A Lawrence-based manufacturer of computers is giving up its property-tax break, acknowledging that the company can’t keep enough employees on the payroll to justify the savings.

Microtech Computers Inc., 4921 Legends Drive, has agreed not to take advantage of its 50 percent tax abatement on real estate and equipment, a break granted for its $2.1 million expansion project in 1997. Back when Lawrence city commissioners approved the tax break, Microtech had 45 employees and plans for hiring up to 10 more with the expansion to a new location on Legends Drive.

But earlier this month, Microtech acknowledged that it simply couldn’t keep up with the optimism outlined in its abatement application. The acknowledgment comes as members of the city’s Public Incentives Review Committee have criticized companies that have not kept up with their employment commitments.

Microtech this month paid $60,438.46 in taxes on its real estate and personal property for 2005 – twice the amount owed – because of sagging employment. The company had 39 employees a year ago, and has yet to report numbers to city officials for this year.

“Due to the market condition change, our focus on high-end computer systems, and increasing productivity, we can’t keep the minimum requirement of eight new jobs as of (the) 1997 level,” said Mike Zheng, Microtech’s owner, in an e-mail to city officials. “Therefore, we’ll pay the full amount.”

Microtech Computers Inc. no longer wants to take advantage of a tax break approved by Lawrence city commissioners in 1996, when the company was planning its move to this site at 4921 Legends Drive, an estimated .1 million project. The company has been receiving a break on 50 percent of its annual property taxes, but this month agreed to pay the full amount - 0,438 - because it has been unable to keep its employment levels as high as projected at the time of the abatement's approval.

Frank Reeb, city clerk, said he couldn’t recall any company in Lawrence giving up a tax abatement voluntarily. While some companies have agreed to pay off industrial revenue bonds – financing vehicles that enable tax abatements to be used – before they reach maturity, Microtech’s decision to forego actual tax savings represents a first.

“I think it’s positive,” Reeb said. “In my view, they are sort of holding up their end of the bargain.”

Zheng was out of the office for the holidays and unavailable for comment.

The company has been a supplier of computers to city, school and state governments, and previously has supplied “clusters” for supercomputers. But 15 key employees of Microtech’s Atipa Technologies division – which handled such supercomputer business – left the company last year to form their own operation, Team HPC, in Eudora.

Zheng, in his e-mail, thanked city officials for their support during the past eight years, and indicated that the company would endure without the tax break.

“We’ll continue to provide the latest technologies and best service/support to our customers,” he said.

Microtech’s decision leaves other officials with a problem of their own. Paula Gilchrist, Douglas County treasurer, said that while the county had deposited Microtech’s latest check, it would not be able to keep the $30,219.23 overpayment.

The county billed the company for $30,219.23 in taxes, and cannot keep anything but $30,219.23 in taxes – unless city officials can work out the proper paperwork to rescind a tax break granted eight years ago.

“We will return it,” Gilchrist said. “We cannot accept anything but the billed amount. : We did not write the contract, so we cannot void the contract. We’re bound, so we will wait to see what everybody wants us to do.”

Folks in the treasurer’s office have tried three times this month to contact Microtech officials about the overpayment, but have yet to hear back. For now, Gilchrist is pleased that Microtech appears to be willing to follow the terms of a deal, but fears what it might indicate.

“It’s very honorable – very honorable,” she said. “But it’s too bad. It’s not a good sign.”