Accountable USA - Kansas

The Kansas Department of Commerce’s Business Recruitment website features more than 20 different economic development subsidy programs. Kansas is particularly aggressive in its tax programs, as seen, for example, with its STAR bonds, a form of tax increment financing that draws on the sales tax.

Kansas currently offers several incentive programs that allow companies to retain much of the state Personal Income Tax (PIT) deducted from employee wages. For example, the Promoting Employment Across Kansas (PEAK) program allows companies relocating to Kansas to keep up to 95 percent of their employees’ payroll taxes. The Investments in Major Projects and Comprehensive Training (IMPACT) program diverts employee income taxes into a statewide pool that finances grants made to selected companies to reimburse their training costs.

The High Performance Incentive Program (HPIP) is a highly touted program that bundles income tax credits and sales exemptions for companies that bring high-wage jobs to the state. The Business Machinery and Equipment Tax Credit is the largest corporate income tax expenditure, and there are more applicants seeking to receive this subsidy than any other the state offers.

Kansas has repeatedly favored its substantial aerospace sector. In 2003 it offered a $500 million boost to Boeing to get the company to site some of the work on its new Dreamliner jet at its operation in Wichita (see below).

A local controversy in the state concerns the practice of officials in the Kansas City area to use subsidies to lure companies to move back and forth across the border between Kansas and Missouri. In April 2011, in an unprecedented response to the situation, 17 CEOs issued a letter to authorities in the two states urging them to stop the self-defeating practice. In July 2014, Missouri passed a law that would prohibit the state’s subsidies from being awarded to businesses relocating from Kansas to Missouri within the Kansas City metro area.  The law will only go into effect if Kansas enacts a similar law.  It is unclear when or if Kansas will pass such a law.  Unfortunately, the border-jumping continues. In 2011, for instance, AMC Entertainment was given $40 million to move its headquarters (with 450 jobs) from downtown Kansas City, Missouri to an affluent suburb in nearby Kansas. In 2015, after the Missouri’s law passed, Dairy Farmers of America announced it will relocate its headquarters and 325 jobs from Kansas City, MO to Kansas City, KS for which it will receive unspecified amount of state’s subsidies.

For many years, there was no systematic online recipient disclosure for the state's tax credit, exemption, or grant programs.  However in 2015, the Kansas transparency website, KanView.gov, started disclosing data on a few subsidy programs, including PEAK and STAR Bonds.  PEAK data, for instance, incudes projected subsidies, jobs and investment.  The new disclosure showed that out of $369 million awarded in PEAK grants since 2010, $320 million, or 87 percent, went to only two counties, located on the border with Missouri.

Key Subsidy Programs

Subsidy Program Recent Annual
Cost
Online Recipient
Disclosure
Recipient Disclosure
Score
Job-Creation/
Job-Quality Score**
Monitoring/
Enforcement Score***

High Performance Incentive Program (HPIP)

corporate income tax credits for capital investments and training expenses, plus sales tax exemptions on certain expenditures

$33.6 million  (2011) 
0/100
48/100
57/100

Investments in Major Projects and Comprehensive Training Program (IMPACT)

allows companies to divert up to 95% of worker personal income tax withholding toward job training expenses. Law has sunsetted, but program will remain active until completion of agreements with existing recipients.

$25.8 million  (FY2012) 
0/100
60/100
63/100

Promoting Employment Across Kansas (PEAK) Program

allows eligible companies that relocate to Kansas to retain up to 95% of employees' personal income tax withholding for up to five years

$12.5 million   (2012)
0/100
103/100
89/100

Research Credit

 corporate income tax credit based on increases in R&D spending

$1.7 million  (2011)
0/100
not included
not included

STAR Bonds

bonds financed by sales tax revenues and used to pay for major business projects

unknown
0/100
not included
not included

* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).

** The score is derived from the Good Jobs First report Money for Something (December 2011).

*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).

Major Subsidy Deals

Boeing (2003) and Spirit Aerosystems (2005)

Hoping to persuade Boeing to perform a portion of the work on its next-generation jetliner at its 12,000-person operation in Wichita, the Kansas legislature in 2003 approved a plan to make available $500 million in bond financing to the aerospace company. The proceeds from the state bond issue would go to Boeing, which in turn would be allowed to pay off the interest by diverting the state personal income taxes collected from its workers assigned to the 7E7 jetliner. The cost to the state in lost revenue over the 20-year bond payoff was estimated at $200 million. Boeing subsequently announced that it would build part of the 7E7 fuselage in Wichita but claimed that the $500 million bond deal had not influenced its decision. In fact, the company decided not to do the bond deal after all.

In February 2005 Boeing announced it was selling the non-military portion of its Wichita operation, along with two plants in Oklahoma, to Canadian private equity company Onex Corp.  Gov. Kathleen Sebelius signaled that the state was ready to transfer the bond deal to Onex, which was expected to take over the 7E7 work. Onex at first seemed more interested in reducing its labor costs; it sought wage and benefit concessions from the Machinists union, whose members initially refused to go along. The Machinists later ratified a contract that included a 10 percent wage cut but avoided the large-scale layoffs that union members had feared. Onex renamed the company Spirit Aerosystems.

In October 2005 the state offered Spirit $80 million of the same kind of bond financing – including the diversion of employee payroll taxes – that had been approved for Boeing. In 2008 Spirit won a major contract from Airbus but decided to do the work at a new plant in North Carolina that was being offered a $125 million subsidy package. Spirit agreed, however, to expand its operation in Wichita as Sedgwick County provided a 10-year, 100 percent property tax abatement and a cash grant. In 2010 Spirit successfully pressed the Machinists to accept an unusual ten-year contract with modest wage increases. (Key sources)

Kansas City Wizards and Cerner Corp. (2009)

After Lamar Hunt, owner of Major League Soccer’s Kansas City Wizards, announced in 2004 that he intended to sell the team, the league tried to arrange a deal for a new stadium complex to attract potential purchasers. The plan was to get the Kansas legislature to approve the use of sales tax-backed STAR bonds to help finance the project. This effort was continued by Neal Patterson and Cliff Illig, co-founders of the healthcare technology company Cerner Corporation, who led the OnGoal LLC investment group that bought the team in 2006.

After considering other locations, they ultimately settled on a site in Kansas City, Kansas near the Kansas Speedway for a $400 million project that included not just an 18,000-seat stadium but also a 600,000-square-foot office complex that would be used by Cerner to house some 4,000 employees. In October 2009 Kansas officials offered the Wizards and Cerner a $229 million subsidy package consisting of $144 million in STAR bonds and $85 million in tax credits and cash grants. The stadium, which was named Livestrong Sporting Park in honor of Lance Armstrong's foundation, opened in 2011; the team renamed itself Sporting KC. (Key sources)

Walmart in Kansas

  • At least 12 Wal-Mart locations have received subsidies worth about $67 million in Kansas.
  • At least 5 Wal-Mart locations in Kansas have challenged their property tax assessment.
  • Many Wal-Mart workers are ineligible for health coverage from their employer or choose not to purchase what is available, because it is too expensive or too limited in scope. These workers often turn to taxpayer-funded health programs such as Medicaid. Kansas is among those states that have not disclosed data on the employers with the most workers or their dependents enrolled in such programs.

For more information, see the Kansas page of Wal-Mart Subsidy Watch.