JoCo, De Soto and Kansas add millions more in incentives toward Panasonic battery plant

Johnson County will add another $15 million to a growing pot of incentives dedicated to Panasonic’s new $4 billion factory planned for De Soto.

The Board of County Commissioners on Thursday voted to spend $7.5 million on local road improvements and commit another $7.5 million toward building a new fire station with hazmat capabilities for the factory.

Kansas officials have already committed $829 million in incentives to lure the Japanese electronics maker to De Soto. That includes $500 million in refundable tax credits, which allows the firm to not only reduce its tax burden, but receive cash directly from the state.

But the state’s unprecedented incentive package was only the beginning.

De Soto has also approved a local inducement for the company. The city’s tax increment financing agreement is expected to divert more than $202 million to the developer of Panasonic’s plant.

And the Kansas Department of Transportation will add another $26 million to build new roads around the plant.

Only two Johnson County commissioners questioned the incentive project at Thursday’s meeting.

Michael Ashcraft, who represents the county’s fifth district, said he didn’t understand why Johnson County was being asked to contribute to fire services. The property is within De Soto’s city limits, but the Northwest Consolidated Fire District provides fire services for the area.

“This puts the county potentially in a precarious position of funding this or supporting this with very little control,” he said.

Maury Thompson, deputy county manager, said the fire district didn’t have the resources to fully fund the new station. He pointed out that the $7.5 million from the county would not be sufficient to build the new fire station, which must have special capabilities for the hazardous materials used at the battery plant. The fire station will also need more funding for equipment and ongoing operations.

Charlotte O’Hara, who represents the third district, said the county did not need to pile on more incentives.

“My question is, how much is too much?” O’Hara, who is running for commission chair, asked at a meeting last week. “We have other needs.”

O’Hara said she was concerned that more subsidy requests would be coming as the wider Sunflower site is developed. Panasonic’s giant factory is only expected to take up a portion of the 6,000 acres that De Soto has already annexed of the former ammunition plant that the Army has been cleaning up for years.

‘I am shocked’

Panasonic chose to build its factory in De Soto after a heated competition between Kansas and Oklahoma.

The competition pushed both states to pass legislation creating new incentives specifically for the battery plant.

In Topeka, the administration of Gov. Laura Kelly kept details of the project secret and required lawmakers who wanted to know specifics about the legislation — and the company behind it — to sign nondisclosure agreements.

Kelly and a panel of lawmakers voted on the $829 million incentive package in secret, only making details public at the company’s official announcement.

On Thursday, O’Hara read from a Star story that revealed Kansas had secured no commitments on hiring or wages from Panasonic — a common requirement in many incentive agreements.

“I am shocked,” she said. “Boy, are we babes in the woods. We can’t even read a contract.”

County Commission Chairman Ed Eilert described Panasonic’s incentive package as “pay-as-you-go.” For instance, he said the state incentives would be adjusted down if Panasonic didn’t hire 4,000 people or invest $4 billion.

But that’s not exactly how the state’s agreement with the company reads. So long as Panasonic invests $1 billion, it will be eligible for $500 million in refundable tax credits. The company will also receive a 10 percent rebate on its entire payroll for 10 years, though it can hire whatever number of workers at any pay it chooses.

Johnson County’s $15 million contribution will come from a special county fund set up after it received millions in federal pandemic relief funds.

The county was awarded $117 million from the American Rescue Plan Act. But Thompson said the funds no longer had any federal strings attached because they had been moved into a special countywide recovery fund after the county said it had lost revenue during the pandemic.

“There are particular requirements about how we use these funds so we must be very careful about our terminology,” he said. “So they are not now ARPA dollars. They have really lost their identity.”

Several members of the public asked the county to reject the incentive proposal or at least slow down approval after raising concerns about rising property taxes and potential safety issues with the lithium used in battery-making facilities.

“I would say simply that this project is not quite ready for prime time,” said Overland Park resident Will Hoerl. “You need to take it back and look at it a little bit more.”

Commissioner Becky Fast, who represents Johnson County’s first district, said the county would likely have needed to improve the two-lane roads surrounding the former ammunition plant anyways.

“So this was going to happen,” she said. “And we’re getting $26 million from the state that we wouldn’t have received if we would have had to do this ourselves.”

Millions for new roads

The Kansas Department of Transportation will contribute the $26 million from the state’s Eisenhower Legacy Transportation Program.

The department budgeted to spend $20 million per year over 10 years under a special economic development fund within the program. So the $26 million to aid Panasonic’s plant will cut into the funding for other years of the program, said Calvin Reed, KDOT’s senior director for engineering and design.

In De Soto, KDOT plans to reconfigure about 4.5 miles of two-lane roads into four-lane, divided roads. The funding will target W. 103rd Street and should improve travel from three exits off of K-10 highway.

“This is the biggest development in state history,” Reed said. “And it’s really important that we get these transportation solutions in place so they can effectively and efficiently get their workers to the site.”

That road project could cost some $35.5 million, including Johnson County’s $7.5 million contribution and another $2 million in funding expected from De Soto.

While the state and county are funding most of the up-front costs, Reed said the city would be responsible for ongoing maintenance and repairs.

Last week, De Soto’s City Council approved its 20-year tax increment financing plan for the Panasonic plant.

The city’s TIF agreement will allow Sunflower Redevelopment LLC, which plans to build the factory for Panasonic, to be reimbursed for an estimated $202.6 million in project costs. TIF subsidies work by directing all or parts of future property tax increases back to developers to help cover construction costs.

De Soto Mayor Rick Walker said the TIF will protect revenues for De Soto’s USD 232. But the agreement effectively means the city and the county won’t receive any property taxes from the project for the next two decades.

The city also expects to approve a sales tax exemption on construction materials. The state already approved $60.2 million worth of sales tax exemptions as part of its $829 million incentive package.

At the City Council’s July 21 meeting, one resident asked whether the TIF plan would cause an increase in residential property taxes.

Councilman Kevin Honomichl said the TIF was aimed at expanding the city’s tax base. He noted that the city wasn’t spending out of its general fund on the project, but relying on the future property tax revenues from the plant.

“Without the public-private partnership there really isn’t an opportunity to grow the tax base because nothing happens,” he said. “... I know this council is really motivated to diversify our tax base, to grow our tax base for the purpose of decreasing taxes as opposed to giving money out that’s going to increase property taxes.”