Archive for Thursday, January 14, 2010

Better incentive

January 14, 2010


There’s more than one way to attract a new company to Lawrence, and the incentive Lawrence officials are offering an Ottawa-based helicopter business is both creative and has terms that potentially are easier to enforce than traditional tax abatements.

A deal to bring Hawkeye Helicopter to a new facility at the Lawrence Municipal Airport was delayed at Tuesday’s Lawrence City Commission meeting, but both parties appear confident that it can be finalized soon. If it is, the company will move ahead with a $700,000 hangar and office building that is expected to provide up to 10 new jobs in the next five years.

The land on which the new building is constructed is owned by the city and will be leased to Hawkeye. Rather than give the company a more traditional property tax abatement the city is negotiating a lease that will allow Hawkeye’s payments to decline as its number of employees rises. The company plans to move four to six employees to the new facility immediately. If its number of full-time employees rises to eight, its rent would be cut by up to 98 percent during the first five years of the lease and up to 50 percent in the second five years.

One of the biggest drawbacks to giving new companies tax abatements is the difficulty of enforcing the terms of the abatement agreement. The number of jobs a company expects to bring to the community usually is a prime consideration in any tax abatement plan, but the city has almost no recourse if the company fails to meet those goals. The city could offer tax rebates to companies after they met their employment projections, but tax abatements, with no clear consequences for not meeting employment goals, have been the traditional choice.

Some concern has been expressed about the fact that, unlike the city’s tax abatement policy, Hawkeye’s agreement doesn’t require its jobs to pay a “living wage,” defined as a wage that is 130 percent of the federal poverty level. In 2009, that was $11.44 per hour, which adds up to about $24,000 for 52 40-hour weeks. Hawkeye is expected to pay average wages of $36,000 per year, more than meeting that requirement.

The tax incentive policy requires a living wage, but that doesn’t do local workers much good if the abated companies don’t fulfill their job creation goals. The agreement with Hawkeye will require the company to meet job expectations before receiving the full benefit of its incentive.

It’s good to see city officials taking a different approach on economic development incentives that may benefit both companies and local taxpayers. Perhaps the Hawkeye incentive will suggest changes to the city’s tax abatement policy to make sure companies getting a property tax repay local taxpayers by producing the number of jobs they have promised.


Richard Heckler 8 years, 4 months ago

How exactly does this deal help USD 497?

How does it help taxpayers on the long term?

Isn't this a back door tax abatement?

How can the city or county afford tax abatements in an economic displacement economy?

Economic displacement is not economic growth.

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