Lawrence companies receiving tax abatements need to get ready to justify the tax breaks they're receiving.
A city advisory board agreed Wednesday that they likely will begin calling in some of the 12 companies that receive tax abatements to explain why their job, wage or investment levels are below what they projected when they applied for the tax breaks.
"I think what you'll find is that communities need to be firm," said Kirk McClure, a member of the city's Public Incentives Review Committee. "If they don't, they will have large amounts of noncompliance."
Commissioners received data about jobs, wages and investments from each of the companies earlier this year. McClure said the numbers showed several of the companies have fallen significantly short in one of the three areas. Members of the advisory committee, though, have disagreed on what to do if a company is found in noncompliance. McClure said the city should reduce the company's tax abatement until it comes into compliance.
Committee members Wednesday tentatively agreed that may be an option. But first they want to give the businesses a chance to explain why they haven't met projections.
"It is a subjective issue," said Mike Maddox, another committee member. "If they aren't complying, bring them in and let them say why. It could be related to Hurricane Rita or something else. Or there may not be a good excuse, and if that is the case, then maybe they shouldn't have the abatement."
Committee members only mentioned one company that they definitely want to hear from. Staff members were directed to send a letter to Prosoco Inc. requesting it provide information about the minimum wages paid for each job category. That information was required as part of the annual paperwork each company must fill out. Committee members decided to give the chemical manufacturer 15 days to comply.
Journal-World attempts to reach Prosoco officials for comment were unsuccessful.
But other companies likely will be asked to explain their businesses as well. According to the city's annual tax abatement report, seven companies had fewer employees than projected on their tax abatement application. But three of the companies are under by only one, and another by four, employees. Committee members said they may not require companies that are off by small amounts to make a presentation.
The company off by the most is DST Systems Inc. The financial services company had 29 fewer full-time employees than projected. Other companies below projections included Prosoco and Reuter Organ, which were off by 10 and 17 respectively.
Committee members briefly discussed creating a new formula to determine how much a company's tax abatement should be reduced if it's not meeting projections. Communities such as Manhattan, Emporia and Wichita all use formulas that allow tax abatements to be reduced. In Manhattan, for instance, if a company's job totals are only 60 percent of projections, the company only receives 60 percent of the agreed abatement.
Mayor Boog Highberger, chairman of the committee, said he hoped the formula idea would re-emerge later.
"With the system we've agreed upon, I'm concerned every decision becomes a political one," Highberger said.