Legislative Positions 2022

PRIORITIZE FUNDING FOR FRAMEWORK FOR GROWTH


The Issue 
Professional economic developers, whether working at the local, regional or within state government, are the best resources to get the Kansas economy growing. 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 identifies strategies to improve economic development programs that will increase the likelihood of new jobs, investment and start-up activities. 


The Problem
The Kansas Department of Commerce, with input from many economic development professionals, has completed the Framework for Growth (FFG), which outlines recommendations for programs to grow the Kansas economy. In order for the Department of Commerce to lead the effort to grow the Kanas economy, state resources must be available to invest in program recommendations. 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 Solution
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 the Department of Commerce and communities can build economic development programs that result in better outcomes for jobs, investment and opportunities.


SUPPORT FOR NETWORK KANSAS


The Issue
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, Kansas Community Impact Fund (KCIF), Kansas Healthy Food Initiative (KHFI), Restart Kansas, and Empower.


WKREDA Region Impact – as of 10/31/21
•    Provided more than $14.62 million in matching loans to 361 businesses that created and/or retained 2,673+ jobs 
•    82% 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 $113 million in additional capital was leveraged with these projects
•    Hosted Youth Entrepreneurship Challenge (YEC) competitions in 27 communities engaging more than 400 middle and high school students
•    Launched “Empower,” a no-match, minority-owned business loan fund in Ford and Seward Counties


Statewide Impact – as of 11/30/2021
•    Provided more than $59.5 million in matching loans to 1,377 businesses that created and/or retained 5,600+ jobs
•    66 communities have achieved E-Community standing
•    More than $500.6 million in additional capital was leveraged with these funds
•    Launched “Restart Kansas,” a no-match loan fund that provides emergency assistance to businesses during a disaster (e.g., pandemic)
•    Provided Economic Gardening assistance to 89 businesses that created and/or retained 2,613 jobs


The Problem
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.


The Solution
Continue to support Network Kansas and its Kansas Entrepreneurship Tax Credit Program because they are well utilized by rural communities in western Kansas.


THE CHALLENGE OF AFFORDABLE, QUALITY CHILDCARE 


The Issue
Affordable, quality childcare is essential for sustained economic development to occur in rural counties. There is a growing trend of young families wanting to migrate out of metropolitan areas to our rural counties. However, many are unable to do so because of a lack of affordable, reliable childcare services. Employers have a chronic problem of being able to maintain or expand their workforce because our rural communities are unable to meet the demand for quality childcare, particular in the infant–to–3 age range. It is estimated that up to 85% of a child’s brain develops during this critical age range. High-quality childcare has the potential of making a greater impact on a child than their entire K-12 education experience, at a fraction of the cost. The lack of access to affordable quality childcare access is preventing the re-population of our rural counties and has created perhaps the single greatest obstacle to economic development in these counties. 


The Problem
While well intentioned, our regulatory scheme for licensed childcare centers has become overly burdensome and needlessly complex. The licensing and compliance costs make it too expensive to establish and maintain enough licensed childcare centers in our rural communities. As an example, Kansas is one of only three states in the U.S. that requires a 3:1 ratio for staff for infants. Thirty-three states allow a 4:1 ration, 10 states allow a 5:1 ratio and 4 states allow a 6:1 ratio. A licensed childcare center has approximately 400 more regulations than a licensed group home, yet in rural counties there is no demonstrative need for these additional regulations.


The Solution
Significant efforts need to be made to reduce the regulatory barriers to entry for new childcare centers and enable existing centers to survive and expand. While the goal would be to substantially reduce the regulations imposed on childcare centers to more closely resemble those applied to home daycare providers 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 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 that would ease the transition from a group home to a center. Currently, a licensed center must meet all requirements to open, even if it only takes on a few children. It often takes 2 to 3 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 allow the center to revert 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 childcare centers that take into account the demographic and socio-economic differences in our rural counties. Our childcare shortage was exacerbated greatly when KDHE removed the option for Registered Childcare providers and required that all childcare providers instead go through the sometimes overly burdensome Licensed Childcare process. At the same time, KDHE moved 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. Reinstating a “Registered” childcare option would help to address shortages—specifically in rural communities. Further, KDHE does not adequately staff for licensing professionals, and it takes an inordinate amount of time for facilities to gain licensed status. 


TAXATION OF EXEMPT PROPERTIES


The Issue 
Many communities have opportunities to repurpose tax-exempt property for economic development purposes such as housing, daycare, and/or additional retail space. Current taxation policies are written in a way that a tax assessor should collect ad valorem property taxes on the entirety of the property if any portion of the facility is used for a non-exempt purpose. In many cases this taxation policy is a deterrent to developers wishing to make use of the abandoned property and limits a community’s ability to make use of existing facilities. 


The Problem
Kansas communities have access to exempted properties such as community buildings, churches, recreation centers, fire stations, school buildings and other city owned facilities. From time to time, existing exempted properties are abandoned for various reasons. For example, according to the Kansas Department of Education, 571 school facilities closed in Kansas communities from 2000 to 2021, leaving many of these buildings vacant and a burden for communities to handle. In many cases, these abandoned facilities have the potential to support local economic development by repurposing usable space that is not currently generating tax revenue. 


The prohibition to growth lies with the existing statute under KSA 79-201a, which requires any portion of an exempt facility used for a non-exempt purpose be taxed on the entirety of the property. Many communities and/or developers do not have the budget to support the large tax obligation. 


Empty buildings that are not generating revenue are a drag on the community’s bottom line and it requires resources and budgets to maintain these facilities. When a community plans to rehabilitate and use a formerly exempt property to help economic development, under the existing statute KSA 79-201a, a property is either exempt or nonexempt based on the facility’s use. If a community wants to rehabilitate a portion of an abandoned property for either apartments, daycare or retail space, it must pay ad valorem taxes on the entirety of the property, even if the community only intended to use 10% of the property. Unless the community is willing to bear the entirety of the ad valorem taxes, the project dies and the building continues to sit vacant, under-utilized, and potentially condemned, ultimately costing the community even more money.


The Solution
One potential solution would be to amend the taxation policy to allow for the proportionate exemption of ad valorem taxes on existing exempt properties. In the example above, if only 10% of an exempt building is utilized for a commercial purpose, 90% would remain exempt. This is one solution to incentivize repurposing abandoned buildings that were formerly exempted and creating tax revenue where none previously existed. 


SUPPORT FOR RURAL BROADBAND ACCESS


The Issue
The COVID era 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 before. As the COVID pandemic escalated in April 2020, more than 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. Connectivity is, therefore, one of the most critical factors considered by companies choosing to locate 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. In order for rural areas to remain competitive in job creation and business recruitment, retention and expansion, Kansas must invest in the necessary infrastructure for high-speed broadband networks to serve all residents and industries.

 
The Problem
Service carriers frequently advertise speeds to consider a community as broadband-served but are often unable to deliver such service. During the 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.” We encourage further investment in rural broadband through the variety of federal funding resources available to the State. 


The Solution
Recognize that all rural Kansan communities require high-quality broadband services. We continue to support a task force to establish minimum broadband service requirements 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


The Issue 
Kansans are paying more than ever for prescriptions and prescription insurance. Additionally, rural communities are at risk of losing their local pharmacies due to anticompetitive behavior, subpar reimbursement, and patient steering practices. 


The Problem
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 anticompetitive practices that reduce patient access to care and put community pharmacies at risk.


The Solution 
WKREDA supports recent proposed legislation in Kansas that allowed for oversight of PBMs to be assigned to the Kansas Department of Insurance. This legislation also required 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 parody for all pharmacies. 


SPUR KANSAS GROWTH ACT 


The Issue
Rural areas need additional tools to spur new job creation and business expansion. Previously, sales tax exemptions were a part of the former 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. 


The Problem
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.


The Solution
Reinstate the sales tax exemption part of the original Enterprise Zone legislation. Reimplementing 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 reinvestment 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 THE HISTORIC REHABILITATION TAX CREDIT


The Issue
In most rural areas, older buildings—from downtowns to residential neighborhoods—comprise the bulk of the structural framework and a significant portion of assessed valuations. 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 
Since the state historic tax credit program began, within the WKREDA region alone, 77 projects were completed and 37 project are currently underway. The completed projects represent:
•    $12.7 million in new investment by property owners into their properties
•    $15.2 million in total economic impact 
•    209 jobs created
•    $191,400 in new local tax collections and $197,000 in state tax collections
•    When partnered with the federal historic rehabilitation tax credit, an additional $20 million was reinvested in communities, and 540 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.


The Problem 
Future reallocation of State funds may threaten to reduce or eliminate critical funding that spurs reinvestment into local communities. 


The Solution 
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.


COMMUNITY SERVICE TAX CREDIT PROGRAM


The Issue
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.


The Problem
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.


The Solution
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. 


OTHER AREAS OF CONCERN:


Strengthening People and Revitalizing Kansas (SPARK)
WKREDA encourages the SPARK committees to keep rural Kansas at the forefront as they begin the arduous work of assisting the SPARK Executive Committee and the State Finance Council on the distribution of American Rescue Plan Act Funds. We encourage the committees to pursue ventures that have a lasting impact on Kansas, specifically in rural Kansas. WKREDA also recommends that any scoring criteria for distribution of funds take into consideration different population sizes to ensure funding opportunities for rural Kansas. 


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 the 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. This greatly impacts the ability for rural areas to sustain and attract workforce, hindering opportunities for new job creation.


Transportation Funding
Transportation is particularly important to central and western Kansas given our agricultural products and processing industries. We literally feed the world and need safe, reliable access to domestic and international markets. We need a strong transportation backbone for our economy, quality of life and the safety of our citizens. We strongly support and call on KDOT to continue to make safety improvements and expand our highway and rail network within the context of a long-term vision. The IKE program with its rolling 2-year program is ideal for balancing shorter term needs as longer-term corridor plans are developed and constructed. 


Funding for transportation must be maintained and presented with the recognition that transportation accessibility in central and western Kansas is vital to the economic growth in the region. 


We support a freight and corridor study to develop longer-term corridor plans so that Rural Kansas can track changes in our freight and passenger traffic and understand the triggers that signal various highway improvements.


Tax Incentives
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.


Housing
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 biggest obstacles to hiring.


WKREDA supports appropriate funding for housing programs such as the Moderate Income Housing Program as it has a proven track record of working in our communities. WKREDA also supports the exploration of potential housing solutions identified in the Statewide Housing Study and asks the legislature to consider how additional federal funds available to the State could further housing development.