Cargill gets $10M tax breaks to stay in KansasJune 6, 2016 10:25pm
WICHITA, Kan. – A deal to keep agribusiness giant Cargill operations in Wichita includes nearly $10 million in tax breaks over a 10-year period from state and local government entities, according to documents obtained by The Associated Press.
Cargill announced May 24 that it planned to keep its protein operations in Wichita and would look for a new facility. At the time, the company declined to specify what incentives it had been offered to stay. The AP obtained the information from the city through an open records request.
The incentive package, dubbed “Project Orion,” for the Minnesota-based Cargill includes tax abatements and sales tax exemptions from the state, county, city and school district, but no cash incentives. Wichita has agreed to provide industrial revenue bonds to build a new facility — estimated to cost up to $41.6 million — plus an estimated $6 million more in bonds for the equipment and machinery, as well as possibly picking up half the cost of the company’s $15 million parking garage.
In return, Cargill has committed to staying in Wichita for a minimum of 15 years.
The Kansas Department of Commerce spokeswoman Nicole Randall said the incentives are “private information” until contracts are signed. But records obtained by AP show the state’s share of the tax breaks total $3.01 million over the next decade. Randall referred to the governor’s office any comment as to the impact those tax breaks would have given the state’s revenue shortfalls; the governor’s office had no immediate comment.
Wichita is home to the company’s beef business and its turkey and cooked meat business, which includes deli meats. Its processed-protein services, such as its North American egg business and food distribution, also are located in Wichita, where Cargill employs about 900 workers.
The vast majority of the incentives will go to the developer of the building Cargill will lease at a site yet to be determined, and the amount of those incentives varies depending on the size of the building and employees, Cargill spokesman Mike Martin said, adding it is premature to comment given the Wichita City Council has yet to vote on any potential incentives.
Kansas has not been “very friendly” in terms of offering cash incentives to get companies to move to the state, so Cargill’s decision to stay shows other companies that the state is still competitive in other ways, said Jeremy Hill, executive director of Wichita State University’s Center for Economic Development and Business Research.
“Companies like Cargill staying in the state is important for the workforce here. … It shows that there are viable reasons a company can be here because they remain competitive here,” Hill said.
Government incentives were one of 20 factors that were considered in the decision to say instead of relocating the protein operations to Texas or Colorado, Cargill corporate vice-president Brian Sikes said last month. He cited the city’s workforce as one of the major factors for staying.
The total government incentive package for the Cargill project shows estimated tax abatements and sales tax exemptions over 10 years totalling more than $9.99 million, according to the analysis. Though the deal is pending final contracts, the CEDBR analysis dated April 27 and the Wichita incentive proposal signed by Cargill on May 19 offer the first public accounting of the proposed incentives:
— State: more than $3.01 million.
— Wichita: more than $2.92 million.
— Sedgwick County: more than $2.62 million.
— Wichita’s school district tax: $1.41 million.
The Wichita school district was a plaintiff in a lawsuit filed against the state in regards to its school funding equation. The tax breaks means schools and other government entities will get less tax revenue, but some of those may be offset by other benefits.
According to the cost-benefit analysis done by CEDBR, for every dollar of tax relief that the company gets from the city, the community gets that dollar back plus another 93 cents in public benefits like jobs and wages. Hill said that is an atypically high return for this city.