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A conversation with. Steve Kelly Deputy Secretary, Kansas Dept. of Commerce

" Kansas offers a lot of opportunity in energy. The industry has been active for many years in our existing oil and gas fields. We also have climatic conditions for wind energy that show investment potential."

Feb/Mar 07
Q. What measures did Kansas take in the past year to encourage economic development?
In the 2006 session, the legislature passed at the governor's urging House Bill 2619 that eliminates the property tax on new business machinery and equipment. After June 30, 2006, at the end of the state's fiscal year, any equipment purchased or new to the state of Kansas is property tax exempt for the life of the equipment. The new legislation also raises the exemption for "low cost" items from $400 to $1,500. Before this, we had a partial rebate program for machinery purchases. This is a substantial change and attempt to lift the burden on manufacturers. We are also working in economic development to improve the business climate, restructure tax credits, and reduce the franchise tax.

Q. Are you concentrating on nurturing any particular industrial niches?
Kansas offers a lot of opportunity in energy. The industry has been active for many years in our existing oil and gas fields. We also have climatic conditions for wind energy that show investment potential. We have eight ethanol plants on line and four in the works; five proposed biodiesel plants; two proposed plants for integrated coke/coal gasification; and a couple of wind energy projects on the drawing board. This past session, the state house passed "House Substitute for State Senate Bill 303" that authorizes corporate and personal income tax credits, accelerated depreciation, and property tax exemptions for projects such as oil refineries, crude oil and natural gas pipelines, integrated coke or coke gasification plants, and cellulosic alcohol plants. There is a good chance that we will see more legislation for energy plants.

Q. What about opportunities for spinoff industries?
The petroleum industry has become the basis for increased interest in plastics for such things as bio-based plastics research. This creates potential for a whole new industry, specifically in rural parts of the state.

Q. So the focus is on rural development?
We have two tiers of economic performance. The agricultural-based rural areas are lagging somewhat subject to weather and commodity prices. We want to do more for them, and the legislature in 2007 may examine more closely how to deal with the challenges faced by the rural communities, particularly those in western Kansas. The metro areas continue to do very well. Johnson County is one of the strongest economic engines in the country, with regional headquarters and back-office businesses. Of the 2.7 million people in Kansas, 346,000 are located in Wichita, our largest city and the aerospace manufacturing capital of the world. Overland Park's population of 167,000 contributes to Northeast Kansas becoming one of the fastest-growing metropolitan areas in the nation. Kansas is strong in the biosciences, especially in the I-70 corridor from Manhattan through Kansas City and over to Columbia, Missouri, at educational institutions such as University of Kansas at Lawrence, Kansas State in Manhattan, and the University of Missouri in Columbia. The Kansas City metropolitan area has become a regional center for headquarters, with Farmers Insurance of Kansas in Olathe, Applebee's in Lenexa, and in Overland Park, Capital One Home Loans and the fulfillment center for Prescription Solutions, which is rapidly expanding.

Q. How about the already established industries?
We have always been strong in distribution/logistics because of our central location. We are working to improve the logistics infrastructure and are in the seventh year of a 10-year, $12.6 billion Comprehensive Transportation Program. Our Interstates 35 and 29 are part of the NAFTA corridor, and we offer four Class 1 rail carriers supported by 18 shortline railroads. A 1,000-acre planned logistics park in Gardner in Southwest Johnson County for Burlington Northern Santa Fe will feature a 350-acre intermodal facility. The project will be the third of its type in the country, and has the potential over the next eight to 10 years to generate thousands of jobs in logistics. After land acquisition and permitting, construction is expected to start this year.