Show-Me Institute Podcast
The Chiefs and Royals Restart the Border War with Patrick Tuohey
In this episode, Susan Pendergrass talks with Patrick Tuohey, Senior Fellow at the Show-Me Institute, about the Missouri-Kansas border war over economic development incentives. They discuss how the Kansas City Chiefs and Royals reignited the subsidies battle between the states, the effects on local economies, and more.
Produced by Show-Me Opportunity
- Duration:
- 27m
- Broadcast on:
- 25 Jul 2024
- Audio Format:
- mp3
(upbeat music) - So I'm joined by once again, the famous Patrick Tooey who knows most there is to know about all things Kansas City related. And we had a small chat before we started recording this podcast about, you know, recent attention being drawn to Kansas City by a couple of young ladies who can go unnamed, but we're gonna talk a little bit about the border wars with Kansas City, but I still contend that many people, particularly people on the two coasts of the United States, don't really know where Kansas City is, right? - Well, I think that's true. It is pretty much right in the middle of the United States, but more importantly, it's in Missouri. - That's the part they don't, that's my point. - Yes, yes. - It's like what Kansas City, Kansas, that's where it is. It's like, actually part of it is in Missouri. - There was a banner hung by the fans during the 2015 World Series. And somebody said, you know, you're not in Kansas anymore. And of course Kansas City has laughed at that because we never were. And you know, Kansas City was founded, of course, before Missouri and Missouri came before the state of Kansas. So, you know, we've had it first. You're absolutely right, there is a smaller Kansas City, Kansas. It's much smaller and it's economically much more depressed than Kansas City, Missouri. But when you think of Kansas City, you are thinking of Kansas City, Missouri. And it is, absolutely right on the border. - Clarifying question, it sounds like Kansas City came first on the river, then the state of Missouri. So we had Kansas City, Missouri. And then for some reason, the whole territory across the river, through the west of the river, they decided to name Kansas. - Well, that's right. And it's named for the river, the Arkansas River. And so again, it's just a lot of maybe not so complicated history, but yes, it takes effort to remind people that Kansas City is not in fact in Kansas. - Because there's a border war between, we're gonna talk about the border war, so to speak, between Kansas City, Kansas and Kansas City, Missouri. And I think that these things happen in lots of places where it's just much easier to understand like Cincinnati and its Kentucky counterpoint. I mean, there's these rivers where you have both sides of whatever you have, St. Louis and East St. Louis, to a certain extent, I don't know what they compete, but I lived in the DC area for a long time and Marylanders and Virginians have very strong opinions. And rarely would, maybe you would live in Maryland or work in Virginia or vice versa, but it's very clear, like they're not at war with each other because Marylanders tend to think that Maryland is the only answer. And Virginians only think Virginia is the answer, like so they don't even go to war with each other, but I can't understand and this is what I want you to tell us about Kansas City, Kansas and Kansas City, Missouri have had this competition and I do sort of remember they have detente for a little bit, but sports has brought it all back. So can you give us just a brief history of the last 20 or so years of this border wars? - Sure, so first of all, although the border war term may be specific to what's going on in Kansas City, the idea that municipalities or states are competing against each other for economic growth is not unique at all. Certainly in St. Louis, all the small municipalities compete with each other, New York and New Jersey. You're absolutely right, a Washington DC, but for the most part, again, DC has this too, for the most part, your states are far enough apart or the cities are far enough away from the borders that it's just a within-state competition, right? So, you know, Walmart wants to put a development somewhere along this highway. They don't necessarily care in which municipality it falls along this 10-mile stretch of highway, but they will absolutely play those small municipalities against each other to get the best deal for Walmart. Now, what is rare is, again, Kansas City and the Washington DC area where you have a large metropolitan area that crosses state boundaries. And so in Kansas City, not only do we have the municipalities on the Missouri side kind of fighting each other, but you've got Overland Park, and it really is Overland Park, which is right next door to us, which is in a different state. And so you end up with not only the municipalities and the states competing with each other to move things in from across the country, think Amazon or Google years ago, but you also have these tiny skirmishes where a company will want to move, you know, maybe a few miles or a few blocks, but those few blocks cross state line. And so what you end up with for years is Missouri and Kansas battling each other for these really meaningless wins. And so an example I've talked about in the past is Applebee's, Applebee's moved its headquarters back and forth several times from, and again, it may have been only a few miles or a few blocks, but they moved their headquarters across state line in response to whatever incentives were being offered to them. - Like what? - Oh, well, you know, we will abate your taxes if you move here. We will allow you to keep the sales tax that is collected at your site or even the 1% earnings tax, which is an income tax that your employees pay. We'll let you keep that to pay for renovations or the construction of the building or whatever. And so whenever that package ran out, Applebee's would again show some leg and get lured across the state line. Now that sounds crazy, but it allowed the bureaucrats and the politicians on each side of that state line to declare a win. We created 600 jobs. We created 400 jobs. Regionally, no new jobs were created. And even if your commute changed, you didn't sell your home and move to the other side of state line. Your commute, where you had lunch may be changed. So that's what we have in Kansas City. The border war moniker, though, goes back to before the civil war, when Kansas was being admitted as a free state and they were gonna vote on it. And so you had a lot of people crossing into the Missouri, or forgive me, into the Kansas territory to vote. And it was a very ugly skirmish. People were dragged out of their homes and butchered because maybe they were an abolitionist or maybe they weren't an abolitionist. And so the term border war was initially kind of a legitimate war. And now it's just come to mean kind of the economic skirmishes. And one last point, a few years ago, 2019, the governor of Kansas, Laura Kelly, signed an executive order, which said that she was commanding her employees and the executive to not engage in this type of border war skirmishes. She encouraged the municipalities on the Kansas side to also withhold. And Missouri, through legislation, had said it was also going to stand down. I was never convinced at the time that this was a big deal. There were so many loopholes, but at least from a psychological point of view, it was important in that the two sides admitted the border war is bad because it doesn't help the people who supposedly win because the cost to taxpayers is greater than any benefit. And so kind of that's where we were up until a few months ago. And then at well, then the chiefs and royals, the football and baseball team, which now play in Kansas City, Missouri, didn't get the result they wanted from a vote to give them more subsidies. And so they kind of wanted to pit the two municipalities, the two states against each other. Kansas went and changed the way it offers its version of subsidies so that it could do more, specifically to lure the teams across into Kansas and build them new stadium. And Laura Kelly signed that and said, well, the chiefs were never included, which is a misdirection, because if you look at her executive order, it never specified what teams were included, what companies were included or not. But again, it's this skirmish, it's an absolute shame. It's a waste of money, not only for the people of Kansas and Missouri, but Virginia, Washington, DC, Maryland, any place where this happens, Ohio, Kentucky, any place where it happens, it's a waste. And so we had a bright shining light maybe, but it seems like now we're back to our old habits. - And is it because it's sports? 'Cause so that's just to go back for a quick second. The royals and the chiefs want new stadiums, essentially. And they reached out and said, look, we'd like to build a new state. I don't know why it's happening simultaneously. You can explain that to me. Simultaneously, and they both ask for tax increases, essentially, right, to pay for at least a portion of it. And Missouri taxpayers, they said, no. Is that right? - Pretty much. So in 2006, Jackson County, which is the county in which Kansas City sits, voted to tax itself to pay for the construction of a Kauffman Stadium for the royals and Arrowhead Stadium for the chiefs. And that was a 25 year tax and a 25 year lease agreement with the teams that was going to expire, that still will expire in 2031. But earlier this year at the urging of the royals, the Jackson County legislature put on the ballot a new tax to not only kind of refurbished chiefs arrowhead, but to build a new stadium in downtown Kansas City, Missouri for the royals. We can talk about the nature of that campaign in general, but ultimately it was defeated by voters overwhelmingly. I think it was a 42, 58%. And so after that, I think the teams again just decided, well, let's see what else we can get elsewhere. I will editorialize here. I think there never was any real chance the teams were going to go anywhere. At best, they were looking for leverage. They want to encourage different municipalities to get into a bidding war. Now they've got perhaps Kansas and Missouri back in a bidding war for them. And if I'm a team owner, or if I'm any business owner, this is exactly what I want. I want-- - When the Missouri Governor come out and say, what can we do to keep you kind of thing? - Yeah, pretty much. The Missouri Governor, a Governor Parson, has spoken to leaders at Jackson County in Kansas City. He's gone to another municipality called North Kansas City and Clay County in which they set and basically said, well, we don't really know what the conversations were, but we presume he just kind of wanted to touch base with them and see where they were. Right now, we're in a situation where the teams haven't put forward a request. And it seems based on what the owner of the chief said just the other day that they're waiting for the states and municipalities to come to them. I don't know how common that is around the country, but it seems backward. If you're looking for subsidies, you should be the one that puts forward the request and then we can talk about it. But so it seems now that nothing's really happening. Maybe there are deals going on in the background. I don't know, but I suspect the teams will stay on the Missouri side. I suspect the chiefs will stay exactly where they are. It is possible that the royals will stay exactly where they are at Kauffman, but we don't know. And every few days or every few weeks, somebody has a press conference and it sounds like something new is happening, but we just don't know. And so we're kind of in this limbo and the fear for people at the Shomi Institute and policymakers frankly around the country is that not only are cities going to make bad decisions based on a stadium team owner demands, but that at least here in the Midwest, this border war will reignite. - Yeah, and so that's the fear maybe at the Shomi Institute, but that's not the fear in most of Kansas city, right? Like a lot of the fears that they're going to lose their sports teams. And I think people feel kind of strongly about that. And you and I have been, you have been on this podcast before talking about it. I've done podcasts about the St. Louis side of this very same thing. And I just feel like people have such a mental block on this. It goes, there's research that goes back decades that these sports stadiums do not benefit the economy in the way that the people who want them say they're going to, that the owners of these sports teams tend to have a lot of money. And when, you know, the St. Louis Rams owner just picks up and leaves that kind of tells you, right? Like, you can just go build his own stadium. He didn't need the St. Louis taxpayers to build his stadium for it for him. They have a lot of money. But I think the bigger point, and you and I have talked about this a lot, is to play war with corporate subsidies is just bad policy, whether it's sports teams or H&R block or whoever it is, but to play war, Applebee's playing war by giving up taxpayer dollars to corporations, which is bad policy. - It's absolutely bad policy. And I'm probably repeating myself on this podcast, but, you know, it used to be that amenities that we all like, entertainment districts, you know, football and baseball, a stadium, restaurants, hotels, vibrant downtowns, were a lagging indicator of a healthy economy. When you saw that development, you thought, wow, investors want to invest because there's wealth here, there's money, this is the place they want to be. And so we kind of looked at that development and thought, well, this is the sign of a healthy economy. And then somewhere in the maybe 80s or 90s, municipal leaders got it backward. And they thought, oh, maybe if we build those amenities, we can work it backward and we can say, well, if we build all these things, then we will get a healthy economy. And so municipalities started subsidizing all this development and it detracted their attention from doing the hard work of infrastructure, public safety, all those important things. They just thought they could skip their vegetables and go right to dessert and build nice shiny things. And the example that listeners have heard me use before is Baltimore. Baltimore has everything that a developer would tell you to build. They have two professional ball parks. They have a streetcar, a convention center. They have a very impressive airport. They have an inner harbor and aquarium, yet nobody would say, we want to be like Baltimore. And it's because Baltimore hasn't eaten its vegetables. They haven't done the hard work of building a good city. And so the bigger picture is that, politicians are racing to build that shiny thing to go to the ribbon cutting. And it's not just their fault. Voters want our politicians to do something and when they see development downtown, they think, oh, something has been done, this is good. And they don't, they don't dive into the minutia and find out that, you know, I like to describe it to people as getting a Valentine's Day card from your mom. You know, at first you're excited. And then when you open it up and realize who it's from, you realize it doesn't count. And so all this shiny development we're seeing downtown just doesn't count. It's not real. It's not real investment. It's taxpayer funded. - Yeah. And then we still have to pay our property taxes and they don't have to pay their property taxes, right? So like, but then you, so it's a bad policy and then you get into competing with another state on that bad policy and that's just compounding the issue. And now that can't, and it's the same governor that was in Kansas, right? Who did it and then undid it? - Correct. Governor Laura Kelly. - So, you know, it's kind of hard for Missouri then to be the one that's gonna pull back first and say, okay, well, we'll lead our vegetables while you guys have dessert. That's hard 'cause it's a cold war, right? - Yes, no, that's absolutely right. And, you know, when Amazon was throwing out the idea that they were gonna build Amazon two headquarters and they invited the whole country to embarrass itself by making all sorts of ridiculous bids. Richard Florida, who is an urbanist, I think he's a professor at the University of Toronto, he had predicted early on that Amazon is either gonna go to New York or Washington, D.C. because that's where the talent is they want. Jeff Bezos, the owner of Amazon had just built a house or moved to Washington, D.C. So that was one of the reasons why Richard Florida predicted that. And then all these cities and states, including Kansas City, Missouri, presented all these bids and made embarrassingly big offers. We're gonna get, give you money outright, we're not gonna have to pay taxes. And Richard Florida said, while this was going on, you know, these municipal leaders know that this is a crock, they know that this is garbage, but they all feel that they have to participate because, you know, you can't win if you don't play. Yeah, they all made these things. And by the way, as a footnote, Richard Florida was a paid consultant on Kansas City's bid for Amazon. So here is somebody whose participation-- Well, it's not stupid. But right, he's participating. He's a whole team's a buddy, right? He's participating in one of the bids while at the same time he's tweeting that everybody knows this is a scam. So again, if you are a corporate leader, this is great for you. If you are a political leader and you win, and maybe even if you lose, it kind of makes you look good, but it distracts from the important work of city building, which is again, not sexy, not fun, not easy. Is it true that, or is it the case? I don't honestly know that parents prefer the schools on the Kansas side, to the Missouri side? Would you have to say-- Well, God. That is a decades old story. Yeah, I'm just curious. Our colleague, Mike Michain, can talk in great depth about that. What has happened over the past 50 years is Kansas City's population has remained about flat, at around 500,000 people. But Overland Park, the community on the Kansas side right next to us has grown, not just in population, but in business and jobs. And it's because Kansas City has not made itself an attractive place to live. The schools here are not a reason you would move to Kansas City. I have plenty of neighbors who, when their children reach a certain age, have picked up and moved to Kansas because the schools are better. So again, it's a sign that Kansas City, Missouri is not doing the hard work of making ourselves an attractive place to live. And one last point, if you can live on the Kansas side and enjoy better schools and more efficient government. And then, a few times a year, drive a few miles to see the Chiefs and the Royals play in their stadium and you don't have to pay for it, that's a great deal for you. That's right. Likewise, I tell people if the teams were to move just a few miles west into Kansas, it really wouldn't affect my enjoyment or my ability to go and see games. It would just mean that Kansans are paying for it. They're taking on the financial risk and that's better for us. So I understand that if the teams, if it was plausible that the teams were picking up and leaving the market entirely, maybe then taxpayers would wanna consider offering something, but that's not where we are right now. - Right, right. I mean, I do know that Kansas, the state of Kansas has like one of the strongest public school choice programs in the country where you can pick, it's gonna start the school year coming up, but you can pick any school in the state and get transportation. And Missouri has been very reluctant to make those things happen. And now I'm just like talking from my point of view here, but Iowa, you can pick any public or private school, Oklahoma, you can get a tax credit for private school tuition. And I think Missouri could be doing some, I say it all the time, we could be doing more of the hard work to make us attractive to families and businesses and not to these giveaways. Like these are like promotional giveaways, right? Like these are like loss leader pricing kind of things. It's just like, it's quick, it's easy, you know, we'll give up whatever we need to to keep our sports stadiums, but we should be doing the real work that makes families say, this is where I wanna raise my kids. - Kansas City and St. Louis are facing the same problem. They're both located, you know, next to state line. They both have plenty of municipalities around them that are gobbling up their population. And it's because for whatever reason, and there are plenty of them, they haven't done the basic work of building a good competitive city. You don't have to live within an urban environment to get the benefits of being near an urban environment. And Kansas City and St. Louis have so far refused to realize that they are in a competitive environment. And so everything from, you know, again, not providing for infrastructure and public safety to instituting a 1% income tax is a way that they are daring people to leave and people are taking that dare. - That's right. I would love to have you come back and talk about this another day. We can't talk about it now, but I'd thought someone's going to buy Country Club Plaza. - That's right. Country Club Plaza is a real asset in Kansas City. It is one of the first, I believe, outdoor shopping centers built in the country. It's absolutely beautiful. It was designed to look like our sister city in Seville, Spain, but it has real problems attracting businesses because of crime concerns. And I don't, you know, just as I don't fault any business who's trying to get as many subsidies as they can, I don't fault any business who's wary of moving into a place where their employees and potential customers don't feel safe. - Yeah. Yeah. So where do you see this going for? If the sports stadiums are any sort of a hard thing, or do you see that the border war is going to heat up and you're going to see more of these like tax incentives going out the door on the Kansas City, on the Missouri side of Kansas City? - Well, of course, I don't know. Here's what I think will happen. I think both teams will end up staying in Missouri. Unfortunately, Missouri is just better set up to offer bad for taxpayer subsidies than Kansas is. We're just better at it. Our laws allow. - They're so glad. - Yeah. So I don't think the deal will be good for taxpayers, but I think the deal that Missouri can put together will be more attractive for the teams. - Okay. - I hope, and I want to do more research on this. My hope is that the revivocation of the border war here will help more states understand that it is worthwhile to consider interstate compacts where we actually negotiate terms so that we are not doing this anymore. Because again, like Richard Florida said, like we talked about earlier, governors and mayors realize these deals are a fool's errand, but they feel compelled to engage in them because they want to look like they are active, competitive advocates for their community. And so we end up with a lot of this talk about civic pride and that's a vague and tangible, but the costs we are paying to get that pride are very, very concrete. - I did just, I rolled just a little bit when you said it, right? It's just like, yeah, yeah, yeah, but like you, anyway, that's, to me, if you have to cross the river to go to the game, there's 10 football games a year. I mean, I just think that people feel this team sports using that term is like in the general sense of feeling loyal to something. That team sports idea often causes people to make bad decisions, but that's for another day. Thank you so much for joining us and to talk about it. And I'm sure we'll be revisiting this topic. As it moves forward. - Oh, it's the story that never ends. And thank you very much. It's good to be with you. (upbeat music) (upbeat music) (upbeat music) (light music)