TOPEKA — As Kansas legislators work against the clock to revise a bill designed to woo an unnamed company that promises to invest billions of dollars into the state, many are concerned about the lack of clear details and the potential budgetary impact the measure could have.
The Attracting Powerful Economic Expansion Act, or APEX, requested by Gov. Laura Kelly, looks to put Kansas ahead of its competition in Oklahoma for the site of a company expected to invest $4 billion in a production plant. The incentive package would allow the business to claim a credit of up to 15% — in this case, the state would pay the company $600 million over three years.
According to estimates from nonpartisan legislative staff, based on limited assumptions about the secret deal, the megaproject would have a $1.2 billion price tag. When coupled with the governor’s proposed food tax exemption and a one-time tax rebate, the state’s projected budget surplus would turn into a $400 million deficit by 2026.
“We are being told we have this great opportunity to bring a company here that will create a lot of jobs and hopefully a lot of income for individuals, but at what cost?” said Rep. Sean Tarwater, a Stilwell Republican and chairman of the House Commerce, Labor and Economic Development Committee. “How much damage can we sustain in order to get this $4 billion investment that will eventually pay off?”
A Senate version of the bill removes the tax credit but includes a corporate income tax cut that would leave the state in only a $300 million budget deficit, but the Kansas Department of Commerce indicated the tax credit is key to securing the deal. Tarwater’s panel is set to work a House proposal Monday that would spread the reimbursements over 10 years and limit the corporate income tax reductions.
The Department of Commerce has argued the state needs the program after whiffing in the past on 11 megaprojects.
Legislators are working under the assumption the production plant would bring in 4,000 direct jobs averaging $50,000 in annual pay. An analysis by the Wichita Business Journal estimated it would take those 4,000 employees almost 40 years to pay the equivalent in taxes for what the company is getting in subsidies.
While legislators acknowledged some of the uncertainty surrounding the bill is part of the process, concerns about the absence of a fiscal note attached to the bill and the uncertain return on investment have many lawmakers wary about saying yes to such a proposal.
“I mean, we’ve got assumptions in here about what aspects of the governor’s proposed budget are actually going to pass and in what form they pass,,” said Rep. Shannon Francis, R-Liberal.
Meanwhile, the governor and Lt. Gov. David Toland, who serves as commerce secretary, continue to urge swift action to pass the economic development bill. In a release from the governor’s office, Joann Knight, economic development director for Dodge City, touted the APEX bill’s key role in leveling the national playing field for Kansas.
“Not only will this opportunity create thousands of new jobs for Kansans, but it will also make us an economic powerhouse that will draw in national attention and make Kansas a top-level workforce competitor,” Knight said. “I support the movement to pass the APEX bill and bring Kansas to a level that we can compete.”
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