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Archive for Thursday, November 30, 2000

DST wants tax breaks

Financial firm seeks $9 million in bonds for Sallie Mae deal

November 30, 2000

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DST Systems Inc. is asking for tax breaks to help finance its takeover of Sallie Mae's loan-servicing center in Lawrence.

Kansas City, Mo.-based DST is asking the city of Lawrence to issue $8.95 million in industrial revenue bonds for the project. The tax-exempt bonds would be used to buy the $5.55 million building, cover $2 million of construction and purchase $1.45 million in equipment.

When Sallie Mae shuts down the center Dec. 22, DST will be there to hire as many of the 250 displaced employees as possible, said Tom McGee, vice president for DST Realty in Kansas City. And that's not all.

"If we can make this facility work for us favorably, we will use it as a base to grow our presence beyond the immediate plan by adding onto the existing structure so that up to 1,000 new employees of DST may be in the facility," he said in the company's application filed this week at city hall.

When announced two weeks ago, the sale to DST was hailed by Sallie Mae officials as a "perfect marriage," given the financial company's ability to offer Sallie Mae workers comparable jobs at existing or higher wages. Some Sallie Mae workers already have been switched to the DST payroll.

Now city officials must determine whether giving DST tax breaks would serve the public's interest.

Mayor Jim Henry said he considers the incentives critical to landing the financial services giant, which already has about 5,500 employees in the Kansas City metro area. The Lawrence center at 2000 Bluffs Drive would start with up to 350 employees, cover 52,000 square feet and keep professional jobs in town.

Still stinging from American Eagle Outfitters' decision to move a planned distribution center to Ottawa from Lawrence, Henry said Lawrence couldn't afford to lose DST.

"It's like buying a car," Henry said. "A lot of people do their best job of dealing, and if a dealer up the road has the same car at a better price, they will go up the road.

"I don't want that to happen. I want to be the dealer that gets the deal."

DST is asking the city to:

l Freeze the property's current taxes for five years. The $102,500 annual payment would remain fixed through 2006.

l Leave tax exempt the personal property acquired from Sallie Mae such as computers or other items through 2006.

l Tax at only half the usual rate the $1.45 million in new equipment, including as much $500,000 in new furniture.

l Commit to rebating half the taxes that would be assessed on a building expansion for 10 years, provided DST hires more than the 250 employees displaced by Sallie Mae's closure.

DST's request was forwarded this week to Kansas University's Public Policy Institute for review, and its findings will be forwarded to the city's Administrative Review Committee for a recommendation.

The request ultimately would be forwarded to the Lawrence City Commission for a decision.

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