Kansas House lawmakers slow process for ‘train wreck’ megaproject incentive bill

TOPEKA — A House panel refrained from acting Thursday on what some called a “train wreck” financial incentive package to encourage manufacturers to pursue significant investments in the state, opting instead to discuss potential improvements.

The so-called megaproject bill provides companies with special incentives if they plan to invest at least $1billion in Kansas over five years. Amendments added by the Senate would reduce the state corporate income tax, make a tax credit offered to these companies nonrefundable and establish a sunset date on the act of June 20, 2023.

As requested by Gov. Laura Kelly, the bill is intended to boost the state’s bid for an unnamed company expected to invest $4 billion in a production plant. The company is also considering Tulsa for the site, according to the Kansas City Business Journal.

However, efforts to expedite the bill in the Senate resulted in a sloppy bill requiring further work, some House members said.

“We are still in the process of fixing this train wreck of a bill that came over to us, to say it nicely,” said Rep. Sean Tarwater, a Stilwell Republican and chairman of the House Commerce, Labor and Economic Development Committee. “We want to make sure that the i’s are dotted, and the t’s are crossed because we want to make sure we do it right.”

The House panel had anticipated working and potentially acting on the bill Thursday, but it instead discussed amendments to the bill. The committee will vote on the potential alterations when members reconvene Monday.

Rep. Blaine Finch, an Ottawa Republican, said efforts to collaborate with the governor’s staff and the Department of Commerce did not result in an agreement but offered several ideas for potential solutions to House concerns. Finch proposed a significant amendment guided by three principles — accountability, economic development and benefits for all businesses.

His amendment would restore the refundable capital investment tax credit removed by the Senate and extend the payout from three years to 10 years. The update would also cap payroll reimbursement for qualified companies at 7.5%

Any efforts by the secretary of commerce to change the payout or payroll reimbursement rate would require approval from the State Finance Council.

“That last mile or those biggest chunks of incentive have to have someone else looking at the deal and making sure that it makes sense for all of Kansas,” Finch said. “No deal of that size should happen without a check and balance.”

Finch said the bill should function as an economic development incentive program, not just a lure for one company. The amendment would ensure that anyone benefiting from the incentive program lives or operates in Kansas.

To encourage this, Finch proposed a $10 million matching incentive fund for the corporation to provide relocation incentives for employees moving to Kansas from another state.

Finch noted complaints from businesses and some lawmakers that the measure was picking winners and losers. Rather than sticking with the Senate proposal to lower the state’s corporate income tax rate of 4% by 0.5%, or about $50 million annually, each year project funds are sent to these companies, Finch proposed a more measured approach.

The reduction would stay at 0.5%, but that would only occur once for each project.

“This measured reduction in Kansas and taxation on all Kansas corporations is a small fraction of the incentives that might be paid to even one apex project, but it spreads the benefit instead of being for one company or a handful of suppliers to every Kansas corporation,” Finch said.

The amendment would also limit the state to one megaproject initiative per year and amend the sunset to two years.

Rep. Francis Awerkamp, a St. Marys Republican, proposed another change to sweeten the base bill for existing Kansas businesses. His amendment would automatically reduce the sales tax on utilities from 6.5% to zero in years the state pays benefits to the megaproject company.

“Each year Kansas businesses are subsidizing somebody else’s business, they also receive a benefit,” Awerkamp said. “That shows Kansas businesses that we actually care about them too, and we’re not just trying to find somebody outside the state to bring into the state.”

The amendment would cost the state approximately $55 million a year.

Rep. Ron Highland also proposed a clawback mechanism for the committee to consider Monday.

“If (the company) leaves the state between the 10th and 15 years, there will be a prorated basis of what they’re going to have to pay back,” the Wamego Republican said. “The exception is if they sell to a company that stays in the state.”