Two new provisions added to the Deciphera agreement approved this week:
¢ Douglas County Development Inc., the city, county and Lawrence-Douglas County Biosciences Authority will provide Deciphera with up to $500,000 in cash, if the company reaches certain employment milestones over the next 10 years.
¢ The maximum amount of property taxes that the company will pay in any given year are capped. The amount ranges from $50,000 to about $145,000 per year, depending on how many employees the company has. Any tax payment above those amounts would be repaid to Deciphera.
Call it a de facto tax abatement.
Deciphera Pharmaceuticals - a promising startup company that could launch Lawrence onto the bioscience industry's big stage - will receive a property tax break for the next 10 years on a building it is purchasing at the East Hills Business Park.
But unlike other Lawrence companies that have gone through an oftentimes contentious process to receive a tax abatement, Deciphera went through none of the normal review processes.
Instead, all it took for Deciphera to receive its tax break was one simple motion authorizing the vice mayor to sign a packet of documents containing more than 20 pages of legal language. One of those pages contained a single paragraph authorizing the unique "tax rebate" - not tax abatement - provision.
The concept of the tax rebate - believed to be a first for Lawrence - was never publicly discussed during Tuesday's City Commission meeting.
But several city commissioners defended the process Thursday.
They said that the city needed to move quickly to keep Deciphera, a drug development company, from moving to a Johnson County community that was offering an incentive package to lure the bioscience company.
"I think it would have been tragic to have lost Deciphera," said Mayor Sue Hack, who technically abstained from Tuesday's 4-0 vote because she has a financial interest in Deciphera. "It has the potential to really jump-start Lawrence and Douglas County into the bioscience world.
"There is no question in my mind that it was in the best interest of the community."
By city ordinance, a cost-benefit analysis is required to be conducted for all tax abatement applications. All tax abatements also are required to be reviewed by the city's Public Incentives Review Committee. Neither of those reviews took place, because no standards are in place for a "tax rebate."
Commissioners, though, struggled to explain why staff members did not make a presentation outlying the unique property tax rebate program. Typically, most agenda items have a staff memo summarizing issues. This agenda item did not.
"I wish I could answer that, but I can't," Hack said of why a staff report wasn't provided or a presentation wasn't made detailing the provision. "I'm not coming up with an adequate reason for that."
City Manager David Corliss was unavailable for comment Thursday.
Originally, the agenda item was part of the consent agenda, which means commissioners don't discuss it all. It was placed on the regular agenda at the request of Commissioner Boog Highberger, but that still did not spark a detailed explanation of what commissioners were approving.
Highberger said he was aware of the property tax rebate provision when he voted for it. He said he would have rather had the Deciphera deal go through the normal process for a tax abatement, including a cost-benefit analysis. But he acknowledges that he did not push for that.
"I'm not entirely comfortable with how it was all handled," Highberger said. "I may have dropped the ball on this."
Douglas County commissioners on Wednesday also approved the incentives package for Deciphera, including the tax rebate program. But unlike the city, county commissioners did discuss the tax rebate program in an open meeting.
"It was openly discussed on our end of the street," Douglas County Administrator Craig Weinaug said.
Several commissioners confirmed Thursday that they were briefed on the property tax rebate program as part of a series of closed-door executive sessions.
State law allows governing bodies to discuss certain matters behind closed doors - including the selling and buying of real estate by government - but it wasn't immediately clear whether a property tax rebate program is the type of issue allowed. The rebate program was part of a larger discussion related to selling the East Hills Business Park building at 3813 Greenway Drive.
The rebate program is part of a much bigger incentives package that is being offered to Deciphera - which is expected to produce 150 or more high-tech jobs over the next 10 years. The deal began to take shape back in January when the city agreed, in an open meeting, to partner with the Kansas Biosciences Authority to convert a vacant building at the East Hills Business Park into a magnet for a biosciences company.
As part of that deal, the city, county, Douglas County Development Inc. and the Lawrence-Douglas County Biosciences Authority agreed to pay the Kansas Biosciences Authority $3 million over 10 years to compensate the authority for buying the building and spending millions to build lab space that would make it attractive to bioscience companies.
But the deal changed this month when Deciphera - which at one point had planned on leasing space in the building from KBA - decided to purchase the entire building. That required a change in the agreement approved in January.
Instead of investing the money directly into the building, KBA will give the money to Deciphera to use to purchase and renovate the building. But the amount of money coming from the city, the county, Douglas County Development Inc. and the local biosciences authority decreased from $3 million to $1.5 million.
But two new provisions to the agreement were added. The local groups will provide Deciphera with up to $500,000 in cash, if the company reaches certain employment milestones over the next 10 years.
The second provision added to the agreement was the property tax rebate program. The amount of money that Deciphera stands to net from the rebate program is unknown because the program does not cap the maximum amount that can be refunded to the company.
Instead it puts a cap on the maximum amount of property taxes that the company will pay in any given year. The amount ranges from $50,000 to about $145,000 per year, depending on how many employees the company has.
But City Commissioner Rob Chestnut said he's confident the amount of money that will be paid to the company for the rebate program won't cause the total incentives package to top the $3 million that the local groups had agreed to in January.
All five city commissioners said Thursday that is why they felt comfortable moving forward on the project with limited public involvement.
"I think we were just trying to use the same amount of money that was approved by the commission in January," Chestnut said, "but restructure the deal in a way that it makes sense for everybody."