Report / Kansas City
Heartland of gold
This month in our series on emerging business hubs, we visit Kansas City, Missouri, where big companies and small start-ups are investing in America’s heartland. Meanwhile the region’s low prices are also luring in new residents. But if the city really wants to rebrand itself, some of those small-town attitudes need to be addressed.
When Sean Hopkins first visited Kansas City for a job interview, he had no clue what to expect. The stereotypes rolled through his mind: farms, cornfields, dorothy and The Wizard of Oz. Upon arrival, though, California and Florida- bred Hopkins was pleasantly surprised.
“I loved the feel and the flavour,” he says. “Kansas City has something to offer that a big city doesn’t – a slower pace of life that’s good for the soul.” It’s a typical reaction from outsiders who relocate to this mid-sized Midwestern city, and a sentiment shared by hundreds of thousands who were raised in the region and have never left.
The 33-year-old also followed a path trodden by many fellow newcomers: founding a business. Hopkins now runs DXD (dimension X design), a $2.7m (€1.8m) revenue company that handles projects such as sports scoreboard graphics and interactive websites. He has taken advantage of cheap overheads to undercut the rates of coastal companies. About 70 per cent of DXD’s business comes from outside Kansas City.
Small, fast-growing companies such as DXD are one part of a civic revival in the Kansas City region, which encompasses 18 counties on the border of two states, Kansas and Missouri (contrary to many outsiders’ beliefs, Kansas City is actually in the state of Missouri, not Kansas. But to confuse things further, just across the state line to the west, there’s a satellite city called Kansas City, Kansas. Locals calls the pair, which share a common border, KCMO and KCK.) Public and private investments are renewing the once decrepit downtown of KCMO: the “Crossroads art district” is the local cultural hot spot, and traditional industry strongholds, including animal health and logistics, are expanding.
Kansas City lies in the middle of america’s heartland, near both its population and geographic centres. Three interstate highways and two rivers con- verge here, and companies house call centres in the region because employees’ accents are considered to be location-neutral. From the edges of the city, you can see for miles across sparse prairie.
As recently as the mid-1990s, down-town was dead. Then-mayor Kay Barnes helped corral business leaders and legislators toward an urban renewal fast-track that’s beginning to bear fruit. today, key downtown tenants include tax preparation giant H&R Block, which opened a €92m headquarters in 2006, and Hilton hotels, which renovated the President hotel after it had been empty for almost a quarter-century (things don’t move fast around here).
Though the new Sprint Center failed to attract a professional sports team, it’s pulling in heavy sales from acts including country singer garth Brooks, who opened the venue with nine sell-out shows. (Yes, dorothy, you’re still in Kansas). The Kansas City Power & light district attracts thousands of visitors who come to eat out and attend concerts. These changes helped to increase the downtown population by 39 per cent to 14,600 between 2000 and 2007. It’s a figure that looks poor by European standards, but at least the graph is heading in the right direction.
Neighbourhoods all over the city are getting a similar makeover: The Nelson-Atkins Museum of Art unveiled its Bloch Building to rave reviews in 2007. Village West, a €383m development, with a minor league ballpark and the Kansas Speedway, has helped to resuscitate Kansas City, Kansas (KCK) just across the Missouri border.
In the Crossroads area, chef Rob Dalzell, 33, and his wife Margarita, 30, manage a mini food empire. In the past four years they have opened three restaurants, and are in talks to turn one of them (Chef Burger) into a chain. After meeting in Santa Barbara, Philippines-born, Los Angeles-bred Margarita and Missouri native Rob chose to settle and start up in inexpensive Kansas City.
“Everything is one-third of the price: goods, workers’ compensation, supplies,” says Rob. “You’re not spending nearly as much to live.”
he cycles to work from the couple’s €168,000 house. Because farms are nearby (some inside city limits), fresh food is fairly cheap. Dalzell wishes more people took advantage of farmers’ markets, but “buying local” isn’t part of the ethos for most citizens – this is not surprising, as the region is a central hub of the american mass market.
In Kansas’s Overland Park, YRC Worldwide, the €6.5bn transportation company that owns the trucking line USF, is one of several companies that route billions worth of goods through the area’s freeways, rivers, rail yards and airports. Kansas City is the top rail centre by tonnage and the third-largest trucking centre in the US and Toys“R”Us and Harley-Davidson house production and distribution facilities here.
Technology companies have been quick to capitalise on this logistics prowess: Garmin International, based in Olathe, made €2bn in 2007 by selling devices such as in-vehicle GPS navigators. Freightquote.com, which is headquartered in Lenexa, reached €253m in revenue last year acting as a sort of Expedia for small business shippers.
Like many US regions, Kansas City touts itself as a biotechnology hub and seems to be making progress. The Stowers Institute for Medical Research opened in 2000 with a €1.3bn endowment. It has lured 400 world-class scientists, including neurobiologist Debra Ellies.
Though Canadian-born Ellies misses ethnic cuisine, she has adapted to the relaxed lifestyle of Kansas City. “Where else could I build a house and have a convertible?” she jokes. having left Stowers, she has received €502,000 in grants, stipends and tax credits to set up her own research business looking into building bones for osteoporosis sufferers. Joerg Ohle, president of Bayer Animal Health, says other corporations are already relocating here. Fort Dodge Animal Health is consolidating research and development in a €26m olathe facility. Kansas is also a finalist for a €300m national biodefence lab. and Kansas City area development Council President Robert Marcusse, claims more businesses are in the relocation pipeline than at any time during the council’s history.
Kansas City has long been known as a “cowtown” – and despite the label’s provincial connotation, there’s good reason for it. About 45 per cent of feed cattle and 40 per cent of US pigs are reared within 350 miles of Kansas City.
That’s why the city often seems less than cosmopolitan. AM radio stations broadcast right-wing talk shows or religious programmes and when voters approved a constitutional amendment to ban gay marriage, liberals put bumper stickers on their cars saying “Kansas: As bigoted as you think” – a play on the state’s “As big as you think” slogan.
But there’s also an “each to his own” attitude in the metro area. “This community is comfortable with the guy driving the pickup truck and the guy that drives the Mercedes,” insists Marcusse. “There’s a place for both, even at the biggest corporations.”
Population: 447,306 (city)
Income tax: 6.45 per cent above €20,000 in Kansas; 6 per cent above €6,040 in Missouri.
Corporate tax: 4 per cent with a 3.35 per cent surtax for income in excess of €33,550 in Kansas.
Bonuses: Kansas Enterprise Zone gives businesses €1,000 income tax credit for each new employee hired and €670 for every €67,080 in capital investment.
Median household income: €27,450.
Movers & shakers
Matthew Abbott, a soft-spoken 36-year-old native of Quincy, Illinois, got into property as a college student, buying up local rental properties. Around 2002, he saw young professionals flocking to downtowns and began looking for a second-tier metropolis following the same demographic path. State and federal redevelopment tax credits lured Abbott to Kansas City, where he has four developments in the works. The €22m The Manhattan, a 221-condominium complete with on-call limousines, a cinema and penthouse pool deck, is 99 per cent sold.
Kansas City International, renovated in 2004, has some of the lowest prices and highest customer satisfaction of any mid- sized American airport. Though its services are limited to North America, a flight out of KCI can reach any US city within three hours. Kansas City contains more freeway miles per capita than any metro area in America, and light traffic means trips across the 826 sq km metropolis take less than half an hour, even during rush hour. Residents rely heavily on cars but that may change if voters approve a 14-mile light rail this autumn.
Live the life
For the most part, Kansas City residents share Midwestern kindness and family values, but lifestyles vary widely. Some spend the first Friday of each month trolling art gallery openings at Crossroads; others love nothing more than catching a Nascar race at the Kansas Speedway in nearby Wyandotte County. Suburban-style chains including The Cheesecake Factory do brisk business, as do high-end restaurants such as 2007 James Beard Award nominee Colby Garrelts’s Bluestem. Barbecue is huge too – Oklahoma Joe’s has people queueing out the door.
The area boasts jaw-droppingly low housing prices: the average home costs €87,253, with one- bedroom condos available for half that much. Yet mansion-like homes in ritzy places such as Mission Hills go for several million dollars. The new Kansas City Power & Light District added nine square blocks of restaurants, retail and office space, and an open-air concert pavilion to the heart of downtown. Developers looking to capitalise on the revival have added more than 2,000 new loft and condo units to the area, with another 1,250 planned or under construction.
Five fixes to improve the city
01 Public transport – Outside downtown, buses are rare and trains don’t exist. Better transit networks would make it easier to walk instead of driving. 02 Identity – If developers planned better, neighbourhoods would keep their Kansas City feel. 03 Diversity – Revitalised African- American areas often look lily white. Civic leaders should make sure minorities share in the gains. And a more liberal attitude towards the gay community wouldn’t go amiss. 04 Housing – As in many American cities, few families live downtown. More suitable housing may change that. 05 Fiscal responsibility – Former Mayor Kay Barnes revived downtown with public investments. New Mayor Mark Funkhouser, elected in 2007, must keep his campaign promises.