Shawnee passes tax measure to attract startups

A tax incentive program that aims to attract high-growth startups to the City of Shawnee unanimously passed a city vote, paving the way for firms to tap a variety of benefits to alleviate initial costs.

The city council voted 8-0 on the “Startup Workforce Relocation and Expansion Program,” which aims to 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.

“I’m extremely pleased and excited that we were able to garner unanimous support for this program,” Shawnee City councilman Brandon Kenig said. “(The vote) sends a clear message that we’re willing to be innovative in how we attract and grow startup businesses in our city and partner with entrepreneurs to realize their business ideas.”

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 constructing 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.

The city has the ability to recover partial or full funds in the event a business relocates out of the city within one year after receiving their last benefit payment. Shawnee also can verify job creation requirements through external means as provided by program applicants for eligibility for the lease program, Keing said.

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.

“This is a tremendous opportunity for us in the midst of state incentives for startups and entrepreneurs that are drying up and disappearing due to declining revenues and budget deficits,” he said. “Local governments can play an outsized role in filling the increasing void at the state level by leading in the development of hyper-local incentive programs that directly grow their communities. … This is a game-changer, and we expect other cities will take notice.”