wKREDA Legislative Positions 2019
wKREDA support for Kansas Economic Development
The Kansas Department of Commerce has the leadership role to aid Kansas communities to grow their economy. Over time, budget cuts to Commerce and state agencies responsible for other programs necessary for economic development have resulted in reduced services. Both the number and experience level of state staff available to assist local communities have decreased.
Funding cuts for the Kansas Department of Commerce have resulted in a reduction of services Commerce is able to provide. These reductions, which are critical for providing support for economic and community development, have impacted the number of programs available to communities for development.
wKREDA strongly supports the Kansas Department of Commerce as a vital economic development partner to work with local communities. wKREDA supports developing a new strategic plan for economic development, including a review of all agencies that provide services important to community and economic development programs. The Department of Commerce needs to be fully-funded, experienced staff need to be retained, and resources that allow Commerce to work with local economic developers to attract and expand business in Kansas need to be available.
Community Service Tax Credit Program
Rural Kansas communities have limited access to funds for necessary improvements and developments. Since 1994, the Community Service Tax Credit Program (CSP) has enabled Kansas not-for-profit entities to access tax credits to fund vital projects related to health; community development; crime prevention; and in a recent adaptation of the program, to youth apprenticeship and youth technical training.
Since CSP’s creation, wKREDA counties have utilized the program to raise more than $45 million to improve hospital facilities and equipment; build rural health clinics; develop community housing, wellness facilities, childcare centers; and enhance arts and culture facilities. These tax credits are awarded through a competitive state-wide process, and the resulting developments have contributed greatly to the viability and sustainability of western Kansas.
As Kansas has looked for ways to fill shortfalls in the state’s budget, the allocation for the CSP has been reduced. As a result, fewer dollars are available to fund projects that are critical to the survival of rural, and specifically western Kansas, communities.
Protect the Community Service Tax Credit Program and maintain current funding levels to ensure that Kansas communities continue to have access to a vital community development tool.
Support for Network Kansas
NetWork Kansas supports the economic needs of entrepreneurs throughout the wKREDA region. One of the mechanisms utilized by Network Kansas to support these efforts is the Kansas Entrepreneurship Tax Credit, utilized to raise money for program support and two funding partnerships: StartUp Kansas and the Entrepreneurship (E-) Community Partnership. StartUp Kansas and E-Communities provide matching loans for startups and expansions of existing businesses in rural communities across Kansas. NetWork Kansas also provides matching loans and investments to businesses in the wKREDA region through the Kansas Capital Multiplier Loan and Investment fund.
wKREDA Region Impact
- Provided more than $8.947 million in matching loans to 248 businesses that created and/or retained 1,500+ jobs
- 84% of the funded businesses are in communities of 10,000 or less with startups comprising 44% of the businesses funded
- 25 wKREDA communities have achieved E-Community standing
- Leveraged more than $87 million in additional capital
- Provided Economic Gardening assistance to 20 businesses that created and/or retained 688 jobs
- Provided more than $35.919 million in matching loans to 829 businesses that created and/or retained 4336+ jobs
- 60 communities have achieved E-Community standing, which has created an additional $5 million in loan funds to support projects and leverage other business financing options
- Leveraged more than $317 million in additional capital
- Provided Economic Gardening assistance to 89 businesses that created and/or retained 2,613 jobs
Most economic development opportunities in the wKREDA region stem from entrepreneurs willing to invest in rural Kansas. Start-up Kansas and E-Community funds provide financing not available through traditional methods to move entrepreneurial ventures from ideas to reality. These funds are made possible through the Entrepreneurship Tax Credit Program.
Continue to support Network Kansas and its Kansas Entrepreneurship Tax Credit program because they are well utilized by rural communities in western Kansas.
“Spur Kansas Growth Act” - Partial Reinstatement of Enterprise Zones: Sales Tax Exemption
Rural areas need additional tools to spur new job creation and business expansion. Previously, sales tax exemptions were a part of the old Enterprise Zone program for construction and expansion of businesses in our smallest rural communities. When Enterprise Zones were abolished, a significant incentive related to sales tax for new business construction or expansion of existing businesses also disappeared. Now, for many rural projects, the only opportunity for sales tax exemption on construction or expansion is through the issuance of Industrial Revenue Bonds. Not all projects are appropriate for Industrial Revenue Bonds.
Rural communities have limited opportunities to access current incentive programs and have lost the competitive edge necessary to incentivize industrial manufacturing, agriculture, healthcare, and retail ventures in their counties.
Reinstate the sales tax exemption part of the original Enterprise Zone legislation. Re-implementing only the sales tax portion of Enterprise Zones would be less costly to the state and would also be much simpler for the state to administer than the original Enterprise Zone program.
The project sales tax exemption on construction materials will incent investment in rural communities statewide and will spur re-investment in downtown properties as well as manufacturing, agriculture, healthcare, and retail ventures. Economic Development practitioners from all sizes of counties can provide multiple examples of how this incentive worked to create additional opportunities within their communities when it was available.
We recommend that a new bill be introduced, one that is simplified and only addresses the sales tax piece of the original Enterprise Zone legislation.
Because these sales tax collections are unrealized if projects are not built, this incentive is not a loss to the State General Fund. Additionally, if projects are completed, it would be a net positive for state income because the state will recoup a significantly higher amount of funds over the life of the business and infrastructure investment through local property and other sales taxes.
Support For Rural Broadband Access
The Internet is an essential tool for rural development. Reliable, high-speed Internet affects nearly all aspects of our livelihood, including education, healthcare, public safety, government services, and economic development. It allows businesses in rural areas to market their products and services, enables citizens to work remotely for out-of-area companies, and provides opportunities for businesses to provide products and services to residents while staying on the cutting edge of technology and innovation. Adequate broadband is necessary to grow economic opportunities and required to retain existing businesses in our communities. All industries that utilize new technologies need reliable access to broadband. Rural organizations that small communities rely on - agriculture, medicine, education, finance, local government, law enforcement, first responders, utilities – need suitable infrastructure to deliver the best service.
Recent studies have concluded Internet access is as important to economic success as electrification was a century ago. The availability of reliable, high-speed broadband service is one of the most critical factors that companies consider when choosing to relocate to, or stay, in a community. Broadband service is so important that it now ranks among energy costs, ease of doing business, taxes, labor costs, education levels, availability of water, and workforce when site-selection decisions are made. In order for rural areas to attract new businesses and create jobs, Kansas must invest in the infrastructure needed for high-speed broadband networks that serve all Kansans.
It isn't just a question of whether or not our communities have some access to broadband service; it is about ensuring rural areas have a network in place to keep up with the changing technologies. If we are to compete for businesses and residents in the future, we must have all required infrastructure in place.
In many rural communities, one provider serves the area, leaving businesses and residents at the mercy of that provider and its plans (or lack thereof) for expansion and improved service. It is imperative that all rural communities across Kansas have access to high-quality, high-speed Internet services. If this need is not addressed, we will continue to see yet another significant urban versus rural issue - the “digital divide.”
Recognize that all rural Kansans need and deserve high-quality broadband services. We support a task force that will establish minimum service requirements for broadband that is sufficient to meet business needs.
wKREDA Support for Rural Health Care
Rural health providers are critical to the sustainability of rural communities because they represent important jobs in rural communities and enhance quality of life for residents. Therefore, to ensure providers can continue to operate in rural communities, providers must be compensated at a level that allows them to at least break-even after considering the amount of charity care they must provide. Most rural health providers are pillars of the economic vitality of rural communities and need to be preserved and supported.
Some rural hospitals are struggling to remain viable as the amount of charitable care they must provide continues to increase, reimbursement rates from Medicaid and Medicare fail to cover the true cost of care to provide services, and some insurers are reluctant to pay for certain procedures and delivery methods. Community hospitals represent important jobs in rural communities and enhance quality of life for residents.
wKREDA strongly urges the Legislature to be aware of how their decisions affect the profitability of rural health providers. Access to care from a variety of providers is critical to the economic vitality of rural Kansas. Access to local health care is also an important economic development recruitment question that companies consider when determining where to locate. wKREDA supports measures that make it possible for rural health care providers to remain financially viable.
Lack of available, affordable, and quality housing for middle income families continues to be a hindrance to development and population growth in many western Kansas counties.
Since 2012, the Moderate Income Housing (MIH) program has received nearly $36 million in requests and has awarded over $14 million with an average leverage factor of $6 for every $1 in state resources. Of the 46 counties receiving funds, 22 are part of the wKREDA region. Within our region, $6.5 million was awarded, leveraging more than $35 million of housing investment in the region. There is a demonstrated need for this program across the state and certainly within the wKREDA territory.
Moderate income housing is vital for economic development, yet it is difficult to achieve since most federal housing programs serve a lower income bracket, and market supply of housing is limited due to high development costs, low appraisals, tight lending conditions and lack of investor interest. Industries and retail businesses considering expansion continue to state that lack of housing is the biggest obstacle to hiring.
Continue to appropriate funding for housing programs, such as the MIH Program, because they have a proven track record of working in our communities. The addition of non-profit organizations, those with a focus on housing as eligible entities for applying for the MIH program funding, would simplify access to funding for many local and regional organizations across the state. Also, direct application for MIH funding would help support regional housing projects across multiple governing jurisdictions and make the process more efficient.
Support for the Historic Rehabilitation Tax Credit
In most rural areas, older buildings—from downtowns to residential neighborhoods—comprise the bulk of the structural framework. Other older buildings, such as schools and hospitals, may be local landmarks that are no longer suitable for their original purposes. However, they may still offer opportunities for new uses, such as housing and light manufacturing.
Because rural communities often do not have the market rents or sales volumes to support new developments, the state’s historic rehabilitation tax credit provides a critical boost to new investment in buildings and infrastructure already in place. Historic rehabilitation projects create new jobs, attract new businesses, create new housing opportunities, draw visitors and tourists, and demonstrate a community’s pride in its history and heritage.
wKREDA Region Impact
Within the wKREDA region alone, 66 completed projects utilizing the state’s historic rehabilitation tax credit resulted in:
• $11.3 million in new investment by property owners into their properties
• $13.7 million in total economic impact
• 188 jobs created
• $293,700 in new local tax collections and $330,300 in state tax collections
• When partnered with the federal historic rehabilitation tax credit, an additional $22 million was reinvested in communities, and 361 additional jobs were created
Specific examples made possible by the Historic Rehabilitation Tax Credit
• Rehabilitation of the Heaton Building in Norton, a $1,596,230 investment in an existing building, resulted in several new downtown commercial and office spaces.
• Adaptive reuse of the St. Thomas Hospital in Colby into affordable housing resulted in $5,996,047 in investment and the addition of 30 new housing units in the community.
• Rehabilitation of the First National Bank building in Smith Center, a $470,000 investment into an existing building, resulted in the creation of additional downtown office space.
Future reallocation of State funds may threaten to reduce or eliminate critical funding that spurs reinvestment into local communities.
The Historic Rehabilitation Tax Credit must be maintained at its current level to ensure that Kansas communities can continue to revitalize their historic downtowns and neighborhoods and creatively reuse other significant buildings, such as schools and hospitals.
Other Areas of Concern:
State Agency Support for Economic Development
wKREDA supports adequate funding to all agencies that impact community and economic development. Agencies need to be equipped with adequate human and financial resources to meet the needs of communities. For example, funding deficiencies at KDHE have resulted in significant delays in licensing new and/or expanded childcare facilities. Also, redevelopment of industrial sites with potential contamination concerns, such as change of use water permits, are hampered by the lack of necessary employees and the loss of institutional knowledge that has occurred at KDHE over the past several years. This greatly impacts the ability for rural areas to sustain and attract workforce, hindering opportunities for new job creation.
Funding for transportation must be restored and presented with the recognition that transportation accessibility in central and western Kansas is vital to the economic growth in the region. Maintaining safe highways, railways, and airports improves the quality of life of our existing residents and aids in recruitment of new residents and business to Kansas. Any matching requirements should take into consideration the size of the community.
Tax credit programs have been a large part of Kansas’ incentive programs available to rural communities. Changes in federal tax law have diminished the benefit of tax credit programs. Kansas communities need access to programs that are useful to entice companies to expand or locate in rural communities. State and Federal job creation and capital investment incentives that are not fully reliant on tax credits should be considered. Establishment of a State “rural deal closing” fund for projects that create new jobs and investment would be beneficial to the long-term stability of rural communities.
New and Emerging Markets Opportunities
The wKREDA organization supports further development of specialty crops and associated processing that would add to the diversity of the agricultural industry by creating additional industry and jobs in Kansas.