Spoiler alert: It’s taxpayers. Taxpayers foot the bill.

The scale of these data centers is staggering. As Friestad reports, the energy demand from these facilities is equivalent to 100 Walmarts or 40 hospitals​. Their massive electricity needs—driven in part by artificial intelligence—have led Evergy, the regional utility provider, to plan two new natural gas plants and expand renewable energy production by 3,000 megawatts over the next decade​.

While Evergy insists that existing customers won’t subsidize these projects, some experts aren’t convinced. The Missouri Office of Public Counsel warns that the increased demand could drive up energy prices across the region​. Even if Evergy builds enough capacity, ratepayers may still bear the costs of maintaining infrastructure that primarily benefits tech giants.

Kansas City approved up to $8.2 billion in tax incentives for Meta alone, a package more than three times the city’s annual budget​. Google has also secured generous tax benefits, though the full scope is still unclear​.

These incentives were pitched as a way to boost local schools and communities. But as Friestad’s reporting shows, and as regular readers of this blog have come to expect, the expected windfalls have been slow to materialize. The Smithville School District, which was promised rising tax revenues, has instead seen a fraction of what was projected. In 2024, Meta paid just $86,839 in property taxes to the district—far short of the more than $1 million in annual payments initially forecast​. Construction delays and city permitting issues have further postponed expected revenues.

The pieces highlight an important debate: Did Kansas City need to offer such massive subsidies at all? Economic development officials argue that data centers wouldn’t come without them, but others suggest that factors like cheap land, energy access, and infrastructure play a much bigger role​.

A broader trend is at play. At least 36 states now offer incentives for data centers, creating a nationwide bidding war​. Critics like Good Jobs First director Greg LeRoy argue that these subsidies often do little to sway a company’s decision, while shifting tax burdens onto residents​.

And while data centers bring major investments, they don’t create many full-time jobs—typically around 100 per facility, despite requiring billions in public support​.

As they have with entertainment districts, hotels, and sports stadia, Kansas City leaders are making a massive bet on data centers, banking on future economic gains. But as the Kansas City Business Journal’s reporting makes clear, the immediate costs are real, and the benefits remain uncertain. Will the promised revenues materialize? Will taxpayers ultimately bear the burden of subsidizing these projects?

The people of Kansas City should demand answers. If policymakers want to keep handing out billions in incentives, they owe the public clear, transparent explanations of when—and if—the promised returns will actually arrive.

The post Kansas City’s Data Center Boom: Another Costly Gamble appeared first on Show-Me Institute.

If Cerner fails to live up to the promises that made it Missouri’s top recipient of taxpayer subsidies according to Good Jobs First, what are the consequences? Did the issuing agencies insist on clawbacks? Were subsidies issued on a performance basis? Or did taxpayers’ representatives just believe what they were told and not insist that Cerner actually deliver on its promises? If experience is any indication, it’s likely the latter.

Now we have an answer. According to a story in the Kansas City Business Journal, the Kansas City Council requested a report from the Tax Increment Financing Commission on the status of the Cerner development, now owned by Oracle. According to the author:

Cerner pledged 15,000 new jobs ahead of its TIF plan’s 2013 approval, and 16,000 with revisions through 2018. A Bloomberg report in April found Oracle Health had 40% of that count, or 6,400 employees, designated in Missouri, where the Innovations Campus is its lone metro location. However, the commission’s report did not discuss the campus’ job creation or retention, as its redevelopment terms do not have binding job thresholds.

The job creation promises were not binding. Our representatives, including members of the city council and the mayor, just took the company at its word. And what’s more, they didn’t even ask for any guaranty. We apparently just handed Cerner the money. Kansas City leaders should have set up measurable markers and demanded Cerner meet them lest it lose the subsidies and potentially face additional penalties.

As my colleagues here can attest, researching public policy will make you a skeptic. Often, one needs to resist becoming a cynic. But rarely—though maybe not as rare as we’d hope—you find out the truth is as bad or worse than you feared. This is one such occasion.

The post Apparently, Failing to Meet Promises Is Not a Violation of K.C. Subsidies Regime appeared first on Show-Me Institute.

At the time of the subsidy application in late 2014, Cerner claimed it had just over 10,000 employees in Kansas City alone. In Exhibit 4B of its application for tax-increment financing (TIF) it promised to create 15,659 “permanent jobs to be CREATED IN Kansas City” as a result of the new headquarters building [emphasis in original]. And Cerner claimed it would accomplish this in 10 years.

One of the unmet challenges with economic development incentives is that it is difficult to know whether any economic growth is due to the subsidies themselves. Growth, if there is any, may have happened for reasons other than incentives, such as an improving economy overall. As we have noted time and again, the economic literature makes clear that there is little evidence that economic development incentives themselves actually drive any growth.

Five years in, it seems the company is struggling to keep the promise about jobs. Just this week, The Kansas City Star reported that Cerner had 14,000 employees in the Kansas City region (presumably including its Wyandotte County, Kansas location). This is 4,000 more employees than what it reported in 2014. That’s pretty good growth for any company in just a few short years. But it’s nowhere near the 26,000 (a baseline of 10,000 jobs plus the 16,000 additional promised) it should have by 2024.

Maybe Cerner will make a lot of new hires in the next five years, but it needs to bring on at least 12,000 people in Kansas City to make good on its commitment.

If Cerner fails to live up to the promises that made it Missouri’s top recipient of taxpayer subsidies according to Good Jobs First, what are the consequences? Did the issuing agencies insist on clawbacks? Were subsidies issued on a performance basis? Or did taxpayers’ representatives just believe what they were told and not insist that Cerner actually deliver on its promises? If experience is any indication, it’s likely the latter.

The post Where Are Those Jobs, Cerner? appeared first on Show-Me Institute.

The Port Authority, or Port KC, ultimately could issue up to $25 billion in bonds over 35 years for the Google data center project, a figure that represents the company’s maximum investment in Kansas City. Think of the $25 billion as a credit limit on a personal credit card. It’s not necessarily an indication of how much Google will invest.

The benefit to Google is that the Port KC can issue Chapter 68 bonds that give Google a property tax exemption for 25 years. Vockrodt goes one step further and makes clear in the story that such subsidies for data centers don’t offer a great return, if any, for taxpayers:

Good Jobs First, a research group often skeptical of corporate incentives, in a 2016 report identified a Google data center project in Oregon from 2006 that received $360 million in subsidies in return for 175 jobs, or $2 million per job. Good Jobs First advised cities and states to treat data center subsidies with caution.

“Internet-based companies have to grow the cloud and they will choose stable areas with cheap electricity,” the report said. “They will barely benefit your local economies because they create so few jobs and often import top-wage labor.”

Once again, Kansas City through its port authority is playing handmaiden to large corporations even when there is so little to gain. (Rest assured, this same story will unfold if/when the USDA considers locations in Missouri.) How is Kansas City supposed to fund infrastructure, education, public safety and all the other basic needs on which we depend if we continually offer exemptions from the taxes needed to provide them?

If taxes are too high for Kansas City to be a competitive place to attract business, then that needs to be addressed fairly for everyone. Offering sweetheart deals to a few while the rest of us pull their weight is no way to operate a city.

The post Port KC Versus Taxpayers appeared first on Show-Me Institute.

The USDA’s cost-benefit analysis found that shifting these two agencies to Kansas City would reduce costs by 11.3 percent, saving taxpayers roughly $300 million (in nominal terms) over the next 15 years. These savings stem primarily from the fact that Kansas City has dramatically cheaper real estate than D.C., as well as marginally lower cost of living. The USDA’s report noted that the median sale price of a home (a major factor in determining cost of living for employees) in Kansas City is $205,400, compared to $420,000 in D.C.

This isn’t a surprise to me; I moved to Kansas City from Washington, D.C. in 2005. Nor should it surprise anyone who read our paper on the competitive advantages of the Kansas City region, as the paper mentions low cost of living as a major advantage for Kansas City.

While we don’t know exactly were in the region the USDA will locate, it was disheartening to read in The Kansas City Star that $26 million in “unspecified” incentives were part of the deal. The authors reported:

Greg LeRoy, executive director of the watchdog group Good Jobs First, accused the USDA of engaging in an Amazon-style selection process that made states compete for the jobs with incentives.

“It’s outrageous that the USDA would run an auction. This is the extreme version of privatized behavior by the federal government. Uncle Sam has no business running auctions, dangling jobs on state and local taxpayers,” he said.

LeRoy said the final competition the USDA is setting up between Kansas and Missouri is reminiscent of how corporations set municipalities against each other after a region has been selected.

“This is classic site location consultant chicanery…This is an ugly, extreme version of Uncle Sam imitating Jeff Bezos. Yuck. If I were a Missouri or Kansas taxpayer, I would never stand for this. And as a federal taxpayer I’m cross-eyed.”

It’s a shame that the USDA encourages such behavior. It’s a shame that the Kansas City region plays ball, and it’s a shame that we’ll now fight among ourselves for the specific USDA location.

I discussed this topic with Pete Mundo this morning on KCMO Talk Radio. Click here to listen to the segment.

The post USDA Moves to Kansas City, Gets Incentives appeared first on Show-Me Institute.

Moore is correct that metropolitan areas are falling over themselves to lure Amazon. In doing so, many will offer all sorts of taxpayer subsidized goodies such as tax credits, property tax abatements and tax-increment financing.  Philadelphia offered to forgo property tax for 10 years; New Jersey is offering 7 billion dollars of tax incentives. Here in Missouri, Saint Louis and Kansas City areas have both submitted proposals—but won’t share them with the public. If the past is any indication, they will likewise be loaded with such taxpayer giveaways.

Therein lies the problem. Big companies seek and get a great deal of public assistance. Using the online subsidy tracker developed by Good Jobs First, one can see that the companies constituting the executive council of TechNet have received at least $1.2 billion in state and federal subsidies—almost five times more than the $250 million Moore calls for in additional federal education funding.

Like any company, Amazon doesn’t want to pay any more taxes than it has to. The problem is that subsidies such as those being offered for their new headquarters actually divert money away from schools, libraries and other basic services funded by property taxes. The size of the various Amazon proposals only multiplies the effect. Most of those hired to work at the new headquarters would likely be drawn from elsewhere, placing additional demands on school districts in the form of hundreds of new children—while granting the districts no additional resources. This is in addition to the stresses placed on infrastructure and other services, such as and policing.

Because federal funding for education makes up only a small portion of any school district’s budget, the terrible irony is that even with the increase in federal funding Moore calls for, the school districts in the city that “wins” Amazon’s second headquarters may still be worse off because of the loss of local property taxes.

Seventy-three civic organizations responded to these realities by writing an open letter to Amazon CEO Jeff Bezos demanding that Amazon pay its taxes—including on “building materials, machinery and equipment.”  The letter also includes the following:

If you want a highly-educated local talent pool you must pay all of your property taxes to fund our schools, public safety, infrastructure and other public goods and services.

If tech leaders like those at TechNet want to increase education funding of any kind, they should stop asking national, state and local governments to subsidize their companies and start contributing their fair share to public coffers.

The post TechNet Companies: Want More Education Funding? Then Pay Your Fair Share. appeared first on Show-Me Institute.

The report indicates that the total value of all corporate welfare in Missouri is a whopping $5.8 billion. That makes the Show-Me state the 10th-most subsidized in the union. Missouri subsidizes business to a greater extent than all of its neighboring states except Kentucky. (We even beat out Illinois!)

Of the top five corporations in Missouri that receive corporate welfare money, three are headquartered in Kansas City: Cerner, H&R Block, and DST Systems. They account for $2.3 billion in subsidies, about 40 percent of Missouri’s total.

Little wonder, then, that Kansas City—a high tax city—must borrow money to provide basic services such as dangerous structure teardown or infrastructure maintenance—we’ve given boatloads of our tax revenue away to wealthy corporations. Perhaps it’s time policymakers change direction; after all, for all the business Missouri residents subsidize, we’re still one of the slowest-growing states in the union. 

The post Kansas City, King of Corporate Welfare appeared first on Show-Me Institute.

Well, earlier this month GASB issued long-awaited guidance on local tax abatement reporting, and it's a doozy for abatement-happy governments. From GASB's Statement:

This Statement requires governments that enter into tax abatement agreements to disclose the following information about the agreements:

• Brief descriptive information, such as the tax being abated, the authority under which tax abatements are provided, eligibility criteria, the mechanism by which taxes are abated, provisions for recapturing abated taxes, and the types of commitments made by tax abatement recipients

• The gross dollar amount of taxes abated during the period

• Commitments made by a government, other than to abate taxes, as part of a tax abatement agreement.

The accountants out there can find greater detail about the policy change at the link above.

Also, this story from American City & County magazine has an excellent rundown of the reactions to GASB's guidance seen in the policy sphere.  Greg LeRoy of Good Jobs First, while generally supportive of the change, notes that GASB's guidance doesn't necessarily require local governments to disaggregate tax abatements by company, and I do think that's a shortcoming of the reform. The other reservation I have is that many of these reforms won't become effective until later this year, with the first round of data becoming available sometime in 2017. I hope that in the interest of being proactie and transparent, local governments in Missouri will release a version of this data well before then.

Overall, GASB's reform is a significant improvement over the status quo. Tax abatement liabilities have long been a public policy concern; it's terrific that local governments, many of which have been less than forthcoming about them, will now have to reveal those costs annually.

The post Big News: Accounting Board Beefs Up Tax Abatement Disclosure Requirements appeared first on Show-Me Institute.

As reported in The Nerve,

. . . state and local governments for the first time would have to report, among other things, in their annual financial statements:

• General description of their tax abatement programs;
• The total number of tax abatement agreements entered into during the reporting period, and the total number of agreements in effect at the end of the period;
• The dollar amount by which the reporting government’s tax revenues were reduced during the reporting period because of tax abatement agreements; and
• A description of the types of commitments other than to reduce taxes—for example, tax dollars spent on purchasing land and installing utility lines—and the most “significant individual commitments other than to reduce taxes, if any, made by the reporting government in tax abatement agreements.”

Translation? Governments would have to disclose, in a standardized format, exactly how much money they give away. That’s a huge paradigm shift, both from the standpoints of government transparency and public research. Greg LeRoy of Good Jobs First, a Washington, D.C.-based think tank that looks at tax incentives, called the development “tectonic.” “These things (incentives) have gotten so out of control, so overgrown, so arcane—it’s been off the radar.”

LeRoy is right, of course. If local and state governments have to divulge all of the relevant details about the incentives they’re giving away, it could have a huge impact on how governments interact with tax incentive beneficiaries—and how taxpayers view the tax incentive programs themselves. As explained in the blog Next City,

Cold, hard numbers could soon settle the heated debates about whether tax incentives encourage regional growth and competitiveness or simply deplete public resources. LeRoy argues that any site location consultant for a corporation could tell you that tax breaks often don’t affect the bottom line: State and local taxes comprise less than two percent of a company’s total cost structure. Other environmental factors like labor, logistics and materials matter much more. But companies would never admit that to the governments offering them free money.

Like other places around the country, Missouri’s tax incentive programs are a mess. If GASB institutes robust accounting standards for these incentives—and it appears it might—it may go a long way to draining the cronyism swamp in this state. Cross your fingers.

The post Tax Incentives: How Much Money Do Governments Give Away? appeared first on Show-Me Institute.

But we must not ignore the shopkeeper’s opportunity cost of fixing the window, namely those products and services that she had to forgo. The businesspeople selling these forgone items take a hit as a result of the broken window.

I was reminded of all this while reading a recent report from goodjobsfirst.org. One section outlined the subsidy programs offered to incentivize private enterprise to move from Kansas to Missouri. The Show-Me Institute’s Patrick Ishmael and Michael Rathbone have expressed concern about such programs over the past few months (here and here).  In 2012, Freightquote moved its headquarters from Lenexa, Kan., to Kansas City, Mo., which landed the company $64.3 million in tax incentives. In 2011, North American Savings Bank received almost $6 million in subsidies to relocate to Missouri. Velociti benefited from $1.6 million in corporate welfare for moving to Riverside, Mo. The list goes on . . .

Such programs are defended on the grounds that they bring much-needed jobs to the state, but one cannot ignore the means by which they are financed. The government is not an exogenous entity, magically creating wealth out of nothing. (Trillion dollar coins notwithstanding.) To provide anything, it must first take from others. This confiscated wealth constitutes revenue that would have otherwise been spent, invested, or saved in the private economy. Accordingly, it is not a stretch to contend that the state creates jobs only by means of destroying them. Bastiat’s sage advice unfortunately seems to have been lost on many of our public officials.

The post The Cost Of Ignoring Opportunity Cost appeared first on Show-Me Institute.

But several Missouri state legislators who received low grades happen to be strong supporters of free-market policies and/or opponents of corporate welfare.

Take Rep. Jay Barnes (R-Jefferson City). The Missouri Chamber gave him an ‘F’.’ I certainly do not agree with everything that he proposed during the 2012 legislative session (nor do I agree with everything that any other lawmaker discussed in this post has sponsored). But Barnes sponsored several bills in the wake of the Mamtek scandal that were designed to limit the Missouri Department of Economic Development (DED) and local governments from irresponsibly awarding large subsidies to corporations.

Rep. Paul Curtman (R-Pacific), who was given a ‘D,’ also sponsored some good legislation aimed at limiting corporate welfare. Curtman sponsored a bill that would require two-thirds of area voters to approve local property tax development subsidies. He also sponsored one of my favorite bills, which would allow people to enter some professions that require a state license without obtaining a license, as long as they do not advertise themselves as being licensed. Do we really need to license interior designers, private investigators, and cosmetologists?

Sen. Jason Crowell (R-Cape Girardeau) was awarded a ‘C’. In my book, Crowell deserves an A+ for taking strong stands against tax credits. Various state departments award hundreds of millions in tax credit dollars every year, frequently with little to show for it. Some state tax credits have been created for just a single company. Crowell has filibustered against these handouts, and during the 2012 legislative session, sponsored a bill that would subject tax credits to the state budgetary process. He also sponsored a bill that would limit tax-delinquent developers from receiving property tax subsidies.

Rep. Jeanette Mott Oxford (D-St. Louis) was awarded the lowest grade. She has introduced bills with which I disagree. But Oxford’s “Good Jobs First” bill would have gone a long way to help bring more transparency and accountability to Missouri’s corporate subsidy programs.

I hope that Missouri legislators continue to fight bills that increase corporate welfare, as well as continue to try and roll back some of our existing corporate welfare programs, regardless of grades received from the Missouri Chamber of Commerce.

The post Legislators Who Opposed Corporate Welfare Receive Low Grades appeared first on Show-Me Institute.