Kansas House gives incentive package for secret company megaproject stamp of approval

Senate to take up bill Wednesday

By: - February 8, 2022 5:50 pm

Rep. Stephanie Clayton touted efforts to clean up the APEX act after estimates indicated the bill would gobble up the state budget surplus. She said the measure was an opportunity to provide boost Kansas business. (Sherman Smith/Kansas Reflector)

TOPEKA — Kansas representatives deflected concerns Tuesday about the secrecy surrounding a bill wooing an unnamed company expected to invest billions of dollars in the state, sending the measure back to the Senate with their stamp of approval.

The Attracting Powerful Economic Expansion Act, or APEX, was brought forward at the behest of the governor and the secretary of commerce. It looks to provide Kansas with an edge over Oklahoma in competing for a production plant into which the secret company plans to invest $4 billion. The bill provides a refundable tax credit of up to 15%— Kansas would be on the hook for $600 million in this instance — paid back over 10 years.

In addition, the measure offers payroll reimbursement for the company of 7.5%. Estimates from nonpartisan legislative staff indicate the act would cost approximately $1.2 billion.

After more than an hour of debate, concerns about the secrecy of the deal, which involved some members entering into nondisclosure agreements to learn more concrete details, were trumped by the potential many legislators saw in the bill.

“I think that we have reached a reasonable compromise,” said Rep. Stephanie Clayton, D-Overland Park, noting efforts to clean up the Senate proposal. “I am very proud to have worked with the members of the House Commerce Committee … to make sure that we get something reasonable that does have good oversight and something that honestly gives every single one of us an opportunity to take a good, old-fashioned, pro-business vote.”

The House voted 80 to 41 to send the bill over to the Senate for a concurrence vote. Should the Senate approve the bill, APEX will head to Gov. Laura Kelly for final approval.

Both the governor’s proposal and the Senate iteration raised concerns in the House Commerce panel about potential impacts to the budget. Estimates from legislative staff indicated Kelly’s proposal would sap the budget surplus and leave the state in a deficit in 2026.

The Senate revised the bill by removing refundability from the tax credit and including a corporate income tax cut that would leave the state in a better, albeit still negative, budgetary situation. 

To ease those concerns, the House reinstated the refundable credit, extended the payout from three to 10 years and added oversight from the State Finance Council before any the secretary of commerce reaches any agreement or amends any payout durations. They also added a sunset of May 1, 2024, and limited the number of agreements the state can reach to one per year.

The House proposal still cuts the corporate income tax of 4% by 0.5%, but only once for each project, rather than each year the company benefits from the incentive package, as the Senate proposed.

Despite the added safeguards, Rep. John Carmichael, a Wichita Democrat, was unwilling to bet his constituents’ tax dollars on the program, even if he had confidence in the governor and commerce secretary. He said that for all they knew the company could be pornographic, driving home that question marks surrounding the bill were many, except for the select few who signed NDAs.

“Did somebody buy this deal? We don’t know.” Carmichael said. “You’re going to go spend your constituents’ money on the hope and the prayer that people who’ve signed nondisclosure agreements are representing you, as a legislator and your constituents, because you can’t represent them yourself.”

The measure also includes clawback provisions requiring the company to repay funds should it leave the state 10 to 15 years after the deal.

Rep. Leo Delperdang, a Wichita Republican, voted in favor of the measure after admitting he was conflicted about which side he fell on. He urged legislators to keep in mind the potential effect approving this budgetary boon could have on the feasibility of some other proposals, such as eliminating the food sales tax.

“I am assuming the same is true for any rainy-day funds or the efforts from several in this body for Medicaid expansion,” Delperdang said.

Rep. Henry Helgerson echoed Delperdang’s concerns about potential collateral damage.

“We’re betting the bank,” the Eastborough Democrat said. “We’re betting school finance. We’re betting the social service network. Somebody better get down here and ask, are we biting off more than we can chew?”

The APEX bill also incentivizes employees of the company looking to relocate to Kansas through a $10 million matching incentive fund. An amendment from Rep. Trevor Jacobs, a Fort Scott Republican would reduce the amount of money offered to employees for food and lodging while they relocate.

The Senate plans to take up the House version of the bill Wednesday.

In a meeting of Senate Republicans, Sen. Caryn Tyson, of Parker, asked for an official cost estimate for the incentives package.

“We’re voting blind here,” Tyson said. “Even the talking heads on PBS are mocking us for this legislation.”

The Department of Commerce has argued the state needs the program after whiffing in the past on 11 megaprojects.

Lt. Gov. and Commerce secretary David Toland asked senators to put aside politics and work to push this measure across the finish line. He said the state is at risk of missing another economic opportunity should it fail to pass this bill. 

“Failing to take into account $2.5 billion annually in new economic activity, along with presenting projections that are only based on worst-case scenarios paints a picture that shows none of the benefits to Kansas,” Toland said. “The opportunity we have in front of us today would be transformative, by creating thousands of new jobs and injecting billions of dollars into the Kansas economy.”

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Noah Taborda
Noah Taborda

Noah Taborda started his journalism career in public radio at KBIA in Columbia, Missouri, covering local government and producing an episode of the podcast Show Me The State while earning his bachelor’s degree in radio broadcasting at the University of Missouri School of Journalism. Noah then made a short move to Kansas City, Missouri, to work at KCUR as an intern on the talk show Central Standard and then in the newsroom, reporting on daily news and feature stories.

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