An ad from the Jeff Longwell for Mayor Committee contains a false claim.
An advertisement advocating the re-election of Wichita Mayor Jeff Longwell contains a claim about economic development that is false.
The ad appears in the October 20, 2019 print edition of the Wichita Eagle. Under the heading “Let’s Set the Record Straight,” we find this item: “Multiple large scale business development projects like the Cargill Downtown Headquarters which created 850+ jobs.”
It’s the use of the word “create” that is false. It’s wrong because Cargill’s headquarters was located in downtown Wichita at the time it announced it would build a new headquarters in another part of downtown Wichita. 1 Whatever the number of jobs, they merely moved from North Main Street to East Douglas Avenue in the same zip code. 2
It’s possible that if Cargill’s threat to build a new headquarters in another city was genuine, we could say the city and state “retained” these jobs. But using the word “create” to describe these jobs is false. Regarding the retention of these Cargill jobs, voters can decide whether the cost was worthwhile.
Regarding the cost of retaining Cargill jobs, since Mayor Longwell raised the topic, here is a list of the known subsidies and incentives the city offered to retain the Cargill jobs. 3 As summarized in the agenda packet:
“In exchange for Cargill’s commitment, the City has negotiated the following:
- Issue Industrial Revenue Bonds (Letter of Intent approved April 18, 2017) 100% property tax abatement; 5+5 year basis
- Sales tax exemption
- Acquisition of a 15 year parking easement for public access to the garage in the evenings and on weekends (estimated cost of $6,500,000)
- Expedited plan review (50% reduction in time)
- Reduced permitting fees (50%) (estimated savings of $85,000)
- Assign a project manager/ombudsman for a single point of contact for the company”
The Wichita Eagle reported the value of the tax breaks as $13.6 million. 4 More information about these subsidies is here: More Cargill incentives from Wichita detailed.
The agenda packet for the city council meeting doesn’t mention this, but from the state of Kansas Cargill is likely to receive PEAK benefits. Under this program, the Kansas state withholding tax deducted from Cargill employees’ paychecks will be routed back to Cargill. 5 (Not all; only 95 percent.) Some very rough calculations show that PEAK benefits might be worth some $2 million annually to Cargill. 6
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Notes
- Cargill to keep headquarters in Wichita, but new site still unknown. Wichita Eagle. Available at https://www.kansas.com/news/business/article79516092.html. ↩
- Cargill selects site for new Wichita headquarters. Wichita Eagle. Available at https://www.kansas.com/news/business/biz-columns-blogs/carrie-rengers/article105193381.html. ↩
- City of Wichita. Agenda Packet for July 18, 2017. Approval of Development Agreement with Cargill Meat Solutions Corporation. ↩
- Cargill’s job guarantee to city could count 1-day workers as full time. Wichita Eagle. Available at https://www.kansas.com/news/politics-government/article161882968.html. ↩
- Weeks, Bob. In Kansas, PEAK has a leak. http://wichitaliberty.org/kansas-government/kansas-peak-leak/. ↩
- For the first year of the agreement, Cargill is expected to have 750 or more employees at an average salary of $66,814. That annual salary / 26 pay periods = $2,570 biweekly. For a family with two children (this is just a guess and could be way off), there are two withholding allowances, so $2,570 – ($86.54 x 2) = $2,397. Using the new withholding tables for married workers (another assumption), bi-weekly withholding is $48.17 + 5.7% x ($2,397 – $1,298) = $48.17 + $62.64 = $110.81. That means $2,881 annual withholding, so Cargill’s 95% share is $2,737. For 750 employees, this is an annual subsidy to Cargill of $2,052,750. ↩