Shawnee tax incentives aim to lure startups to the ‘burbs

The City of Shawnee is poised to kick off a tax incentive program that hopes to attract “high-growth” tech companies to the area by alleviating initial startup costs.

Shawnee City councilman Brandon Kenig said that the “Startup Workforce Relocation and Expansion Program” will encourage job growth and innovation in one of Kansas’ fastest growing cities. The program — a part of the Shawnee Entrepreneurial Economic Development (SEED) initiative — will offer businesses specializing in legal services, tech and biosciences various incentives to build, buy or lease space in Shawnee.

“The SEED program has been very beneficial in helping bring new business in, but we didn’t have anything that was directly targeting to high growth industries — particularly tech startups,” Kenig said. “We know tech startups’ needs are vastly different than the typical established business, so I wanted to create a program off-shoot that appealed to them with the idea that we can grow that segment of business in our community.”

After a 7-1 committee recommendation in December, the council will take a final vote on the program on Jan. 11, where Kenig said he expects it to easily pass.

The incentive program has apt timing for a variety of reasons, Kenig said, including the metro area’s burgeoning tech sector. In addition, the State of Kansas is struggling to generate tax revenue and support of its incentives for early-stage business are fading away. That affords Shawnee the opportunity to fill the gap and attract businesses that may otherwise hop the Kansas-Missouri border into the Show Me State.

“With the tech boom in Kansas City, it’s a fast growing segment so we recognize that Kansas City has an outsized role to play in that area,” Kenig said. “With the loss of revenue and incentives on the state level in Kansas, there’s an opportunity for cities to step up to the plate and provide incentives to appeal to those (high-growth) industries. The fact is that not only are those industries likely to grow once we provide a place in Shawnee, they also attract talent from all over the country, so it’s also about increasing our brain capital within our city.”

The city is defining “high-growth” employers as those in “industries that are anticipated to see significant growth within the region or state.” Examples of those firms include IT, finance, insurance, transportation and warehousing.

Firms purchasing or buying a building in Shawnee will receive 100 percent property tax reimbursement on the first year, winding down to 75 and 50 percent in year two and three, respectively. There’s an optional 4th year tax reimbursement of 25 percent for firms providing space or funding to clients of the Enterprise Center of Johnson County and Device Shop.

Firms renting office space in Shawnee will receive varying lease reimbursements based on job creation in the city. Startups with two employees will receive a 20-percent-lease offset; firms with three to five people will receive a 25-percent-lease offset; and firms with six to ten staff will snag 30-percent-lease offset. Depending on staff size and rent, Kenig said startups could save roughly $10,000 to $50,000 with lease offsets in three years.

Eventually, Kenig said that he could see the program offering small grants to businesses for relocating to Shawnee. The grants could range from $75,000 to $100,000.

Kenig, who owns a tech consulting agency named Brandaway Digital, said there are many reasons why a startup should consider a move to the suburbs.

“We’re the third largest city in Johnson County and the seventh largest in Kansas and we’re also one of the fastest growing cities in the state,” he said. “We have a lot of room for growth, offer a low cost of living and stable home prices and a mix of residential options as well. There’s a real opportunity for job growth and residential options and we have a perfect location with access to the I-35 and I-435 corridors.”