City leaders admit error in Deciphera tax deal
City leaders didn't handle a tax rebate deal the way they should have - that's the word from Lawrence City Manager David Corliss on a series of closed-door sessions to keep a startup company from leaving town. Enlarge video
The city and county could be required to keep paying for a unique package of economic development incentives, even if Deciphera Pharmaceuticals moves its operations to another Kansas city.
Attorneys and others involved in crafting the deal confirmed those details on Friday.
Lavern Squier, president and chief executive officer of the Lawrence Chamber of Commerce, and City Manager David Corliss agreed that the city, county, Douglas County Development Inc. and the Lawrence-Douglas County Biosciences Authority would be obligated to pay $1.5 million of a $3 million grant even if the company moves out of the city.
The grant is being administered by the Kansas Biosciences Authority. The KBA is providing Deciphera with $3 million to purchase and improve a vacant building in the East Hills Business Park. The building will be used as the headquarters for the startup drug development company, and also will include significant laboratory space.
The Lawrence organizations have agreed to repay KBA for $1.5 million of the grant. The documents that were approved Tuesday without much public discussion included a clause that the local groups will be responsible for repaying the $1.5 million - over a 10-year period - as long as Deciphera remains in the state of Kansas. In other words, the company could move to Johnson County, and the local groups would still be required to repay the KBA.
"It is not the desirable result, but it is still palatable because we'll have the improvements that have been made to that building, and it should be a desirable building to attract business to the community," Corliss said.
More details also became available about the tax rebate program commissioners approved as part of the deal. Squier confirmed that the Lawrence school district will not be losing any tax dollars as a result of the rebate program. Instead, the district will be able to keep its share of the taxes that Deciphera pays.
But that means that the city, the county, Douglas Development Inc. and the local biosciences authority, will contribute additional money to make up for the school district keeping its full share of the Deciphera taxes.
How much the local groups will have to pay as part of the rebate program, however, is not known. That is because the program sets a cap on how much Deciphera will pay in property taxes during any given year. It does not set a cap on how much the local group will rebate in taxes. The amount of taxes owed on the building can't be known until area governments set their mill levies and the county appraiser sets the assessed value for the building each year.
Tax abatements also are open-ended commitments, but they usually do not involve local governments spending actual money out of their checkbooks. Instead, they usually involve forgoing future tax revenues.
City commissioners, though, have said they believe the property tax rebate program will cost less than $1 million over its 10-year life. That would keep the total local portion of the incentives package at or below $3 million, which commissioners have said they are comfortable with.
Comments
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merrill (anonymous) says…
Reschedule the whole event. That is the only right thing to do. Mayor Hack has a personal invvestment in this matter and Commissioner Bob Johnson has been involved with East Hills Business Park for years. If the deal falls through that's what happens when bad judgement takes precedent over proper procedure.
Bring it back for a complete review for the sake of transparency. There is no fast track policy on the books that anyone is aware of so far that is known. Apologies and explanations are not good enough for that is no assurance it cannot happen again. I respectfully submit that Commissioners Bob Johnson and Sue Hack recuse themselves from the entire process.
usesomesense (anonymous) says…
It appears to me that we (the City or County) is selling that big, empty 'Spec' building that Harris construction convinced the City (or County - can't remember which one - or maybe it was both) to build under the guise of "Build it and they will come" probably for less than what was paid to construct it.
"The KBA is providing Deciphera with $3 million to purchase and improve a vacant building"
That building is huge and I would bet that at least $2 million of that is just for the improvements.
It looks to me like it would be a good idea under this plan for Deciphera to improve and resell the property instead of stay here.
This CANNOT be an option. This is a fantastic example of why processes are in place. Public scrutiny (although sometimes over the top) can bring real potential problems to light that may keep taxpayers from losing millions of dollars.
I am OK with taking a gamble on high tech businesses in Douglas County - but there is no need to be reckless. If they're not willing to commit to not moving and taking the higher paying jobs with them we need to say 'no thanks'.
Godot (anonymous) says…
A city manager, a lawyer in public administration, who does not know the difference between policy and law is not qualified to fill the position.
Note that USD497 gets to keep its property tax levy; how was this determined? It appears that Weseman, and maybe the school board, were consulted, behind closed doors, before this deal was made. This stinks to high heaven.
terrapin2 (anonymous) says…
I am very disappointed in our City Commission for the way they have handled this whole situation. I can only imagine the conversations that have been held behind closed doors. It certainly sounds to me as though the Commission knew that there were lots of issues that would tick off the average Lawrencian, which might have slowed down, if not halted, this deal, so they knowingly avoided that firestorm before the agreement was accepted. Surely they knew all of this would come out and make them look like the bad guys! So their interests in making this happen must be worth quite a lot to them. I know for me personally it really stinks of s%^t to know that Sue Hack has a vested interest in seeing that this company receives a tax break. So what if she recused herself from the vote. Don't tell me she didn't encourage the other Commissioners to vote to approve this!
I agree with Merrill that they need to offer the residents of this fine city, which they represent, a chance to review the entire deal and be a part of the discussion!
At least I can sleep at night knowing that I didn't vote for Chestnut, Hack, or Dever!
Godot (anonymous) says…
terapin2, I agree with you; however, the vice mayor signed a contract with Deciphera. I doubt the contract had a provision for "do-over" if the citizens of Lawrence complained. Of course, since the details of the deal were not shared with the public, perhaps the only way we will find out is through discovery.
Godot (anonymous) says…
Regarding Hack's involvement, I do not know what her interest in this deal is, but if she was involved in these closed door discussions at any point, it does not matter that she "recused" herself from voting. Even through there were no adio tapes made of these back door meetings. surely minutes were taken, surely we can find out who attended, can't we?
OnlyTheOne (anonymous) says…
Recall election
toefungus (anonymous) says…
If closed door meeting occurred on official city business, the sunshine law could apply. Lawrence continues to fail at leadership.
BigPrune (anonymous) says…
Is Lawrence finally chipping away at its anti-business persona?
All of this controversy for the cost of one roundabout.
Priceless.