The Kansas-Missouri Border War Isn’t Over Yet | Guest Comments

Missouri and Kansas are no strangers to border disputes. No, we’re not talking about the chaos that inspired The Outlaw Josey Wales. The fear today is for cross-border job poachers. However, that doesn’t justify giving Fidelity Security Life Insurance $12.7 million just to stay in Kansas City. No one gets a gold medal in a race down – but politicians will waste endless taxpayer dollars trying to tell you they “win”.

Fidelity’s new headquarters – less than a mile from its current location – will be luxurious. The property is the most desirable in the metropolitan area, overlooking green spaces at Penn Valley Park and Union Cemetery and on a ‘transit hub’ of the expanded streetcar route. A third of the office space will be rented at the highest price in the area – more than double the average price for Class A office space. The building will occupy less than half the site, allowing for another high-rise in the future.

But should the public fund a project that predominantly benefits one company? What if the company was likely to be successful without subsidies? And why are local leaders even considering subsidizing these types of projects?

The answer won’t surprise you: it’s just a sad symptom of the larger problem illustrated by border-hopping companies. Kansas City politicians may have worried that if they didn’t offer subsidies, Fidelity might be stolen from a suburb, much like they nearly poached Waddel & Reed of Overland Park, Kansas.

There are hopeful signs that everyone is fed up with these border wars. In 2019 and 2020, city and state leaders took first steps to curb subsidy abuse. The two state governors agreed to end subsidies that lured businesses across the state line, and then Kansas City reduced its own subsidy program to reflect what the Kansas suburbs were offering. However, more remains to be done.

Denver offers a good example of escaping a metropolitan economic war. Since 1987, the mayors of communities around the city have met every month to ensure they are working together to grow the economy together, rather than undercutting one another.

It is important to move forward with similar ideas along the Missouri-Kansas border for several reasons.

First, subsidies generally hurt local economies. Every dollar spent on a subsidy cannot be spent on social security benefits or broad-based tax cuts for all businesses. This results in negative economic impacts that rarely outweigh the projected benefits of the funded project. Worse, only one in eight subsidies is material to changing a company’s decision about where to locate or expand, as Kansas City recently discovered with BlueScope Construction’s empty threat of relocating to Kansas. That means most subsidy spending is a waste.

Second, existing subsidy reforms in Missouri and Kansas are tenuous and temporary. Kansas participation in the armistice is subject to an executive order, meaning it is only as permanent as the goodwill of the next governor. The Missouri Olive Branch is a bit more robust as it was implemented by law, but the law expires in 2025. Also, the agreement has limited, but not completely eliminated, the subsidies that local governments can offer.

Third, this is a national problem. State and local governments squander $100 billion each year in anti-growth competition for jobs. However, a growing coalition of policymakers is working to develop an interstate compact — a more elaborate and permanent version of the Missouri-Kansas “gentlemen’s agreement” — that would offer a lasting solution.

Both states have good reason to join, because without a more holistic and lasting deal, the border war will almost certainly start all over again.

David Stokes is Director of Local Policy at the Show-Me Institute and Michael Farren is a Senior Research Fellow at the Mercatus Center at George Mason University.

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