State officials want to bring a $4 billion megaproject to Kansas — without naming the company involved

Kansas legislators are set to embark on a high-stakes game of "Deal or no Deal," as lawmakers consider the merits of a sweeping set of economic development incentives designed to target a major company reportedly considering moving to the state.

But lawmakers won't likely have the full slate of details available to them, including which company is considering a reported $4 billion investment in the state and where in Kansas they will locate to.

Those details won't be made public either, even as the Department of Commerce pushed legislators to act on the incentives before the end of the month, leaving some legislators concerned they are not in the best interest of the state.

"You know, we used to talk about the backroom, shady, smoke-filled room deals?" Sen. Caryn Tyson, R-Parker, said. "And this appears to be along those lines."

A parade of state and local economic development leaders, however, painted the legislation as a key way of modernizing how the state attracts and retains large companies.

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Officials argued that mega-projects, or deals totaling more than $1 billion in investment, are now the norm and Kansas must keep up with the Jones — or, in this case, states like Texas and Arizona.

"This is the kind of tool that helps change our economy," Andrew Nave, executive vice president for economic development at the Greater Wichita Partnership, told the Senate Commerce Committee on Wednesday.

Project could create 4,000 jobs, Kansas officials say

The package of incentives in the legislation, Senate bill 347, are wide-ranging and under the current structure they would go to both any company who invests over $1 billion in the state and a set of five suppliers that firm picks.

In this case, the legislation is largely targeted at the mystery company, who has agreed to create 4,000 permanent direct jobs, with an average income of $50,000.

Paul Hughes, deputy secretary of commerce, told the Senate Commerce Committee Wednesday that thousands more jobs will be created indirectly, either in construction or further down the supply chain.

Kansas is one of two finalists for the project, with the company looking to pick their destination in February and announce their intentions publicly in March. That means the state is pressuring legislators to get the package approved by the end of January.

The incentive package would allow businesses to claim a credit of up to 15% of their investment, which must total at least $1 billion. Up to 10% of payroll costs may be refunded for the first decade of the project and a company can also see $5 million in training expenses reimbursed per year, for up to five years.

In addition, firms could qualify for 50% in property tax exemptions if they meet additional criteria. And 100% of construction materials would be sales tax-exempt.

The proposal would also include a package of incentives for the companies that are designated as suppliers for the major company, with the goal of building a self-contained supply chain within Kansas.

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Company name, details not disclosed as legislators must make decision

The comprehensive nature of the proposal, Hughes said, is a way of keeping up with other states who have fared better in attracting large-scale projects.

He noted that Kansas has been a finalist for 11 mega-projects in the past five years and has whiffed on each one of them. And current development incentives are not sophisticated enough to attract a firm of this magnitude, he added.

"You're in a position today where you have to choose between forwarding and approving Senate Bill 347," Hughes said. "Or, we returned to the standard practice, which is 0-and-11 and will become 0-and-12 without this tool."

Officials argue securing a single megaproject would instantly improve the state's odds at getting future major deals.

"Reputation matters, notoriety matters, momentum matters," Nave said.

The identity of the company, however, is unknown, as is the location where they are might locate to. Commerce officials say they are bound by non-disclosure agreements that bar them from revealing those details.

"It would cause financial harm to that company if the word got out that they were planning it,” Hughes said.

This, combined with the speed at which the legislation is moving, leaves legislators with a raft of questions to work through.

Sen. Renee Erickson, R-Wichita, told reporters there needed "to be the proper checks and balances" in any bill.

"I think that there's a role for legislative oversight, how to balance that with the secretary being able to do what the secretary needs to do to attract those businesses," she said. "But yet the Legislature have a vetting process to make sure to minimize the unintended consequences or negative fallout from a potential project."

‘All we're worried about is enticing new business … ’

But incentives for major economic development projects have come under fire in other states, with critics maintaining they often do not live up to the hype.

A proposed $10 billion deal that would have seen Taiwanese manufacturing giant Foxconn construct a factory in Wisconsin has slowly shrunk, with the company backing off claims it would employ as many as 13,000 workers. The state was set to pony up $3 billion in subsidies — the largest such deal in American history.

A restructured version of the proposal, approved in April, would see Foxconn invest a slimmed down $672 million in a smaller facility.

Economic development officials argue the swinging pendulum towards megaprojects means the state must change course as well. Data backs this up — figures compiled by the advocacy group Good Jobs First show a five-fold increase in those deals between 1996 and 2015.

But some legislators noted this trend was not necessarily a good thing.

"I find it difficult, especially with my existing businesses, my existing constituents that are trying to make ends meet," Tyson said. "And all we're worried about is enticing new business, not taking care of our own."

Meanwhile, Kansas legislators have been critical of the state's STAR bonds program, an economic development tool created to boost tourism and business projects. A report from the legislature's nonpartisan auditing arm found that only three of the 16 projects reviewed met key performance benchmarks.

Hughes said he was confident in the safeguards the latest bill puts in place, which would allow incentives to be clawed back if the agreed to investment doesn't come to fruition. A company would also be required to take out a bond to cover the costs of the project if their credit rating declines.

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Still, Erickson acknowledged these risks and noted the committee was attempting to minimize them — while also moving quickly to get something passed.

"With a time constraint, we're feeling that pressure about how do we properly vet this to make sure we're not blowing an opportunity," she said. "But yet doing the work of the people to make sure we don't have a situation like (Wisconsin)."

Andrew Bahl is a senior statehouse reporter for the Topeka Capital-Journal. He can be reached at abahl@gannett.com or by phone at 443-979-6100.

This article originally appeared on Topeka Capital-Journal: Kansas officials want help landing a $4 billion business deal