Nationally in Labor Participation
WKREDA Legislative Positions 2021
Prioritize Funding for Framework for Growth
Professional economic developers, whether working at the local, regional, or within state government, are the best resources to influence growth of the Kansas economy. The partnership that exists between local, regional, and state groups relies on programs that are adequately funded to spur economic activity. The Framework for Growth (FFG) identifies strategies to improve economic development programs that will increase the likelihood of new jobs, investment and start-up activities.
Lack of economic activity results in missed tax revenues, college graduates leaving the state, and business investment going to other parts of the Midwest. The Kansas Department of Commerce (Commerce), with input from many economic development professionals, has completed the FFG, which outlines recommendations for programs to grow the Kansas economy. However, for FFG to effect change, state resources must be available to invest in program recommendations.
Growing the Kansas economy requires investments in staff, programs, and promotion of Kansas as a good place to do business. The Legislature should consider funding the FFG a priority so Commerce and communities can build economic development programs that result in better outcomes for jobs, investments, and opportunities.
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 $50 million to improve hospital facilities and equipment; build rural health clinics; develop community housing, wellness facilities, and 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 seeks 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, which raises 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 – as of 11/17/2020
- Provided more than $11.98 million in matching loans to 320 businesses that created and/or retained 2,483+ jobs
- 81% of the funded businesses are in communities of 10,000 or less with startups comprising 41% of the businesses receiving funding
- 27 WKREDA communities have achieved E-Community standing
- More than $100 million in additional capital was leveraged with these projects
- Provided Economic Gardening assistance to 20 businesses that created and/or retained 688 jobs
Statewide Impact – as of 10/31/2020
- Provided more than $46.2 million in matching loans to 1,116 businesses that created and/or retained 5,000+ jobs
- 66 communities have achieved E-Community standing
- More than $362 million in additional capital was leveraged with these funds
- 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. StartUp 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.
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 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 in 2019, 77 completed projects utilizing the state’s historic rehabilitation tax credit resulted in:
• $13.8 million in new investment by property owners into their properties
• $16.6 million in total economic impact
• 227 jobs created
• $354,900 in new local tax collections and $399,000 in state tax collections
• When partnered with the federal historic rehabilitation tax credit, an additional $20 million was reinvested in communities, and 333 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.
The Challenge of Affordable, Quality Child Care
Affordable, quality child care is essential for sustained economic development to occur in rural counties. Young families wanting to migrate out of metropolitan areas to our rural counties is a growing trend. However, many are unable to do so because of the lack of affordable, reliable child-care services. Employers struggle to maintain or expand their workforce because our rural communities are unable to meet the demand for quality child care, particularly in the infant-to-age three range. It is estimated that up to 85% of a child’s brain develops during this critical age range. High-quality child care has the potential to make a greater impact on children than their entire K-12 education experience, at a fraction of the cost. The lack of access to affordable quality child care is preventing the repopulation of our rural counties and has created perhaps the single greatest obstacle to economic development in these counties.
While well-intentioned, our regulatory scheme for licensed child-care centers has become overly burdensome and needlessly complex. The licensing and compliance costs make it too expensive to establish and maintain enough licensed child-care centers in our rural communities. As an example, Kansas is one of only 3 states in the U.S. that requires a 3:1 ratio for staff for infants. Thirty-three states allow a 4:1 ratio, ten states allow a 5:1 ratio, and four states allow a 6:1 ratio. A licensed child-care center has approximately 400 additional regulations than a licensed group home, yet in rural counties there is no demonstrative need for these additional regulations. Our child-care shortage was exacerbated greatly when KDHE removed the option to be a registered child care provider and required that all child care providers instead go through the overly-burdensome child care licensing process. At the same time, KDHE migrated nearly all training for Continuing Education credits to an online format, which has left many providers in rural Kansas with no ability to maintain their licensed status. Further, KDHE is not adequately staffed for licensing professionals, and it takes an inordinate amount of time for facilities to gain licensed status.
Reduce the regulatory barriers to entry for new child-care centers and enable existing centers to survive and expand. While the goal is to substantially reduce the regulations imposed on child-care centers to more closely resemble those applied to home day cares and group homes, those regulatory changes are unlikely to be made at the agency (KDHE) level. A quicker and better solution would be to grant statutory exemptions to our rural counties to relieve them of the more burdensome regulatory requirements. These exemptions or “pilot programs” could be done with little to no adverse impact to child safety. For example, going to a 6:1 ratio in most childcare centers would reduce the negative cash flows in these rural centers by almost 50% per year.
One additional solution in rural counties would be to create a hybrid licensing category to ease the transition from a group home to a center. Currently, a licensed center must meet all requirements to open, even if it is only taking a few children. It often takes two to three years in a rural county to reach an enrollment of 40+ children, which is where most centers begin to cashflow. This hybrid licensing category would create the flexibility for a center to open and operate under less stringent and more affordable licensing requirements and would allow the center to move back and forth between being a group home and a center as it gradually builds its enrollment. Legislative pressure needs to be applied to KDHE to focus on long-term, common-sense regulations for child-care centers that take into account the demographic and socio-economic differences in our rural counties. Reinstating a “registered” child-care option would help address shortages—specifically in rural communities.
Further, staff KDHE with additional licensing professionals to ensure efficient licensing of facilities.
Support for Rural Broadband Access
2020 has accentuated the need for reliable, high-speed connectivity as an essential tool for rural development. With companies and individuals forced to adopt remote working methods for continuing operation, and schools and colleges turning to virtual platforms for education, the necessity for robust broadband infrastructure across the state is now greater than ever. As the COVID pandemic escalated in April 2020, over 51% of Americans were working remotely. As of October 2020, only 46% of American companies reported having all, or nearly all, of their employees returning to on-site work.
Recent FCC data suggests that while 97% of Americans in urban areas have access to high-speed fixed service, that number falls to 65% in rural areas. In Kansas, estimates show that nearly 20% of the population cannot access internet with speeds in excess of 25 Mbps x 3 Mbps (FCC guidelines), although households frequently require a minimum of 50 Mbps to accommodate the number of connected devices and streaming services.
High-speed broadband is crucial to education, healthcare, job creation, economic opportunity and civic engagement, and connectivity is one of the most critical factors considered by companies choosing to relocate to or remain in a community. The importance of reliable, fixed service currently ranks among energy costs, ease of doing business, taxes, labor costs, education levels, availability of water, and workforce during the site-selection evaluation process. For rural areas to remain competitive in job creation, business recruitment, retention and expansion, Kansas must invest in the necessary infrastructure for high-speed broadband networks to serve all residents and industries.
Service carriers frequently advertise speeds to consider a community as broadband-served but are often unable to deliver such service. During the 2020 COVID pandemic, CARES Act funding was allocated to enhance connectivity across the state. Although this will have a positive impact on several areas, there will still be Kansas communities that remain either unserved or underserved following the program’s project completion deadline. In many rural communities, one provider serves the area, leaving businesses and residents at the mercy of that provider and its plans for expansion and improved service. Unfortunately, some smaller providers were unable to qualify for CARES Act connectivity funding, simply because they lacked the capacity to meet the criteria or build-out timeline. 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 Kansas communities require high-quality broadband services. We continue to support a task force to establish minimum service requirements for broadband sufficient to meet business needs. We also advocate for continued support of telecommunication providers that service and develop broadband infrastructure in our rural communities.
Kansas Pharmacy Benefit Managers Reform
Kansans are paying more than ever for prescriptions and prescription insurance. Additionally, rural communities are at risk of losing their local pharmacies due to anti-competitive behavior, subpar reimbursement, and patient steering practices.
Middlemen called Pharmacy Benefit Managers (PBMs) control the prescription marketplace in the United States. In Kansas, these companies do business without any oversight. As a result, PBMs operate in the shadows and provide little transparency into net cost of pharmacy care. Additionally, the vast majority of prescription claims are processed through only three large corporations. This monopolization has resulted in a host of anti-competitive practices that reduce patient access to care and put community pharmacies at risk.
Recent legislation in Kansas proposed that oversight of PBMs should be assigned to the Kansas Department of Insurance. This legislation also requires PBMs to report net costs of prescription services to patients and plan sponsors (usually employers). This would ensure that patients and employers are armed with the necessary information to make educated decisions about their healthcare and healthcare plans. It also creates protections for a free marketplace and fosters strong small pharmacy businesses in Kansas. These measures include pricing parity for all pharmacies.
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 water use permits, is hampered by the lack of necessary employees and the loss of institutional knowledge that has occurred at KDHE over the past several years. Lack of these resources 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, but 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.
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 is limited due to high development costs, low appraisals, tight lending conditions, and a lack of investor interest. Industries and retail businesses considering expansion indicate the housing is one of the largest obstacles to hiring.
Continue to appropriate funding for housing programs such as the Moderate Income Housing Program as it has a proven track record of working in our communities. Adding non-profit organizations with a focus on housing as eligible applicants for the MIH Program 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.