Kansas City

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Patrick Tuohey

Dear Waddell & Reed employees,

I read with interest a story in The Kansas City Business Journal that your company may be considering a move (back) to the City of Fountains. This is exciting, and the people of Kansas City would welcome you with open arms. According to the Journal,

A move could allow the company to consolidate its employees in a single location. A move to Missouri also could allow Waddell & Reed to receive sizable development incentives from the state and city agencies.

While this may be an opportunity for your company, it may affect not only your commuting time, but also your wallet. If you aren’t familiar with local economic development policies, let me bring you up to speed. In order to benefit from having more and bigger employers, cities often offer them incentives to relocate within their boundaries. They may include simple property tax abatements or more complicated programs like tax-increment financing (TIF). Cities may offer assistance in issuing bonds to pay for construction or forgo the sales taxes your company would otherwise pay on construction equipment. Heck, if you’re building a hotel, we might just give you a fat check!

Kansas City believes that these short-term costs are worth it over the long term. The economic research literature on the matter says otherwise, but certainly the company and its development partners see a great boon.

Given that Kansas City levies a flat tax on all earnings of people who either work or live within the city boundaries, you may experience a 1 percent reduction in income if Waddell & Reed does relocate. However, if your executives get the same incentive package that Burns & McDonnell did for its recent campus expansion at Bannister and Wornall Roads, you’ll be happy to know that half of your 1 percent earnings tax will be returned to your employer to offset the cost of development. Don’t think of it as a tax increase—think of it as a reduction in salary.

As the Twitter hashtag reads, that’s @howwedokc. City leaders tax workers so they can offer subsidies to their employers. (We also divert funds away from schools in which 90 percent of students are in the free and reduced-price lunch program to pay for successful companies’ headquarters buildings, but that probably won’t affect you.)

And if you find after a while the Kansas City just isn’t for you, remember that once these incentives expire, your company will likely start looking to move back to Kansas to take advantage of whatever incentives it may offer. If that turns out to be the case, as it was in 1990, we’ll certainly miss you. But just like Applebee’s before you, we know you’ll likely be back.

 

Regards,

Patrick Tuohey

 

 

About the Author

Patrick Tuohey
Patrick Tuohey
Senior Fellow of Municipal Policy

Patrick Tuohey works with taxpayers, media, and policymakers to foster understanding of the conse