Kansas Delivers Compelling Pro-Business Message
21 Apr, 2013
By Rachel Duran
Historically, Kansas has been a business friendly state with tax policies that have been intended to be welcoming to businesses. “That will continue to be the case,” says Steve Kelly, deputy secretary, Kansas Department of Commerce. Changes made in last year’s legislative session take effect this year, including a business income tax exemption. According to media materials, the change “eliminates certain non-wage business income on lines 12, 17 and 18 of IRS Form 1040 for Partnerships, Limited Liability Corporations, Limited Liability Partnerships, Sole Proprietorships and Subchapter-S Corporations that have elected at the federal level to be taxed as a pass-through entity.”
Officials have also changed from a three bracket structure for individual state income taxes (3.5 6.25 and 6.45 percent), to a two bracket system featuring rates of 3.0 and 4.9 percent.
Kelly says with changes proposed in this year’s legislation session, both of these rates would be reduced further.
Industries and Innovations
Barbara Hake, business recruitment manager, Kansas Department of Commerce, says Kansas primarily targets four industries: distribution, alternative energy, advanced manufacturing and biosciences, but we also work a number of office, general manufacturing and professional services projects as well.
In the Johnson County metro, located in northeastern Kansas, activities in the professional services and IT industries are on the upswing. For example, pharma company, Teva, is building a $71 million facility in Overland Park, where it will employ 602 people in an office and administrative support facility. Overland Park has also been selected by Netsmart Technologies, a medical software developer, for its headquarters operations.
In nearby Lenexa, CoSentry, a provider of data center, cloud computing and managed technical services, is building a $31.6 million data center. In nearby Leawood, AMC Theatres is building a new headquarters location, moving operations from Missouri. “One significant piece is that AMC was recently acquired by the Wanda group [Dalian Wanda Group], which is a Chinese firm,” Kelly says. “It is the largest single investment made in the United States by a Chinese firm; a $2.7 billion acquisition. Wanda is a very active player in the Chinese market and has interest in potentially being involved more heavily in the U.S. market. This is a good segue into opportunities for Kansas down the road.”
Cerner Corp., which is a developer of medical software, is constructing its new campus in Kansas City-Wyandotte County, which when finished, will support 4,000 office positions. Moving west in the state, in Manhattan, CivicPlus, a workforce software developer, is building a new headquarters.
In regard to the state’s advanced manufacturing sector, noteworthy projects include the first manufacturing plant built in 35 years for Mars Inc. The company is investing $500 million to produce Snickers and M&Ms from Topeka, Hake notes.
In Wamego, Caterpillar has conducted a significant expansion to its facility, where it manufactures shovels for the company’s machinery. And in Fairfax, General Motors announced it would conduct a $600 million retooling of its paint operation, in addition to other upgrades. The investment will retain 4,000 jobs.
In Shawnee, electronics components manufacturer E.C. Manufacturing LLC is moving into an existing facility at Perimeter Park. The startup will locate to a 142,000-square-foot facility, and create 250 jobs during a three-year period.
Spirit AeroSystems, which has major operations in Wichita, has established a manufacturing operation in Chanute, giving them access to a new labor pool in a community eager for jobs. Valent Aerostructures, which does a considerable amount of work for Spirit, and has several operations in Kansas, has significantly expanded its facility in Fredonia. “These two projects will add between 200 and 300 aviation manufacturing jobs,” Kelly says. “This is significant because we can provide opportunities for smaller communities, as well as participate in the growth of larger firms.” What’s more, Spirit’s Wichita operation is within easy driving distance of these “insourced” operations, as opposed to being a half a world away.
All About Agribusiness, Logistics and Energy
The Kansas economy, particularly in western Kansas, is driven by agricultural-related activities. The dairy industry continues to emerge in southwest Kansas, where Kelly says in a 15-year period, the region went from zero to more than 100,000 dairy cows. Dairy processors have been growing. In Hugoton, Kansas Dairy Ingredients has built a dairy ingredient and cheese plant. In northwest Kansas, McCarty Dairy in Rexford is producing milk for use in Dannon yogurts.
One of Kansas’ leading business assets is its location in the middle of the country. Logistics-related companies and manufacturers will be interested to know facilities and sites are available or coming online to support their needs. In Edgerton, south of the Kansas City metro, BNSF will begin offering intermodal services by the end of this year at its new operation. The complex also includes a new business park, complete with new interstate exits.
In Harvey County, officials continue to market the Kansas Logistics Park, which features 500 acres but will be considerably larger. The park, which is in the design process for a transload laydown facility, is ideal for businesses involved in energy, agriculture, heavy manufacturing and transportation activities. “The park continues to be well received; we are centrally located in the U.S., and when you have a short line served by two Class I rail lines, that has intrigue,” says Mickey Fornaro-Dean, executive director, Harvey County Economic Development Council Inc.
Fornaro-Dean adds that renovations are also underway at the Newton City-County Airport. The airport serves as a reliever for the Wichita Mid-Continent Airport, thanks to its 7,200-foot runway. “These improvements at the airport are an advantage for our logistics park because they are interconnected,” Fornaro-Dean says.
In other industry sectors, Kansas features an established renewable energy cluster. Last year, in Ford County, two wind farms, Spearville III and Ironwood, began production. “With the federal Production Tax Credit renewed for another year, we are getting ready to start construction on a wind farm for Infinity, which will be located near Spearville,” says Joann Knight, executive director, Dodge City-Ford County Development Corp. Additionally, one transmission line has been completed, and one is under construction.
The Dodge City region has also seen an influx of oil and gas industry activities. Dodge City is located in the center of the Mississippi Lime shale play, which runs from Oklahoma to northwest Kansas, Knight says. “There are 117 permits in Ford County, and wells have been drilled. Seven businesses have opened offices to support development, and we sold our first parcel of land at one of our new business parks to an oil and gas company.”
Talent and Education
Administration officials in Kansas are enhancing workforce-related opportunities for businesses. “There is an engineering initiative underway where the universities with major engineering programs have the opportunity to share additional dollars,” Kelly says.
Like many states, Kansas is investing to expand its career and technical education system as many jobs require specialized skills, but do not require four-year degrees. “We have a career-tech ed initiative, with the goal of the student achieving industry skills certification,” Kelly says. The certificates are awarded to students who have mastered skill sets required in certain occupations.
“Certification also provides the employer the assurance that these employees have mastered these particular skill sets,” Kelly adds.
Under this initiative, training is free to students. In an effort to encourage high schools and school districts to explore the certification opportunities, the school receives $1,000 for each student who attains certification.
In Lawrence, home to the University of Kansas, the community has formed a training consortium, which has entered a memorandum of understanding with area community colleges to establish a training facility.
“One of the benefits is the ability to partner with the school district on some of its initiatives,” says Sean Johnson, economic development project manager, Lawrence Chamber of Commerce. “The community is voting on a bond issue this spring, and when it is to pass, some of the funds will be used to establish a training facility in the school district. The big picture is to co-locate a school district and higher education consortium.”
Johnson’s team is also partnering with university officials to explore the community’s entrepreneurial ecosystem, meeting with entrepreneurs, service providers and others to understand what needs to be done to close gaps.
In other ecosystem initiatives, in Harvey County, economic development officials are in the beginning stages of establishing a rural innovation accelerator, which will include services for workforce training, and entrepreneurial support, among others. In the Manhattan region, economic developers are preparing the ecosystem required to support a federal facility and its supporting players. Kansas State University and Manhattan have been selected as the location for the National Bio and Agro-Defense Facility. Federal officials continue to release funds to support the project and the site has been cleared. In late February, the U.S. Department of Homeland Security approved construction on an 87,000-square-foot central utility plant to support the facility. The $80 million project’s costs will be split between the state and the DHS.
“We are located 20 miles from Manhattan and we are exploring several ways to tap into the activities surrounding NBAF,” says Tom Weigand, president and CEO, Junction City Area of Chamber of Commerce Economic Development. “The timeline is pushed out a bit; however, the goal is to be operational in 2018.”
Kansas’ bioscience sector also includes a leading animal health sciences cluster, which stretches from Manhattan to Columbia, Mo. Hake says 32 percent of the world’s companies involved in this sector are located in this corridor. Along the corridor is the North American headquarters for Bayer HealthCare AG’s animal health division in Shawnee.
To further support the state’s biosciences industry, the Kansas Biosciences Authority is investing $580 million to expand the industry.
In Kansas, working together to move industry forward is a common theme, as partnerships and favorable policies continue to evolve. Johnson says Lawrence is part of the Kansas Research Nexus, along with Topeka and Manhattan. The communities aim to better tell the story of the region’s advantages to support human and animal health research.
A partnership focused on workforce development has formed between Junction City-Geary County, Riley County and Pottawattamie County, along with Heartland Works, to ensure the Flint Hills region is recognized for its educated and available workforce, Weigand says.
When it comes to favorable policies, communities continue to create initiatives to support businesses with their expansion decisions. In Shawnee, in an agreement between the city and a waste removal company, a significantly increased impact fee allows the company to operate a landfill within city limits. The funds are used to support economic development, including the Shawnee Entrepreneurial and Economic Development (SEED) forgivable loan program, and a local contribution credit.
The SEED loan awards cash upfront to companies based on new payroll, says Andrew Nave, executive director, Shawnee Economic Development Council. The half-percent local contribution credit awards companies that hire and source Shawnee residents and companies. In addition, in February, city commissioners were expected to approve the suspension for two years of the local excise taxes on undeveloped and unplatted sites. “This comes to $9,500 per acre; so any single family or commercial development that comes in to plat will not have to pay excise taxes,” Nave says.
In Dodge City, a rural housing incentive district takes the incremental increases of the property taxes that will be generated from an expansion and funds the land and infrastructure needed for the development, Knight says. “We have been aggressive at recruiting people to fill available jobs, which overemphasized the need for housing,” she says. “During the last few years we have been aggressive in getting developers to build housing. That has ensured businesses that we are addressing the housing issue; and we have seen an increase in existing industries making investments in the community.”
Developers are also investing in business parks and commercial spaces throughout the state. In Shawnee, new development is focused at the intersection of 43rd Street and Kansas Highway 7. The 300-acre Shawnee Eco-Commerce Park, a master-planned sustainable park, is well suited to logistics and manufacturing companies. Another industrial development of 50 acres will soon begin development, to include the construction of a160,000-square-foot spec building.
Weigand says Junction City is expanding its sites and buildings inventory, which includes a 60-acre shovel-ready site. There are also smaller tracts of land available throughout the city. What’s more, officials are working to secure another 500 acres for business development.
The take-away from Kansas’ economic development leadership? “Doing business in Kansas offers tremendous assets to companies,” Fornaro-Dean says. “First of all, consider our location and transportation opportunities. And secondly, we have a talented workforce — in south central Kansas we are particularly skilled in manufacturing and production.”
Illustration by suphakit73 at Free Digital Photos.net