Report suggests revamping Economic Development Corp.

By KEVIN COLLISON
The Kansas City Star

A critical evaluation of how Kansas City handles economic development got a mixed reception Thursday amid signs of another split between the mayor and City Council members.

The analysis, prepared for the Economic Development Corp. by Boston Consulting Group, contended that the city trailed its national and metropolitan competitors in economic development. It suggested sweeping changes to make the city more business-friendly.

The report’s most aggressive recommendation calls for dismantling much of the EDC and handing most of its development and incentive programs over to City Hall.

It says that would allow the agency to concentrate on retaining and promoting existing businesses.

That’s the preferred option of EDC Chairman Mike Chesser, who is CEO of Great Plains Energy. Chesser, with the backing of Mayor Mark Funkhouser, is leading the effort to revamp the city’s economic development efforts.

“This is not working for us,” the mayor told a special EDC board meeting. “We need to do something differently.

“In terms of our market share, Kansas City, Missouri, even with the Northland growth … our proportion of the metropolitan population has declined, as well as the concentration of wealth.”

The mayor also said small-business owners told him they never hear from the EDC.

“The best return on economic development is to help existing businesses stay and promote organic growth,” he said.

But the idea of overhauling the EDC got no support from three council members at the meeting — and any changes would require council approval.

“I don’t know about you, but I’m tired of us beating up on ourselves,” said Councilwoman Deb Hermann, noting the city’s previous focus on downtown redevelopment is paying off as Big 12 tournament fans enjoy new amenities.

She also called the development and population boom in the Northland another success story.

More pointedly, Hermann said Chesser and others had not done enough to include council members in their discussions.

Chesser cautioned that the review was only at the “midway point” and was seeking suggestions from the EDC board and others. A concrete set of recommendations is not likely until April.

The study said the Kansas City metropolitan area, both Missouri and Kansas, was below the national average when it came to job creation or business growth in recent years. If the area had kept pace with the nation, it would have added 17,000 jobs and $6.5 billion in business activity since 1990.

It found that within the area, Jackson County employment was roughly at its 1990 level, and the rest of the area had grown 30 percent during that period. The report did not break out the city of Kansas City itself; the city occupies not only part of Jackson County but parts of Platte, Clay and Cass counties.

The report suggested three options for the EDC:

•An “all-inclusive” option, where the EDC continues its current economic development activities, including full support of its development agencies.

•An “independent service provider” option, where the EDC continues to run its administrative and development programs but transfers the fiscal analysis of development incentives to the city.

•A “focused advocate for business” option that would transfer all development programs to the city. The EDC then would become a more public-private organization for business retention.

A major point in the report was that the EDC now allots just 10 percent of its budget to business retention programs. The rest is devoted to running several development agencies, including the Tax Increment Financing Commission, and administrative costs.

The analysis suggests that if the development programs were handed off to City Hall, the EDC would become much more focused on business retention and could attract private financial support.

None of the current recommendations calls for creating a chamber of commerce focused strictly on business within the city limits of Kansas City.

The mayor suggested that Kansas City might want to follow the example of suburban communities that have their own chambers: “Kansas City, Missouri, is competing against other cities in the metro. … We have no army for us. We have no chamber of commerce.”

Others suggested that if the EDC needs to do a better job reaching out to existing businesses, it needs more funding.

Jeff Kaczmarek, the EDC’s president and CEO, said his agency had seen its city funding drop over the past three years from $1.1 million to $800,000.

“We used to have an outreach effort when we had funding,” he said.

The EDC still had 184 direct meetings with existing city businesses last year, he said, and sent a representative to 96 business association meetings.

Councilman Ed Ford suggested that the EDC form more alliances with existing business associations such as the Black Chamber of Commerce and community improvement districts.

Ford also said he wouldn’t support shifting development functions back to City Hall.

Councilman John Sharp supported beefing up the EDC’s effort to retain and promote current businesses.

“The city isn’t pulling its weight in economic development,” he said. “We have let our funds decrease over the years, and a modest increase would make a difference.”

David Frantze, a development lawyer, noted that overhauling the EDC would not address the city’s trouble handling permits, inspections and other bureaucratic functions.

“Capital goes where it’s wanted. Right now we don’t have an environment where capital is wanted. Right now we have a city where it takes five months to get permits.

“Pulling more development functions to the city could make it more difficult to bring business to the city."