What else can Wichita do for downtown companies?

With all Wichita has done, it may not be enough.

Within a month, these two headlines appeared in the opinion pages of the Wichita Eagle:

Investment in downtown Wichita is impressive 1

State and local leaders need to help meet Cargill’s needs 2

The second headline was in response to the news story “Cargill plans to move its Wichita headquarters — but where?” 3 In this story, Carrie Rengers reports “Cargill is looking to move its Wichita headquarters, but whether that’s within downtown, where it already is, or outside of it or even outside of Kansas is unclear. … City and state officials are working in full gear to make sure Wichita — downtown specifically — is the option Cargill selects.”

Rengers reports that Wichita city officials say no specific incentives have been offered to Cargill, but “any incentives likely would involve infrastructure help, such as with parking, or assistance with easing the process for a new building, such as with permitting.” Wichita Mayor Jeff Longwell says “cash incentive won’t be an option,” according to Rengers.

A Cargill official says that the company needs to attract millennials and younger people, who are not attracted to “traditional office space and office-type buildings.”

Now, consider the first opinion headline: “Investment in downtown Wichita is impressive.” In this op-ed, Phillip Brownlee writes “It’s encouraging that investment in downtown Wichita is continuing — and that it is mostly privately funded. A vibrant downtown is important to the city’s image and to attracting and retaining young adults. More than $1 billion in private and public investment has occurred downtown in the past decade. About $675 million of that investment has been privately funded, and $411 million has been public projects, according to Wichita Downtown Development Corp.”

Brownlee goes on to note other investments, such as 800 new apartment units “in the works.”

On the importance of downtown, Brownlee writes “City leaders have long recognized the value of a healthy downtown. Besides the symbolic importance of not having a lot of empty buildings, many young adults prefer an urban environment. That makes downtown important even for businesses not located there, because it can help or hurt their ability to recruit and retain young professionals.”

I see a discontinuity. Our city’s leaders — opinion, elected, and bureaucratic — brag about all the investment in downtown Wichita, public and private, yet it doesn’t seem to be enough to retain a major Wichita employer in downtown.

At least editorialist Rhonda Holman recognizes the problem in her column: “It’s concerning that Cargill’s stated intentions to relocate and consolidate have not included a commitment to remain downtown or even in Wichita or Kansas.” What is her solution? “Elected and business leaders need to be creative and assertive in helping Cargill meet its needs.”

I share Holman’s concern. It’s very troubling that with $411 million in private investment over the past decade, downtown Wichita still isn’t attractive enough to retain Cargill, if the company’s intent to move is real and genuine. And advising the same group of people who have been in power during the decline of the Wichita economy to be “creative and assertive” is a solution?

What’s even more disconcerting is that the person who has overseen much of this downtown spending has been promoted. Now Jeff Fluhr of Wichita Downtown Development Corporation is president of Greater Wichita Partnership, with responsibility “to grow the regional economy.”

Forgive me if I’m underwhelmed.

Regulation
One of the things that may be offered to Cargill, according to Rengers, is “assistance with easing the process for a new building, such as with permitting.” This is a big red flag on a very tall flagpole. If the city has regulations so onerous that they are a consideration as to whether to locate in Wichita, this is something that must be fixed immediately. But the instinct of the Wichita City Council and city bureaucrats is to create more regulations covering everything from the striping of parking lots to the personal hygiene of taxi drivers.

Cash incentives
Mayor Longwell says there will be no cash incentives offered to Cargill. Instead, something like help with parking may be offered. This might take the form of building a parking garage for Cargill. We should ask: What is the difference between giving cash to Cargill and building a parking garage for Cargill’s use? There really isn’t a meaningful difference, except for Cargill. That’s because cash incentives are taxable income. Free use of a parking garage isn’t taxable. 4 5

Further, Cargill may qualify for PEAK, or Promoting Employment Across Kansas.6 This program allows companies to retain 95 percent of the payroll withholding tax of employees. The original intent of this program was to lure companies to locate in Kansas, but in recent years the program has been expanded to include incentivizing companies to remain in Kansas. While this is a state program and not a city program under the mayor’s control, PEAK benefits are more valuable than cash.


Notes

  1. Brownlee, Phillip. Investment in downtown Wichita is impressive. Wichita Eagle. March 5, 2016. Available at www.kansas.com/opinion/editorials/article64129977.html.
  2. Holman, Rhonda. State and local leaders need to help meet Cargill’s needs. Wichita Eagle. April 1, 2016. Available at www.kansas.com/opinion/opn-columns-blogs/now-consider-this/article69534982.html.
  3. Rengers, Carrie. Cargill plans to move its Wichita headquarters — but where? Wichita Eagle. March 29, 2016. Available at www.kansas.com/news/business/biz-columns-blogs/carrie-rengers/article68700517.html.
  4. Journal of Accountancy, (2009). Location Tax Incentive Not Federal Taxable Income. Available at: www.journalofaccountancy.com/issues/2009/apr/locationtaxincentive.html.
  5. American Institute of CPAs, (2015). Federal Treatment of State and Local Tax Incentives. Available at: www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2008/CorpTax/Federaltreat.jsp.
  6. Weeks, Bob. In Kansas, PEAK has a leak. Voice For Liberty in Wichita. Available at bobw7.sg-host.com/kansas-government/kansas-peak-leak/.

One Comment

  • Anonymous -

    You have an error in your article saying $411 million in private funding, but Brownlee says it was public funding in that amount. $675 million in private funding. That makes it even worse. I would like to see a list of these investments that add up to over $1 billion. I really don’t see $1 billion in new investment in downtown and I sure don’t see $1 billion worth of benefits.

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