••• Tax & Spending •••

Kansas keeps getting duped by economic development schemes

Fool me once, shame on you; fool me twice, shame on me. Kansas elected officials keep getting duped by economic development schemes, with politicians of both parties willing to give out hundreds of millions of dollars with poor oversight. Wichita and Coffey County are currently competing for a megaproject by Integra Technologies, with details about costs currently under wraps because of confidentiality agreements.

Last week, ground was broken on the Panasonic megaproject in Johnson County that may receive over $1 billion in subsidies. In return, they have no wage or hiring requirements, indefinite nondisclosure agreements, and confidential investment details. Never mind the very-rushed, opaque process by which these subsidies cruised through the legislature. While this money is being handed out in droves, prices for things like energy and housing keep increasing for ordinary Kansas families.

The announcement a few months ago pegged at least $830 million in various subsidies for Panasonic, though the numbers haven’t been finalized and the end deal could easily be more than $1 billion. The projected 4,000 jobs gained from the deal, which could come in at $207,500 a pop, is only a fifth of the total gap between Kansas’s pre-pandemic job levels and June 2022 numbers.

All this money isn’t going for much growth either, as Kansas subsidies historically simply move the existing economic activity to different areas rather than create it. A study of the state’s PEAK program (Promoting Employment Across Kansas) by Professor Nathan Jensen currently at the University of Texas, Austin found that PEAK recipients were no more likely to create jobs than non-PEAK recipients.  Dr. Arthur Hall, Executive Director of the Brandmeyer Center for Applied Economics at the University of Kansas, reached a similar conclusion in a study of STAR bond projects in Wichita.

Property taxes are another issue. Panasonic itself is eligible for large property tax exemptions, which again, represent a cost passed on to everybody else living in Johnson County. Furthermore, white-collar jobs moving to Johnson County for the factory may be high-priority, high-income positions. These are the kinds of jobs that make local economic development people salivate. Thankfully in this case, no relocation subsidies are on offer. But, that hasn’t stopped a relocation subsidy like Topeka and Shawnee County from costing those local residents between $5,000 and $15,000 for each remote worker to move to the county. Contrast that cost with the county’s losses in net domestic migration being seventeen times greater than the number of workers brought in and you start to get a sense of the waste and futility of these incentive programs.

The rotten cherry on top of this mess is that nondisclosure agreements mean legislators are barred from discussing certain details of the deal to the public. Even worse, a provision passed as part of the final APEX Bill that led to the subsidy makes the information “confidential and shall not be subject to the Kansas Open Records Act.” This is exactly why some of the numbers surrounding the Panasonic deal are hard to pin down. Non-disclosure apparently rules the day. Its almost like people want to keep the public in the dark.