Archive for Sunday, December 6, 2009

Worthwhile risk

December 6, 2009

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Just about any business venture involves a certain amount of risk. Getting a return on an investment obviously involves being willing to make an investment in the first place.

With that in mind, Lawrence and Douglas County officials are poised to take a reasonable step by purchasing and improving the former Oread Labs building in an effort to hang on to one local pharmaceutical company and attract other biotech firms.

The building, located at the intersection of Bob Billings Parkway and Wakarusa Drive, currently is the home to CritiTech, led by Sam Campbell, who has been active in the Lawrence business community for many years. The firm, which is seeking a breakthrough on products that would reduce the side effects of some cancer-fighting drugs, was considering leaving Lawrence in search of expanded lab space.

The desire to keep CritiTech was the impetus for a plan for the city and county to purchase and remodel the existing lab building at a cost of about $2.9 million. Both city and county commissioners have supported the idea, and the Lawrence City Commission is scheduled to consider actions on Tuesday to authorize general obligation bonds to purchase the building.

If all goes as planned, those bonds will be repaid with income from leasing the building to CritiTech and at least one other tenant. The city and county will each be responsible for interest payments of about $20,000 per year over the 25-year term of the bonds. The community also will reap benefits in the form of increased jobs and wages feeding the local tax base if the project meets its projections.

The key phrase, of course, is “if all goes as planned.” No second tenant is committed to fill the space not used by CritiTech. There also are no guarantees that even CritiTech will stay in Lawrence for 25 years, but Campbell’s long history and strong ties in Lawrence make that more likely.

If CritiTech leaves, the city and county still will have a building it can market to other bioscience firms, but it also will have a debt to pay, with or without the assistance of lease income.

That being said, in this day and age, investing in the west Lawrence property is the kind of risk the community really can’t afford not to take. If we want to sell ourselves as a good home for bioscience ventures, we must provide the support and facilities those businesses need. The excellent bioscience research being done at Kansas University is a strong selling point for Lawrence, but it must be matched by economic development resources that support companies that want to use that research in commercial ventures. If Lawrence and Douglas County don’t provide that support, we can be sure that some other community will.

If, as expected, city and county officials move forward on this plan, every taxpayer in Douglas County essentially will become an investor in CritiTech and any other firms that share the west Lawrence space. Hopefully, that knowledge will provide added incentive for the leaders of those firms to make sure the public realizes a good return on its investment.

Comments

in123 5 years, 5 months ago

The Sam Campbell lead group bought the building for $900,000 in 2002 with the same plan to rent space to bio start-up companies. They were not able to keep the space occupied. How is the city and county going to be able to attract companies that the current owners could not?

The real story here is how did a building that needs $600,000 in repairs and problems with occupancy suddenly become worth $2.3MM when it has been assessed at $1.4MM and originally purchased for $900,000? Very poor negotiations by the local government!

Southwester 5 years, 5 months ago

Put it to a public vote, as we were forced to vote on public transportation...

just_another_bozo_on_this_bus 5 years, 5 months ago

"The real story here is how did a building that needs $600,000 in repairs and problems with occupancy suddenly become worth $2.3MM when it has been assessed at $1.4MM and originally purchased for $900,000? Very poor negotiations by the local government!"

Indeed, this is the elephant in the room that is continually ignored. And as long as it is ignored, it points to the possibility that it's not "poor negotiations" by local government, but rather a sweetheart deal, at taxpayer expense.

If so, while it's obvious what benefit the sellers get, what is the quid pro quo (if any) for taxpayers for handing out this apparent $900,000 windfall?

cowboy 5 years, 5 months ago

Hold on to your shorts lawrencians !

Not only are we investing in CritiTech but getting ready to approve 1.4 million for the dilapidated BNSF station.

Seriously if this is the best that Lawrence can do in eco devo why bother. Give bozo and I 3 million. we'll buy some buildings and start up a business incubator for small businesses that actually generate jobs and sustainable businessses.

Richard Heckler 5 years, 5 months ago

The city commissioners are all business people who promised to be good stewards of our tax dollars.

None of them promised to be reckless spenders of OUR tax dollars to bail out local investors who made bad choices. USD 497 just made a irresponsible purchase. If either bodies had promised to take such risks the voting taxpayers would not have elected them.

None of them would buy such a risky purchase with their own dollars. So why are they risking MY TAX DOLLARS without my permission?

Richard Heckler 5 years, 5 months ago

Local voters need the power to vote on new projects that which impact our tax bills and our cost of living which is most every agenda item with the city commission. Our governing body,the city and planning commissions, are loaded with conflicts of interest.

USD 497,City Commission and County Commission purchases of real estate need approval of the taxpayers.

I say voting taxpayers can make the most fiscal responsible decisions. Certainly cannot be anymore irresponsible. Give taxpayers power over their tax dollars and the ability to create economic growth NOT economic displacement. This vote can happen every second Tuesday in November.

Tune in on Tuesdays at 6:45 PM to see what elected officials are doing. The same goes for the school board. All governing bodies NEED very active watchdogs.

Over built retail is anti economic growth and bad for business = more irresponsible government decisions.

It is imperative that communities conduct market capacity studies to understand their market potential, before any vote can be taken on USD 497, retail,residential or light industrial proposals.

Communities are increasingly demanding applicants to underwrite the cost of an independent analysis to determine the market capacity and the economic impact.

Citizen taxpayers deserve to know how new development will impact USD 497, property taxes, sales tax revenue and other businesses in the community.

All new development is often mistaken for economic development when instead it is likely promoting economic displacement instead of economic growth thus reckless spending of tax dollars. Generally the people it affects the most are least likely to understand it.

Could this be a reason for our extraordinarily high taxes? Could this be a reason Lawrence is the most expensive place to live and do business in Kansas?

The big box corporations are waging a war of indoctrination. They need us as accomplices in the destruction of our own hometowns.

Every developer that comes before a City or Planning Commission make their projects sound like they were written in Lake Wobegon where all the site plans are good looking and the economic impacts above average.

The symptoms of retail saturation are everywhere aka empty buildings = economic displacement

Our governing bodies must remember there are still only so many tax and retail dollars available in any community and Lawrence is but a small town surrounded by established commercial competition aka kcmo/joco ,Olathe,The Legends and Topeka Metro.

Richard Heckler 5 years, 5 months ago

Paying twice or three times the price for a piece of property may be a back door tax abatement???

Jerry Harper 5 years, 5 months ago

If you want a public vote on the city getting into the real estate business, see if the governing law doesn't allow for a protest petition and vote. Most capital projects do.

Good thing that the city is rid of those 'smart growth' commissioners. These tightfisted business types now running the show are doing a bang up job.

KU_cynic 5 years, 5 months ago

Key questions that the LJW opinion piece does not address:

  1. Should the City of Lawrence be in the business of owning and managing commercial property? Why?

There are no shortage of commercial property owner/managerrs in this town who would be willing to acquire this property for a reasonable price (see point #2 below) and rent it to CritiTech and other tenants. Why does the city have to perform this economic function with tax payers' money?

  1. If the answer to question #1 is "Yes, because . . . .", then the question becomes "Is the price right?"

The city is not asking for a professional appraisal for the value of this property. Shouldn't it be insisted on? Doesn't the disparity between the assessed value of the property (< $1.5 million) and the transaction price proposed to the city (>$2.3 million) raise obvious red flags that any ethical governmantal body should address?

And finally,

  1. If the city commission believes that subsidies and give-backs are appropriate to retain CritiTech and attract similar companies, aren't there more transparent and less risky ways to subsidize than using the city's debt capacity and tax base to acquire real property?

These are obvious questions to any thinking person.

Why does the city commission and the LJW give in so easily to what seems like an overtly corrupt deal?

KU_cynic 5 years, 5 months ago

My prior comment didn't post as written:

The assessed value of the property is less than $1.5 million, yet the proposed transaction price is greater than $2.3 million.

Smells fishy. Probably is.

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