Kansas to OK secret incentives deal for $1 billion-plus megaproject in Wichita, sources say


UPDATE: Kansas approved more than $300 million in incentives for the project.

Kansas OKs more than $300M in incentives for new semiconductor factory, 2,000 jobs in Wichita

The Kansas State Finance Council will review a proposal from the state commerce department for a secretive megaproject incentive deal in Wichita, an encore to the Panasonic battery plant announced last year.

Kansas Gov. Laura Kelly and leadership from the Kansas Legislature will meet Thursday afternoon to consider approving a massive APEX state incentives package that could bring more than a billion dollars and thousands of jobs to Wichita, according to multiple sources with knowledge of the behind-the-scenes negotiations.

APEX subsidies include refundable tax credits, training costs and payroll tax breaks to a company and five of its suppliers. The incentives can add up to hundreds of millions of dollars in public money.

Signs point to an investment in a semiconductor facility.

The Wichita Eagle identified Integra Technologies, the largest outsourced semiconductor assembly and test operation in the United States, as a front-runner for the APEX incentives program in November.

Integra is headquartered in Wichita, and the APEX incentives would be used to expand the company’s workforce and facilities, sources told The Eagle in November.

The company, which contracts in aerospace and defense work, has not confirmed or denied its interest in APEX and did not respond to questions Wednesday or Thursday. Integra did confirm its interest in CHIPS Act funding, a multibillion dollar program approved by Congress to bolster domestic semiconductor manufacturing. It’s not immediately clear how that federal funding could be used in tandem with APEX funding.

Presenting to lawmakers last month, Deputy Secretary of Commerce Paul Hughes said the state was considering six potential mega projects, including two semiconductor facilities eligible for federal CHIPS Act funding.

Both projects, Hughes said, represented about 2,000 new jobs. One of the projects, Hughes said, was a $1.9 billion investment. The other was a $1.4 billion investment.

The semiconductor projects, Hughes said, were on the most compressed timelines because of the available federal funds. Applications, he said, would go out in February and the federal government would award grants by July.

“It’s a huge opportunity to attract federal dollars to the state,” Hughes said. “We have a couple companies here in the semiconductor space. They’re interested in pursuing the CHIPS act.”

The prospect gained support from Republican lawmakers.

“Right now, it’s all about supply chain. And if we can have that supply chain start in Kansas I would be all for that,” said Rep. Sean Tarwater, a Stillwell Republican who chairs the House Commerce Committee.

The project is being approved under the same mega-incentive deal that allowed Kansas to offer $829 million in tax credits to Panasonic for building an electric vehicle battery plant in De Soto. Under that agreement, Panasonic could receive $500 million without hiring a single worker as long as they invest $4 billion in the plant.

The bill was passed specifically for Panasonic but allowed Commerce to negotiate a megaproject once a year as long as the policy is in place. Under the current law, the Wichita project would be the last one to receive incentives under the bill, which is scheduled to expire next year. Commerce has asked lawmakers to extend the policy.

Integra would break the mold of what lawmakers and the Kelly administration said they were aiming for with the incentive tool. The goal of the tool, officials said, was to draw new industries to Kansas. Integra is already headquartered in Wichita.

“I was brought forward to Kansas to be a headquarter hunter,” Hughes said last year. “It stuck out like a sore thumb. We don’t have the right tools to go after these projects.”

As with Panasonic, the negotiation of this deal was cloaked in secrecy.

Officials with direct knowledge of the Wichita-area project said anyone, including elected officials, briefed on the incentives negotiations was under a strict gag order and had to sign a nondisclosure agreement to be involved in negotiations.

The final agreement would be exempt from the Kansas Open Records Act. The Commerce Department released Panasonic’s agreement to the press despite the exemption.

If lawmakers reopen the bill, Tarwater said last month he would be inclined to remove the KORA exemptions and require the administration to place strict job requirements in any future contract.

Under the law each new project will come with a half percent reduction in Kansas’ corporate income tax. The two projects combined will force a full percentage decrease in just two years.

The potential jobs were announced as Kansas is facing a major workforce shortage. Hughes told lawmakers last month the goal of these megaprojects would be to draw professionals with ties to Kansas back to the state by creating opportunities that didn’t previously exist.

However, existing employers in Kansas are struggling to hire in nearly every industry.

“We need workers, we don’t need jobs,” Tarwater said last month.

Sen. Caryn Tyson, a Parker Republican, said she was disappointed to hear a new APEX project would be authorized. She said she wouldn’t support any extension of the program passed 2024.

“We have not written the checks for the first project and they’re starting the second one without even knowing that it works,” Tyson said.

The Panasonic battery factory is scheduled to be completed by mid-2025.

Tyson said she was especially concerned about the implications of refundable tax credits.

“We need to make sure that we don’t break the state with this program.”

Contributing: Kevin Hardy and Jonathan Shorman of The Star