Kansas City ‘Tax Truce’ not a Match for Charlotte

Richard Breen

Wednesday, December 4th, 2019

A big U.S. metro area that straddles two states recently decided to cut back on some of the economic development incentives it offers. But it isn’t Charlotte.

With Missouri and Kansas declaring a “tax truce” in order to deal with an unintended consequence of incentives in Kansas City, it’s worth checking whether the Queen City has a similar predicament.

But in order to declare a truce in Charlotte, first you’d need a war.

“We are all in healthy ‘coopetition’ for investment,” said David Swenson, York County’s economic development director.

In fact, Charlotte-area economic development representatives from both North and South Carolina recently participated in a joint trip to London and have another one planned for Paris.

The environment has been somewhat different in Kansas City. Tax breaks offered by Kansas and Missouri created a “border war” in which some companies were able to move their offices a few blocks across the state line in order to qualify for incentives intended for job creation. The only thing new about those jobs, however, was the address.

Earlier this year, Kansas Gov. Laura Kelly and Missouri Gov. Mike Parson agreed to close the loophole, limiting incentives offered to companies relocating within certain counties in the Kansas City area. Citing the Kansas City truce, lawmakers in New Jersey, which has its feet in both the New York and Philadelphia metros, are exploring the concept as well.

South Carolina CEO spoke with multiple officials involved in economic development, both on and off the record. They said that while companies have moved from county to county or state to state around the Charlotte region, it’s typically due to business growth and the need for new facilities.

“Kansas City is a unique situation,” said Ted Pitts, president and chief executive of the S.C. Chamber of Commerce. “The market along our border is not mature enough. It’s still growing.”

Another difference is the types of incentives offered.

“We have some competitiveness issues with North Carolina, particularly with regard to property tax,” Pitts said.

Business property taxes are typically higher in South Carolina than nearby states. Property tax reductions are often a big part of the county-level incentives offered in the Palmetto State.

“I don’t think companies are looking to move just to get an incentive,” Swenson said.

In 2009, e-commerce firm Red Ventures moved its headquarters, crossing over from North Carolina into Lancaster County. It was part of a growth plan for the rapidly expanding company, which expected to add 1,000 jobs over 5-7 years.

In 2015, it broke ground on a 300,000-square-foot expansion to its Indian Land campus, with plans to add another 1,500 jobs.

“With the projects that we’ve had where a company was coming, while there were jobs being relocated, most of them were at least doubling the employment once they got here,” said Jamie Gilbert, Lancaster County’s economic development director. “It wasn’t just moving jobs with no net gains for the company.”

Most states have some type of tax credit that doesn’t differentiate whether a job came via relocation, as long as it is new to the state. South Carolina’s has stipulations regarding how much the job pays and the per capita income and unemployment levels in the county where it’s located.

Earlier this year, controversy surrounded a $115 million incentives package approved for the Carolina Panthers. The NFL team, which currently practices on a field near its Charlotte stadium, plans to develop a training complex and team headquarters as part of a mixed-use project along Interstate 77 in Rock Hill.

House Majority Leader Gary Simrill, who represents York County in the General Assembly, described it as “regionalism where both sides win.” The Panthers, which markets itself with a “two states, one team” theme,” is also considering replacement of or upgrades to Bank of America Stadium.

“We weren’t competing with North Carolina for the team headquarters and practice facility, nor are we competing for the stadium, which is in North Carolina,” he said.

Based on 2018 U.S. Census Bureau estimates, Charlotte is the nation’s 23rd largest metro area, with a population of 2.6 million. Kansas City ranks 31st at 2.1 million.