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Will 2014 Be The Year To End The Kansas-Missouri Border War?

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Kansas abolitionists and pro-slavery forces in Missouri fought a bloody border war in the 1850s, splitting the Kansas City region. Some 160 years later the states are still locked in economic combat that pushes businesses, and jobs, back and forth across the state line, with the companies themselves often the only clear winners.

This year motions towards a truce have been made on both sides of the border, most prominently by Missouri Gov. Jay Nixon. Wednesday, Ryan Silvey, a Republican State Senator from Kansas City, Mo., filed a bill that would stop businesses from the Kansas side of the metropolitan area from qualifying for state tax incentives if they jump the border into Missouri.

Over the past five years, nearly 200 businesses moved into or expanded in the Kansas City area. And according to an AP poll, more than $750 million in tax incentives and bonds made it possible.

Some merely shifted their jobs across the state line border with taxpayers paying part of the bill. Brightergy Solar moved from Lenexa, Kan., across state line into the Kansas City, Mo., chasing its customers, as well as state solar rebates and tax incentives.

Why businesses move

Moving was good business, says company executive Susan Brown.

“We took advantage of the Quality Jobs Act on the Missouri side and really that wasn’t the reason we came, we came over to the Missouri side. It really was a business decision. So that was an added bonus. We just left,” says Brown.

Brightergy is small, only around 30 employees in the local office. Missouri’s Quality Jobs Act tax credits amounted to a $1.2 million incentive package for the company.

Kansas launched a program of payroll tax credits to lure business in 2009, the same year Bright Energy moved. Former greeting card executive Bill Hall who heads the Hallmark Family Foundation says that move transformed the economic conflict.

“And that’s really when we became interested because what had been kind of a skirmish turned into a war,” he says.

Hall figures the two states, just in the Kansas City region, have given up $212 million in income taxes as companies moved their jobs from one side of state line to the other. No new jobs, just a shuffle.

His numbers show Kansas attracted 3,200 Missouri jobs, and Missouri took 2,800 jobs the other direction. To Hall, it’s a zero sum game.

“The governor of one state is cutting the ribbon thanking persons for moving from Missouri to Kansas within the metropolitan area while the governor of Missouri’s cutting a ribbon celebrating the person who moved from Kansas to Missouri," says Hall.

"The only people who win are the two companies who moved and the people who lose are the taxpayers who have to subsidize these companies.”

The call to stop the war

A 2011 letter from Hall and signed by more than a dozen local executives, asked the governors of both states to end the warring, work together to attract real new jobs from outside the region. By early this year talks had been underway about a year between government leaders in both states. Then, last month, Missouri Gov. Jay Nixon abruptly called for a border war cooling off period.

At the time, Nixon said that Kansas Gov. Sam Brownback was with him.

“I don’t have a document here to be signed, although the Governor and I have had some discussions and have talked but also at the senior staff level. And I have seen some real progress over the last year,” said Nixon.

Nixon’s call was taken by some as a grandstand play. Gov. Brownback’s press secretary Eileen Hawley stopped short of calling it that.

“We had been expecting to make some sort of a joint announcement together early in the new year so the timing was a little bit of a surprise to us, but it’s fine,” she said.

Kansas Commerce Secretary Pat George has been part of discussions for months with Missouri economic developers. He says he expected an agreement both governors could get behind by early next year.

“We definitely were looking for a way to do a joint announcement with the Governors," says George. "I don ’t know if that’s, with Governor Nixon making his presentation, if any kind of joint announcement is needed or wanted at this point.”

In Kansas, George largely controls those incentives with a cap set by law. In one form or another, it's about tax policy. Kansas legislators have made huge cuts in income taxes for two back-to-back years, in part, to make the state more business-attractive.

Missouri legislators tried to make more modest income tax cuts last year, but Gov. Nixon vetoed the legislation.

In 2009, Kansas joined Missouri and offered employers the ability to keep workers state income taxes for a period. The two have maneuvered back and forth like economic boxers in the ring. There is more than enough internal and external discord to color the border issues.

George thinks Kansas stands to lose with a moratorium. He knows about the conflict between the Missouri Democratic Governor and Republican lawmakers and it throws a monkey wrench into a bi-state easing of competition.

“I know they have some angst about giving power. There’s different parties in power on the legislative side and on the governor’s, and on the administration side,” George says.

Legislating a truce

On the legislative side in Missouri, Republican House Speaker Tim Jones says Nixon is putting his political power over needs of the state. Jones says the legislature is working on more “fundamental reforms” that turn over incentive “keys” to the Governor.

Kansas City area Republican Sen. Ryan Silvey says he’s been part of the talks with Kansas economic leaders since last May. He has co-sponsored a bill with Democrat Jason Holsman to end incentives for moving jobs around the state line. It’s not clear if Gov. Nixon approves.

Bill Hall of the Hall Family Foundation, says the border war continues to undermine both sides of Kansas City.

“We’re a major city in Missouri. We’re a major city in Kansas. We need the two states to recognize that together we are an even bigger economic entity and cooperatively we can do more than fighting each other,” he says.

The Kansas City business community will watch closely as new state legislative sessions convene just after the new year in both Topeka and Jefferson City to see if the business war across the border finds an armistice.

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