Cargill is walking away from the negotiating table with more than $20 million in subsidies courtesy of the Wichita City Council. In return, Cargill will keep its headquarters in the city, build a new building and parking garage, and employ a minimum of 700 people during the first three years of the agreement.
Last year, Cargill announced it would keep its headquarters in Wichita, but the Wichita City Council formally approved most provisions of the development agreement this week.
Jeff Longwell, Wichita Mayor, said the city faced intense competition from other cities interested becoming the future location of Cargill Protein headquarters.
“There are a lot of cities that would love to have a corporation such as Cargill in the heart of their city,” Longwell said.
In return for maintaining its headquarters in Wichita, the city will issue industrial revenue bonds on behalf of Cargill, pay the company for public access to a Cargill parking garage on weekends and evenings, and offer reduced permitting fees and expedited services to Cargill. The city will also assign a staff member to serve as single point of contact between the city and Cargill.
Bob Weeks, a blogger at Voice for Wichita Liberty and the host of weekly television show Liberty TV, calls the need for the single point of contact and the reduced city fees an admission that Wichita regulations are burdensome.
“If not, why would the city devote time and expense to helping Cargill obtain relief from these regulations?” Weeks asks in a recent post.
Longwell said other cities offered cash incentives to lure Cargill away from Wichita.
“Cargill executives said they underwent a nationwide search for a new headquarters. The problem is we don’t know that,” Weeks said. “If the council and Cargill really wanted to gain the trust of the city, they could reveal the offers. Are these offers real?”
Cargill is staying in Wichita, despite a lack of cash incentives, according to Longwell.However, Cargill will receive a one-time payment of $6.5 million, termed an easement, for public use of a parking garage Cargill will build. Weeks says there’s really not a need for additional parking in the area.
“The city has free parking garages in Old Town,” he said. “Generally speaking there’s plenty of parking in Old Town.”
The garage location is somewhat near to the arena, which Weeks admits, has tight parking during big events like tonight’s Paul McCartney concert.
“But those happen only once every two months,” Weeks said.
On his blog, Weeks breaks down the price the city will pay for each parking space.
“Is this a good deal for the city? The city has agreed to pay $9,286 for the use of each parking space for 15 years during non-business hours. For comparison, recently the city rehabilitated the parking garage at 215 S. Market at a cost of $17,609 per parking space. The city rents 180 of these to a nearby company at the rate of $35 per month, which is $420 per year,” Weeks writes. “In the case of Cargill, the city is paying — effectively — $619 dollars per parking spot per year, and for off-hours use only.”
In addition to the one-time payment from parking privileges, the city will forgive more than $13 million in taxes for Cargill Protein.
“How is that different than giving them cash?” Weeks asked.
The Wichita Eagle reported that Cargill has some wiggle room in its promise to employ 700 full-time employees for the first three years of the agreement. The contract will allow Cargill to count employees who work only one day at headquarters.
A Cargill executive told the Wichita council it costs a lot to hire and fire people.
“I hope we can at least trust Cargill. An executive did explain that they’re not going to do that,” Weeks said.
Cargill also may qualify and use Kansas’ PEAK program. PEAK, or Promoting Employment Across Kansas, is a 2009 statute that allows qualifying companies to keep 95 percent of Kansas withholding taxes for PEAK-eligible employees or jobs paid above county media wage. Companies can receive PEAK incentives for up to 10 years.
PEAK was originally conceived to lure company headquarters to Kansas, but today, it’s used to keep companies in the state. The amount of money that companies get back is not disclosed.
Weeks estimates that PEAK incentives may save Cargill as much as $2 million each year.
“Ironically, with recent increases in Kansas income taxes, PEAK is even more valuable to Cargill,” Weeks writes.