This is the first in a series of Good Jobs First blogs lifting up exemplary economic development practices in mid-sized cities, defined as those with a population of 50,000 to 500,000.
Not all incentive programs are made equal; some have better benefits and more transparency. Wichita, Kansas, stands out positively as we scan 250 small- and mid-sized U.S. cities.
Wichita’s Industrial Revenue Bond program, known as IRBX, affords companies up to 100% in sales and property tax exemption for expenses financed by the bonds. In exchange, the program requires recipients to meet certain criteria, including:
- Wage and benefits: New employees must make at least 120% of the county’s median wage with health care benefits — or 150% if health benefits are not provided.
- Community benefits: Applications receive more favorable consideration for sites located in economically distressed areas and when best efforts are made to hire from the local labor force.
- Return on Public Investment: Cost-benefit analyses are to be submitted with application materials and must demonstrate a reasonable relationship between public costs and anticipated returns.
- Others: Additional incentive considerations made for projects that implement job training and certification programs or that provide employee tuition assistance to seek continuing education.
Additionally, the city requires companies to submit yearly progress updates against the commitments made in their applications, which the Economic Development Department collates into an annual incentive report.
At Good Jobs First, we understand that local governments feel compelled to offer economic development incentives as a primary method of attracting and retaining businesses despite a wealth of evidence suggesting that incentives do not cause companies to grow and hire.
Some cities are breaking these bad habits in favor of more cost-effective programs. In our current research on mid-size cities, Wichita merits attention for reevaluating the effectiveness of these deals and using periodic reviews of performance measures. The city’s IRBX program stands out for its wage requirements and local hiring preferences. The city exemplifies what can happen when a local government makes corporate accountability and transparency a central part of incentive deals.
Wichita published the five-year review for its 2016 IRB abatement recipients in the 2021 Economic Development Incentive report. During this period, companies reportedly exceeded their job commitments (73 jobs) and average earnings targets ($43,213), creating 97 jobs with an average salary of $50,174, 132% of the 2022 Sedgwick County median income.
According to the city’s program guidelines, qualified businesses include those in advanced manufacturing or healthcare that generate at least a third of their revenue from outside the county. The city’s abatement typically lasts ten years, during which the council reviews the progress of a recipient’s performance goals at year five. At that time, the council can decide whether to modify or terminate the agreement.
To be sure, the Wichita program leaves room for improvement. For example, it has clawback provisions that aren’t regularly enforced; one official said the city would be more likely to modify an agreement than to recapture the abated value. This raises questions about transparency since these modified deals are often renegotiated privately.
Second, the city’s Economic Development Incentive report is beneficial from a transparency standpoint to understand whether companies hit their target employment rates. However, the report still lacks critical information, such as company-specific data on foregone revenue for the reporting period.
These low-interest bond and tax exemption programs are standard in Kansas. The state rules are a floor, leaving each participating municipality free to add its own community benefits. For example, the Kansas City, Kansas IRBX program uses a bonus system by which each additional set of criteria an applicant meets increases the percentage of their property exempted. Companies may receive an extra 5% off their tax bill, for investing in employee transportation, providing on-site childcare or stipends, and hiring minority-owned contractors.
By contrast, the City of Olathe’s IRBX favors charity rather than justice. It requires recipients to serve as members of local business associations and donate annually to the local community foundation. At least Olathe posts detailed disclosure on these abatements in its annual financial reporting.
When appropriately executed, local authorities’ ability to shape program requirements to meet community needs can be practical tools for implementing more equitable local economic development policies.