Wednesday, July 29, 2009

Leaders call for updated economic development incentives

Harris News Service

TOPEKA -- Economic development leaders asked lawmakers Monday to upgrade the state's financial incentives for attracting business to Kansas, despite a recent report questioning their effectiveness.

Economic officials from across the state told a legislative panel that better programs are needed for the state to remain competitive with other states.

"We need a better set of modern incentives if we're going to win," said Dave Kerr, president of the Hutchinson/Reno County Chamber of Commerce.

The comments to the Legislature's Joint Committee on Economic Development come several months after a report raised concerns about whether such efforts actually work.

A legislative audit updated in August found it difficult to tell whether the $1.3 billion in taxpayer funds spent from 2003 to 2007 on economic development actually had helped the state economy.

But Lavern Squier, senior vice president at the Overland Park Chamber of Commerce, said officials on the ground know how important such incentives are to wooing businesses.

"The numbers are not the entire picture," Squier said.

The Legislature Division of Post Audit's staff found other factors appear to be more important than economic development spending in producing job growth.

However, Kerr said financial incentives often can become the tipping point for companies that have narrowed its choices to communities with relatively equal profiles.

He also said while many of the state's existing incentives were once creative and good, they've become out-of-date. Many other states now are offering better packages.

The state's focus on reducing income taxes isn't effective for bringing in some multi-state business, Kerr said, because they lack significant tax liability in Kansas. Plus, even those who can use the aid might dislike the burdensome record-keeping requirements, he said.

What companies do want are cash or "near cash" incentives, which help them offset the costs of starting up business in a state, Kerr said.

He also suggested state officials need to set aside money for "closing the deal" with companies. The closest thing the state has to such a fund is only budgeted to have $1.3 million, Kerr said, enough to do maybe only one good project.

Eric Depperschmidt, president of the Finney County Economic Development Corp., said it also was important for the state Department of Commerce to have the flexibility to help communities offer aid for businesses, even when lawmakers weren't in session to write up special packages.

"We don't only have prospects coming in during a five-month period from January until May," Depperschmidt said.

Mike Michaelis, executive director of the Ellis County Coalition for Economic Development, said updating the state's incentives also might make it easier to measure their success.

But lawmakers on the panel said the state's dire budget picture -- a $1 billion deficit during two years -- would make it virtually impossible to put additional state dollars into incentives during the next legislative session, which begins in January.

Sen. Karin Brownlee, R-Olathe, said funding for new initiatives likely would have to come at the expense of existing programs.

"I just don't know where we're going to get the money to make changes," said Brownlee, the joint committee's chairwoman.

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