being the local government where the Integra facility is located and the arm of the state giving out the APEX funds.

Poor track record of subsidies in Kansas

Established research has demonstrated time and again these subsidies are incredibly wasteful and redirect economic growth rather than create it. A 2018 paper from the Upjohn Institute for Employment Research estimated that at least 75% of companies receiving an incentive would have made the same business decisions even if they didn’t receive subsidies. These same results have been found in Kansas. A study of the state’s PEAK program (Promoting Employment Across Kansas) by Professor Nathan Jensen found that PEAK recipients were no more likely to create jobs than non-PEAK recipients.  Dr. Arthur Hall of the University of Kansas reached a similar conclusion in a study of STAR bond projects in Wichita.

A massive point in the push for APEX was the need to compete against Oklahoma to land the Panasonic plant. But low and behold in April of this year, it was announced that Panasonic was setting up an Oklahoma plant anyway. States think that they can control their economy with megasubsidies, when in actuality, it’s a way for politicians to cozy up to favored industries and spread other people’s money into the pockets of lobbyists and corporations.

The Panasonic deal had no wage or hiring requirements, indefinite nondisclosure agreements, and confidential investment details. The lack of transparency on economic development subsidies isn’t new in Kansas. There is a long track record of obfuscation or outright denial when it comes to letting taxpayers know how their money is being spent. AFPF-Kansas filed a Kansas Open Records Act complaint against the Department of Commerce for not providing records on Commerce Dept. studies of STAR bond effectiveness. The release date has been delayed 11 times. It’s yet to be discovered if the Integra deal will have similar issues.

Once the other KORAs are released, we’ll break them down in articles similar to this one.