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The state’s involvement in attracting the API Foils corporate headquarters to Lawrence reflects a welcome shift in economic development strategy.

January 10, 2012

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The recent announcement that API Foils will move its corporate headquarters from New Jersey to Lawrence’s East Hills Business Park is welcome news.

How the deal got done makes it even sweeter.

The city landed API Foils and the 17 high-level executive positions that will move with the headquarters without offering a tax abatement or any other local incentive. Even just five years ago, it would have been hard to imagine the city winning this deal — which will produce jobs that pay more than $50,000 per year — without putting forward some significant local financial incentives.

But the environment has changed some on the economic development front. For that, the state of Kansas deserves some credit.

State officials offered significant incentives to attract API Foils to Kansas. The most significant incentive was the state’s revamped PEAK program, which allows companies to retain up to 95 percent of the state payroll withholding tax on eligible employees for a certain time period.

Couple incentives like that with the state’s property tax system that now makes most business equipment and machinery tax exempt, and the state has some real selling points in attracting new business. Of course, incentives can be taken too far. But during this prolonged economic downturn, now is a good time to be aggressive in attracting new business.

It is encouraging to see the state taking a more active role in this process, rather than relying on local communities to just duke it out on their own. One of the worst aspects of property tax abatements and other incentives is that they promote an unhealthy competition between communities within a state. If Olathe, for example, offers a tax abatement at one level, there is pressure for Lawrence to offer a tax abatement at a higher level. It can become a race to the bottom, but, unfortunately, it has been a race that communities must enter if they want to be serious about promoting job growth.

If state officials could make it clear that the state will be the leader in offering economic development incentives, that could create a healthier and more coordinated environment for economic development in Kansas. It would create an environment where companies would be more likely to choose a community based on their workforce needs, geographic requirements and other factors. Lawrence would stand to win more than it loses in such an environment.

In the meantime, Lawrence should be extremely pleased with its latest victory. API Foils — which makes the shiny foils used on greeting cards, high-end labels and other packaging — has had a production plant in Lawrence since 1995. The company’s decision to move its corporate headquarters to Lawrence speaks well of API’s experience in Lawrence.

Congratulations and thanks to all involved.

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