Attorneys say governors’ truce on ‘border war’ may shift work in real estate practices

A truce in the Missouri-Kansas economic border war is likely to bring change for some real estate attorneys’ practices, but they say they are optimistic about efforts to draw new companies to the Kansas City region.

Attorneys say a shift in priorities from relocating existing companies to bringing in new businesses should lead to more business overall for their firms  — not less — and they are embracing the new spirit of collaboration between the states.

On Aug. 13, the governors of Missouri and Kansas formally agreed to surrender the use of state incentives to merely shuffle jobs from one state to the other.

The agreement, signed at a ceremony in Kansas City, Kansas, marks a truce in the long-running economic border war, in which companies have moved existing employees across the state line — often to locations just a few miles away — to take advantage of tax breaks under the guise of creating new jobs in their new state.

The Hall Family Foundation estimates that during the past decade, the states have approved about $335 million in tax incentives in such scenarios.

In signing the bi-state agreement, Missouri Gov. Mike Parson and Kansas Gov. Laura Kelly pledged to limit state-level incentive programs to relocating companies based on net new jobs created. The agreement includes activity in the metro’s border counties of Platte, Clay, Jackson and Cass Counties on the Missouri side, and Wyandotte, Johnson and Miami Counties on the Kansas side.

Each state reserves the right to rescind the agreement if it determines the other state is not holding up its end. The agreement is legally binding.

The agreement follows actions taken by the states individually to end the border war. The Missouri legislature earlier this year approved a senate bill restricting the use of incentives in the state’s border counties. Parson signed the bill in June.

Kelly likewise signed an executive order Aug. 2 instructing Kansas economic development officials to stop using incentives to lure businesses from Missouri counties in the Kansas City region.

In remarks at the signing event, which was organized by the Greater Kansas City Chamber of Commerce, Parson and Kelly both pledged to cooperate to bring new businesses to the region.

“You don’t have to be a scientist to figure out this was a bad deal for both states,” Parson said.

He added that he hopes the agreement serves as an example for other states.

“I hope that Washington, D.C., takes a good look at what happened here today, when a Republican and a Democrat governor can sit down together and do what is right for the people of our states,” he said, receiving lengthy applause from the audience.

Following the signing, Kansas City Mayor Quinton Lucas — a lawyer himself — said he was not too concerned about what the truce would mean for real estate attorneys. He said he’d met and discussed the matter with a prominent attorney one day before the event.

“What he said, and he has worked with a number of these border crossings . . . is they will always find a way to be creative. There will always be some way for them to do good business-attraction work,” he said.

Rather than using incentives to poach businesses, leaders in the region should develop new tools focused on growing and creating more businesses throughout the region, Lucas added.

“I think our real estate bar is wise. They’ll be fine, and frankly, I think they saw this coming down the line, too,” he said.

Andrea Bough, an attorney for Lewis Rice’s real estate practice group and a newly elected Kansas City council member, also attended the signing event. She said the truce likely will lead to a shift in the types of work being done, from relocation work to maybe more business-expansion work.

“What I think has been missing is focusing on existing businesses and empowering them to grow,” she said. “I think that is important because it’s hopefully an opportunity to increase wages, focus on our citizens and increase opportunities.”

Charles Renner, an attorney for Husch Blackwell in Kansas City and chair of the firm’s public-private partnership team, said he believes the truce will have an impact on the work of some lawyers — but not necessarily a negative one.

In general, he said overall growth in jobs and population is healthy for attorneys who handle real estate development matters.

“Certainly, if at the local level this empowers our local economic development folks to direct all the time, energy and resources that have been tied to issues covered by the border war into attracting new jobs and growth from outside the region, I think that can only be a positive,” he said.

Renner said company relocations still will happen under the truce. Demographic changes within a company may dictate the need for a move from the suburbs to the urban core, while some businesses may need the logistical benefits of being in the suburbs versus in the city, he said.

Site-specific incentives still may be involved in such moves, but the focus will not be on jobs moving to a new state, he said.

“I could see a situation where you still see those tools used, but in a way that makes sense,” he said.