KSN Investigates: Stealing Our Aviation Future

WICHITA, Kansas – A KSN investigation into economic development and incentives in Kansas and Oklahoma has led KSN to ask a serious question: Is the state to our South, arguably, Stealing Our Future?

The scope of our analysis focuses on the aviation and aerospace industries, but doesn’t stop there. It extends further, into professional sectors of business, as well.

Wichita: The “Air Capital of the World”

The City of Wichita has long referred to itself as “The Air Capital of the World.” Historically, a large majority of the city’s economy, and then, the state’s, has relied on and centered on that industry.

When Wichita’s new Eisenhower National Airport opened its doors in June, Mayor Jeff Longwell said, in part, “I couldn’t be more blessed to be mayor of a city that recognizes we are the Air Capital of the World… We have a first-class airport with first-class amenities.”

The city’s identity extends further, even into representation in the U.S. Capital.

“Wichita is the Air Capital of the World,” said U.S. Senator Jerry Moran, a Republican representing Kansas. “But, there are many communities who are vying to take that title away,” he said in August.

Also in August, Gov. Sam Brownback said, “We’re going to continue to push forward, to invest in [aviation], so that we can continue to be a growing force as the Air Capital of the World.”

The economic identifier as Air Capital makes up a large chapter in Wichita’s and Kansas’ history book. But, this identifier changes more every year.

“Kansas and Wichita is extremely competitive when it comes to aerospace,” said Jeremy Hill, with the Center for Economic Development and Business Research, or CEDBR, at Wichita State University. “Aerospace companies would normally want to be here because of the labor, because of the infrastructure, the support industries that are related to it, [and] the overall environment fits perfect for aerospace.”

Oklahoma: Stealing Our Future, Data Explained

According to U.S. Census records, in 2014, about 8,000 people moved from Kansas to Oklahoma, an increase comparatively, from previous years.

Of those, as many as 2,000 people who moved may have relocated due to their jobs in the aviation industry.

Source: U.S. Census
Source: U.S. Census

Boeing Commercial left Wichita in 2005. Local industry experts say that number has been on the rise ever since.

Hill explained the Census data further.

“It’s obviously because of opportunity, because of their environment, and incentives that have been attracting some of the [Aerospace] engineers,” said Hill. “They’re competing directly with our Aerospace… that, clearly, is one of the driving factors.”

Jeremy Hill says the state of Kansas is experiencing an “Out-migration.”

Jeremy Hill, WSU Economist
Jeremy Hill, WSU Economist

“Out-migration,” or to “out-migrate” is defined in the Merriam-Webster dictionary as a verb meaning “to leave a region, community, etc., to move or to settle into a different part of one’s country or home territory.”

It is important to note that the U.S. Census data is comprised of estimated figures. However, the net migration remains imperative to this analysis.

There are nearly 8,800 jobs – people moving out of Kansas – and moving in. There are just over 6,000 people migrating from Oklahoma.

“They’re competing directly with our Aerospace…”
– Jeremy Hill, CEDBR, WSU Economist

Net may be calculated by taking the difference of the two numbers above, which in this instance, equates to about 2,700 jobs.

“The question is, where does this add up over multiple states [and] over multiple years when you think about the Labor Economy?’ asked Hill.

Beginning in 2013, Hill says, is when you see net, more people moving out of Kansas, than moving into the state.

“It’s okay for having some number of people moving, but, when you start seeing a lot of net out-migration, that’s when you start thinking, ‘Okay, what’s going on?’” he asked.

According to the U.S. Census data, there could be as many as 2,000 people who have moved directly to Oklahoma from Kansas in the aviation industry. That number has been on the rise since 2005 when Boeing Commercial left Wichita.

Hill posed the following questions:

“Is there something unique that is happening in the Oklahoma economy, or some other state?”

“Is there something that is happening within Kansas that might be causing some of this shift?”

KSN’s Brittany Glas traveled the three hours south to Oklahoma City to see what Oklahoma offers that Kansas doesn’t.

Kansas vs. Oklahoma: A Comparative Analysis

Kansas and Oklahoma host similar economic climates and marketplaces. Both states are located in the Midwest and have similar challenges to deal with in their prospective marketplaces.

“Well, it’s certainly not an overnight success. It’s something that’s taken a long, long time,” said Kurt Foreman, the Executive Vice President of Economic Development for the Greater Oklahoma City Chamber of Commerce.

Corporate Income Tax

Oklahoma has a Corporate Income Tax Rate of 6 percent.

Kansas has a Corporate Income Tax Rate of 4 percent of net income.

State Sales Tax

Oklahoma has a Sales Tax Rate of 4.5 percent.

Kansas has a Sales and Use Tax Rate of 6.5 percent.

tax-comparisons

Aerospace companies that call Oklahoma “home” Aerospace companies that call Kansas “home”
Source: Oklahoma Dept of Commerce

  • American Airlines
  • ARINC
  • Asco Industries
  • BizJet International
  • The Boeing Company
  • Flight Safety
  • General Electric
  • Lockheed Martin
  • Lufthansa Technik
  • Nordam
  • Northrop Grumman
  • Pratt & Whitney
  • Spirit Aerosystems
Source, in part: Greater Wichita Economic Development Coalition

  • Aircraft Interior Products
  • Alltite Inc.
  • Appearance Group and Air Capital Interiors
  • Associated Industries
  • Avcon Industries
  • Aviation Dynamix
  • Bombardier Learjet
  • Capps Manufacturing
  • CE Machine
  • Crate Tech
  • Fiber Dynamics
  • Global Parts
  • Greenwich AeroGroup
  • IMA Aviation Insurance
  • Impresa Aerospace
  • Lee Aerospace
  • Mid-Continent Instruments and Avionics and True Blue Power
  • National Center for Aviation Training
  • National Institute for Aviation Research
  • Omni Aerospace
  • Sherwin-Williams Aerospace Coatings
  • Southwind Global Aviation
  • Textron Aviation
  • Wichita Aero Club
  • Winglet Technology
  • Among others, as well.

Oklahoma: State Tax Incentive for Aerospace Engineers

Governor Fallin signing HB 1008.
Governor Fallin signing HB 1008. It was a bill to restore the Aerospace Engineers Tax Credit.

On April 9, 2014, Oklahoma Governor Mary Fallin signed House Bill 2509 into law, defining a “Qualified employee” eligible for the tax incentive as “any person, regardless of the date of hire, employed in this state [Oklahoma] by or contracting in this state with a qualified employer on or after January 1, 2009, who has been awarded an undergraduate or graduate degree from a qualified program by an institution, and who was not employed in the aerospace sector in this state immediately preceding employment or contracting with a qualified employer…”

The beneficiary of the incentive must have successfully completed a “Qualified program,” meaning that it has been accredited by the Engineering Accreditation Commission of the Accreditation Board for Engineering and Technology (ABET).

The law became effective on November 1, 2014.

Its effective date is just one reason Jeremy Hill says he believes the out-migration, from Kansas to Oklahoma, will increase again in 2015.

“We see more people migrating out every year,” said Hill. “The last two years, more people are migrating out, and I’d imagine 2015 will have an even higher increase… as our economy’s growing slowly.”

In July 2015, Oklahoma Governor Mary Fallin said:

“One of the factors that Boeing told me was important to move employees from other states to Oklahoma is our Aerospace Engineers Tax Credit that families find that attractive and we’re one of few states that has that type of tax credit.”

To explain, this tax credit goes to the worker, not the company.

According to the governor’s website, “Governor Fallin and other officials celebrate the signing of HB 2509, a bill to restore the Aerospace Engineers Tax Credit. The tax credits are available only to companies that have created new jobs by hiring aerospace engineers. Prior to being placed on moratorium, the credits were fully in place for one year. During that time, 348 new engineers were hired in Oklahoma with a direct economic impact of more than $270 million.”

For a complete history of HB2509, click here.

Kansas: No Comparative Incentive for Aerospace Engineers

The state of Kansas does not have an incentive like Oklahoma’s Aerospace Engineers Tax Credit.

Instead, Kansas Governor Sam Brownback’s primary ‘claim to fame’ has been the 2012 tax break for small and large businesses across the spectrum. This incentive equates to money businesses don’t pay in taxes, not their employees.

Economists suggest that these have proven to be incentives that haven’t yet sparked hiring and/or local reinvestment because of its context entering into a ‘slow-growth economy.’

“[It] really ended up being the wrong timing for this aggressive idea of this policy,” said Hill. “If the economy had already been expanding, reinforcing that, would have been the right opportunity for a business to do more reinvestment in the business than what has probably been more likely happening where they [businesses] take the investments and go and do more vacations, and using it in some other ways.”

IAMAW Lodge 70 Union President, Frank Molina.
IAMAW Lodge 70 Union President, Frank Molina.

Local Lodge 70 Union President of the International Association of Machinists and Aerospace Workers, or IAMAW, Frank Molina spoke with KSN News about the lack of incentives the state offers to industry employees.

“Here in Kansas, we don’t have a huge incentive program made to lure companies here,” said Molina.

Referring to other states, Molina said, “They’re looking for ways that they can steal our work or workers constantly.”

For more information about the local IAM Union, click here.

Oklahoma: State Hiring Incentive for Companies

Oklahoma has an additional incentive for companies that encourages businesses to hire people.

In addition to the Employee Tax Credit for Aerospace Engineers, Oklahoma has an Employer Tax Credit for Compensation Paid.

“Employer Tax Credit for Compensation Paid – Provides an annual income tax credit of up to 5 years for qualified employers of 10% of the compensation paid to a qualified employee if the employee received their degree from a university or college in Oklahoma and 5% if the employee received his degree from outside Oklahoma. This credit cannot exceed $12,500 for each qualified employee annually.”

Kansas: State Hiring Incentive for Companies

Jeremy Hill insists that, on the surface, Kansas does offer similar products for companies, but the state’s climate and appetite is different.

Hill lists two problems Kansas has concerning incentives. They are:

  1. Political Environment – Kansas does not have the political appetite for them, and
  2. Lack of Funding – Kansas, he says, does not have the funding behind them.

With these problems, Hill said, Kansas’ incentives can’t “be as competitive as the [incentives] we’re competing against.”

“We have almost the exact same types of products available… and on the books,” said Hill. “If it’s about educating their workforce, getting ready for it, we’ve got that. If you’re talking about high-waged salary positions, we’ve got something on that.”

When it comes to aviation and aerospace, Hill told KSN, “We’re losing some of that competition because other states are trying to be competitive.”

The Kansas Department of Commerce has a full list of Business and Community Finance and Incentives on its website.

Oklahoma: OKC Quality Jobs

Click to view Oklahoma Quality Jobs Program guidelines.
Click to view Oklahoma Quality Jobs Program guidelines.

The “premiere program” for business and economic development in Oklahoma is called “Quality Jobs.”

Quality Jobs is a performance-based incentive to bring businesses to the state.

It is a “percentage rebate, if you will, of wages each year for ten years. That’s only on a job that’s created and is in place at the time,” explained Kurt Foreman, the Executive Vice President of Economic Development for the Greater Oklahoma City Chamber of Commerce.

For this incentive program, incentives are paid on a quarterly basis.

Specifically, the program is a cash back business inventive that “gives qualifying enrolled companies quarterly cash rebates, of up to five percent of newly created taxable payroll, for 10 years.” Further, the state reports that through the program, Oklahoma has enrolled 743 companies that have received more than $968 million in wage rebates.

Kansas: Wichita / Comparable OKC Quality Jobs Incentive

The city of Wichita, Sedgwick County, and the state of Kansas have all long assisted aviation companies with financial incentives to promote economic growth and jobs to the state. Economic incentives have been successful, in large part, in establishing Wichita as the so-called “Air Capital of the World.”

Unfortunately, however, in what has recently been a painful realization for Kansans and their elected leaders, a series of aviation layoffs have crippled the state and local economy the past decade. This, after pledging millions of dollars in incentives to keep and create jobs in the local economy, only to be stung.

RELATED STORY | Nov 17, 2014: “Up In The Air”

In 2011, the state of Kansas, city of Wichita, and Sedgwick Co. collaborated efforts to keep Hawker Beechcraft in town.

The city of Wichita paid out $2.5 million in incentives in exchange for 4,000 jobs.

Former Wichita Mayor Carl Brewer explained the contract last year:

“The rule was if they dropped below, then we would prorate and we would pull dollars back if they fell below that particular number,” he said.

Like Oklahoma’s Quality Jobs program, the Hawker Beechcraft – Wichita contractual agreement maintained that, “If at the end of any year during the five year pay-out period, HBC employs fewer than 4,000 workers, the subsequent incentive payment will be reduced proportionally.”

In fact, Wichita has long used Industrial Revenue Bonds, or IRBs, to incentive companies to expand in the city, including aviation companies like Hawker Beechcraft and Bombardier Learjet.

WEB EXTRAS:

Incentives Explained

Executive Vice President of Economic Development for the Greater Oklahoma City Chamber of Commerce, Kurt Foreman, tells KSN News that Oklahoma state, and the cities within, have worked hard to set up businesses and their employees for success.

However, Foreman says, incentives aren’t everything. “Incentives tend to be what I would consider, for decision-makers, a tiebreaker. It should be, ‘Hey, we’ve got a couple great places that make sense, which one offers anything in addition?’”

EXTRA | Full list of Oklahoma Incentives Projects and how they work.

It is difficult to deny that Oklahoma’s incentives are working… arguably, Stealing Our Future.

Oklahoma City Boeing Facility projection.
Oklahoma City Boeing Facility projection.

Boeing Facility Built, Set to Open Summer 2016

In July 2015, Boeing announced it would be moving operations to Oklahoma City, including with that move, a brand new building under construction near Tinker Air Force Base.

“We will be moving the headquarters for our aircraft, modernization, and sustainment business, led by Scott Drode, here to Oklahoma City,” announced Leanne Caret in July 2015 at the building’s groundbreaking.

Caret is the President for Global Services and Support Defense for Space & Security for Boeing.

Oklahoma leaders and Boeing at groundbreaking.
Oklahoma leaders and Boeing at groundbreaking, July 29, 2015.

Boeing broke ground on the new 290,000 square-foot facility on July 29, 2015. The $80 million facility space will house approximately 800 employees.

According to the company, “The new structure, the third in Boeing’s existing campus, will open in summer 2016 and house employees working in engineering, research and development laboratories, and some support staff.”

The city estimates that the new expansion will add nearly 1,000 jobs to Oklahoma City’s local economy.

“Many of them are new jobs to the market [and] pay more than twice what our average wages are,” added Foreman.

Where are these employees coming from? In part, from the Sunflower State – Kansas.

“They’re [Boeing] doing a lot of hiring in the region,” said Foreman.

Taylor Mayfield: NIAR Graduate 2015

Taylor Mayfield, WSU Graduation 2015
Taylor Mayfield, WSU Graduation 2015

Taylor Mayfield, 24, is a Wichita native. He graduated from Wichita State University in May 2015 with a degree in Aerospace Engineering.

Despite the move South, Mayfield returns home to the Wichita area frequently.

“I come back at least once per month,” said Mayfield. “Probably sometimes twice per month, more regularly.”

The life-long Shocker fan has proven his devotion, even though he’s since moved to Sooner territory after his college graduation.

However, things for Taylor Mayfield, didn’t go exactly according to plan.

Instead of staying and working in Kansas, Mayfield has crossed over the Oklahoma-Kansas state line, for what he says is a better job market and frankly, a better pay scale.

“I wanted to stay here,” he said. “I wanted to maybe try to see if other job openings would open up here in Wichita, but, Boeing’s a great company.”

Taylor-MayfieldTo put it simply, Mayfield says the incentives to move to Oklahoma were “too good to pass up.”

“With that extra $5,000 per year, it’s like, I might as well go ahead and take this,” explained Mayfield. “…This is a good opportunity to go ahead and run with.”

For Mayfield, the Oklahoma Aerospace Engineers Tax Credit means $5,000 he’s not paying in state income taxes. In five years, it adds up to $25,000.

It’s a “great bonus” to the competitive salary he was offered by Boeing.

If the state of the economy and aviation jobs in Kansas had been right for him, Mayfield would not have moved to Oklahoma.

“My heart’s still here. This is still my home,” said Mayfield. “I feel right at home when I come back to Wichita.”

KSN Investigates: Holding the government accountable

After weighing out both states’ incentives packages and speaking with local leaders behind economic development in Oklahoma City, KSN spoke with Kansas Gov. Sam Brownback in August and asked him what Kansas needs to do in order to compete with the state South of us.

KSN’s Brittany Glas asked Gov. Brownback about the Aerospace Engineering Tax Credit in Oklahoma, specifically.

“Well, we’re going to do that, too,” said Gov. Brownback. “I mean, we will provide an incentive package. Our incentive packages are competitive with other states.”

In fact, in August 2015, Gov. Brownback went on to say, Kansas is winning the so-called “Border War” for aviation jobs against Oklahoma.

“The aviation space is so competitive…” said Brownback. “We are competitors on this. We’re going to win. We are winning.”

Gov. Sam Brownback attended the August 2015 announcement of the first fuselage completion in Wichita for the first Boeing 737 MAX by Spirit AeroSystems.
Gov. Sam Brownback attended the August 2015 announcement of the first fuselage completion in Wichita for the first Boeing 737 MAX by Spirit AeroSystems.

“A Conversation with the Governor”

After KSN’s exclusive interview with Governor Sam Brownback, which aired on Thursday, November 12, KSN is looking into the economic issues facing our state, specifically addressing his tax policy and the downturn of key industries in the state’s economy.

“Oil and gas is shedding jobs, agriculture is shedding jobs, the small jets still haven’t picked up. Your big – three of your ‘bigs’ are still not doing well in this state,” said Gov. Brownback.

When confronted about his tax policy, Gov. Brownback says it is successful… to an extent.

RELATED STORY | “A Conversation with the Governor” ; Talking Taxes and Aviation in Kansas

“The thrust of this tax policy, which is to grow small business, because that’s where 70 percent of the people work, is working by the numbers,” said Brownback. “It’s not working to raise the price of oil, or to increase the sale of small jets.”

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