City has economic development options / LJWorld.com

Archive for Sunday, November 9, 2008

November 9, 2008

The fate of the former Farmland Industries plant isn't the only economic development issue beginning to heat up at City Hall.

The long-lingering debate of how to appropriately use tax abatements and other incentives will soon get more talk.

City staff members are beginning to solicit feedback from several economic development stakeholders on a variety of ideas related to economic development incentives.

Here's a look at some of the proposals, which all would require City Commission approval:

¢ Companies that don't live up to specific projections for new jobs or dollar investments would have their tax abatements reduced under a draft plan from Roger Zalneraitis, the city's new economic development coordinator and planner.

For the past several years, the city has technically had the ability to reduce tax abatement amounts if companies did not live up to projections they made when applying for the tax abatement. But the city's own policies have never been specific about when it is appropriate for the city to take action.

Under the proposed policy, if a company's projections ended up being off by 30 percent or more - for example, a company adds 60 jobs instead of 100 - the company would lose its entire abatement for that year.

The policy sets up a sliding scale that would reduce a company's abatement by 15 percent to 25 percent if a company's projections were off by an amount less than 30 percent.

In addition to being penalized for not meeting job projections, a company also could be docked for not meeting projections related to wages or capital investment.

¢ The model the city uses to measure the costs versus benefits of tax abatements could change. Zalneraitis is proposing a new model that could be run in-house rather than the current model run by Kansas University.

The model is used by city commissioners as they decide whether a company seeking a tax abatement could add enough to the local economy to justify a reduction in property taxes.

The proposed model could make it more difficult to justify tax abatements in the future.

That's because the new model counts the tax break as a cost to government. The current model does not. That's because it assumes a company wouldn't come to the city without the abatement.

Zalneraitis said other communities are mixed in how they treat the costs of incentives, and he said he expected the issue to generate significant discussion in Lawrence's economic development community.

Staff members will be soliciting comments on the proposals from stakeholders and members of the public during the next month. City commissioners are expected to discuss the ideas at their Dec. 9 meeting.

Discussion

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9 November 2008
at 7:45 a.m.

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merrill (Anonymous) says…

“Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (And Stick You with the Bill)”Pulitzer Prize-winning journalist David Cay Johnston joins us to talk about his new book, “Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (And Stick You with the Bill).” Johnston reveals how government subsidies,TIF,Tax Abatements and new regulations have quietly funneled money from the poor and the middle class to the rich and politically connected.But I'm asking the question in Free Lunch: Are you better off than you were in 1980? And on the surface, America is much better off. The country is more than twice as wealthy in real terms as it was in 1980. Per person, adjusted for inflation, the economy now puts out $1.70 for every dollar that it put out in 1980. Those are absolutely tremendous economic numbers.So how come we're not all really well-off? Why is it one-in-seven families has filed bankruptcy in the last twenty-five years? Why is it people are so mired in debt that television ads are just full of debt relief and take on more debt ads, sometimes at 99 percent interest? Why is it that so many people don't have health insurance and so many people no longer have a retirement plan?And by the way, the average income of the bottom 90 percent of Americans, what I call the vast majority, is smaller today than it was in 1980. And since the year 2000, when we really got serious about this tax cut business, the average income of Americans every year-2001, '02, '03, '04, '05-has been smaller than it was in 2000. There have been some gains in 2004 and '05, but they haven't gotten up to equal 2000. And of those gains in the year 2000-it's either '05 over '04 or '04 over '03-half went to people who make over a million dollars a year. What's happened is- http://www.democracynow.org/2008/1/18…
9 November 2008
at 8:10 a.m.

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merrill (Anonymous) says…

Our local government officials have no obligation to approve any new retail,housing or light industrial development. Without consistent indepth economic analysis, aka hard evidence, how can government officials make the correct decision. Who in the world makes up the tax incentives that are given away? Existing retail and residential owners? How is this fair? Are tax incentives necessary? Does Lawrence enforce tax incentive agreements?Why not present new projects, complete with indepth economic analysis, to taxpayers once a year on an economic growth ballot and let us taxpayers make decisions about our tax dollars? Every new housing,retail or light industrial project impacts Lawrence/Douglas County taxpayers thus makes each and every tax payer a stake holder. We need the right to vote on projects thus eliminating curious special interest influence.
9 November 2008
at 8:26 a.m.

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MandM (Anonymous) says…

I'm an Economic Development Director in another part of the state. It's good to see Lawrence looking at this issue. E.D. groups all across the state are looking at their incentive programs and more specifically “claw back” clauses to assure that businesses are living up to their promises for job creation and capital investment. I live in a smaller city than Lawrence. We use the Neighborhood Revitalization Program instead of tax abatements. Rather than giving a 100% tax abatement. We give a tax “rebate” and the maximum is 95% for the first three years. Then it changes to 80, 70, 60, 50 percent….decreasing each year for a 10 year period. With our model the local taxing entities never take a step backwards on taxes. They at least get 5% of any new construction or additional to a building. That's from day one. We also use this program for residential properties. But that's another story on not what is being discussed here. But either way whether its Neighborhood Revitalization or Tax Abatements. When it comes to incentives for busiensses there has to be bench marks set and a claw back clause included in the contract. In my humble opinion.
9 November 2008
at 8:27 a.m.

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tonythetiger (Anonymous) says…

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9 November 2008
at 8:28 a.m.

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MandM (Anonymous) says…

I forgot to mention. The reason local taxing entities don't go backward on taxes with the Neighborhood Revitalization Act is because the base amount of taxes on the property before any improvements are made, remains the same. That tax is still paid. It's the improvements such as an expansion or new construction that is counted for the tax rebate.
9 November 2008
at 8:52 a.m.

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merrill (Anonymous) says…

Placemakers was brought to town at the request of Mayor Hack approximately three years ago. They left behind some very good ideas in addition to some unwanted news …30% over built in retail based on their in town research. Yet some commissioners are choosing to ignore that fact based on no current research to counter that finding.Frankly it seems to me major policy issues should be put to the voters in order to maintain a bit of continuity. Why is Lawrence appointing people to a Planning Commission who have no urban planning background/experience.These are tools for making growth decisions which should be applied in a detailed fashion to a specific applicant:*Retail Impact Study*Economic Impact Study*Environmental Impact Study*Traffic Impact Study*Cost of Community Services StudyFailing to use these tools creates anxiety, tax revenue problems and inflated tax bills to property owners. I would rather see growth churning along maintaining my property taxes taxes at a normal cost of living increase(4%) in addition to healthy economic growth taxes picking up the rest of the tab without sales tax and mill levy increases.After 25 years of expanding the tax base what exactly is creating a need to reduce services? Where is the money? Our city's current budget crunch could easily be tied directly to infrastructure expenses needed to serve new housing developments. The community is way over extended in this regard. If residential growth paid for itself and was financially positive, we would not be in a budget crunch. But with increased numbers of houses you have increased demand on services, and historically the funding of revenues generated by residential housing does not pay for the services, they require from a municipality. Bedroom communities do not pay back.
9 November 2008
at 4:14 p.m.

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MandM (Anonymous) says…

hawkperched, I'll admit we are different than Lawrence. We can do the Neighborhood Revitalization program county wide and in every city/community in our county. You have to find an area that can be considered blighted or struggling. Lawrence can't do that as freely as we can do. But if they have a way of doing it then do it. Our two largest employers are doubling the size of their facilities. They had a chance to use tax abatements. The decided to use Neighborhood Revitalization because it was quicker, less paper work and more positive politically because they are paying “some” taxes on the improvement right from the start. It also ramps up on the tax rolls over time which helps the local taxing entities from the start. TIFF could also be a tool for your city to consider. Not always popular but it helps pay for the infrastructure needed for development without it coming from the city budget. Again just IMHO

9 November 2008
at 4:39 p.m.

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MandM (Anonymous) says…

hawk, I was in Atchison County when they started their program. It was the first in the state do put the program in place on a county-wide basis. When I moved away I started doing the same thing in my county. I hesitate to mention TIFF but it is an option for Lawrence as well. Tax Increment Financing is a good tool for some larger cities like Lawrence but I don't know if they have been using it there. Might be worth a search through the LJ World files to see.
20 November 2008
at 3:55 a.m.

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toughangel41 (Anonymous) says…

Progress vanguard out in the east hills is closing the doors at the end of December, what as a business community are we going to do for the 50+ people that are being put to the curb? are we going to keep there skills in Lawrence or let them drive to kc for work? think about that impact…