Archive for Tuesday, December 6, 2011

Too big a risk

December 6, 2011


To the editor:

The hotel proposed at 900 N.H. has become controversial. At a recent meeting, the developers indicated that they plan to request tax-increment financing (TIF) for the project. With TIF funding, the city provides funding for development projects, in effect “betting” that tax revenues will increase sufficiently that the city can recover its investment later.

Consider an example. Washburn-Lane Parkway Renovation LLC was granted $5 million in TIF funding in 2006 to create apartments, town homes and retail space in the College Hill district of Topeka. However, only slight increases in tax revenues resulted, so Topeka is not recovering its money. The town homes are empty, the apartments 60-70 percent occupied and retail space mostly empty. The developers are not even paying their property taxes: $130,196.77 unpaid at last report (Topeka Capital-Journal, Oct. 28, 2010). Lawrence’s own Douglas Compton is among the developers.

The proposed Lawrence development includes a hotel, apartments, restaurant and retail space. Compton and colleagues are confident that it will increase tax revenues enough to merit TIF financing. And if not, as in Topeka? The city would eat the losses. Translation: If Compton’s development fails, the people of Lawrence pay for it. No TIF financing has as yet been requested, but the developers indicated that they would. Compton indicated that he was investing $6.5 million of the $18 million needed; clearly, the developers plan to draw much of the rest from TIF. As per Lawrence city resolution 6789, the developers will argue that this project is viable only with TIF funding. The final straw … Lawrence residents will end up paying for it.


thirdplanet 6 years, 2 months ago

First off the comparison to the Topeka example is poor and misleading because the real estate markets bottoming out in 2007 is the direct cause of Topeka losing money on its investment. The investment failed, as so many others did in those years.

The claims made at the end of the Pete's letter is astounding, and the important thing is to not allow the city council to make up the funding gap with tax payer dollars. TIF can be safely and effectively used if used correctly, but we must not let Compton get away with a bargain deal. But remember with TIF, the only money Compton gets is a portion of revenue increases directly caused by the new building.

But the appropriate thing to keep in mind is the jobs such a project would create and what a hotel on mass street would do to the businesses downtown as a whole. If you want the unique restaurants and shops to thrive, if you want vacant buildings to fill up, hotels bring customers and money downtown to these businesses.

geekin_topekan 6 years, 2 months ago

We have two nice hotels operating in downtown Lawrence now, yet the vacant storefronts remain. If I am not mistaken, the developer in this new project owns some of those same storefronts where rent is too high priced for retail to remain competitive. How can the same developer be both the cause, and the cure for vacancies? Please explain.

jafs 6 years, 2 months ago

thirdplanet's presentation of tif's is incorrect, according to a quick internet search.

They are, in fact, the use of potential future tax revenue to finance debt for private projects. And, while the projects sometimes generate the expected tax revenue, they don't always do so.

just_another_bozo_on_this_bus 6 years, 2 months ago

"they don't always do so."

And all you have to do is look west across NH St. to find an example.

jhawkinsf 6 years, 2 months ago

Emphasis on the word "potential". As opposed to the very small amount of tax revenue that comes in with empty lots, undeveloped projects, etc.
Add in the carpenter jobs, plumber jobs, electrician jobs, all the money coming into the community. Those tradesmen will be spending their wages at local restaurants, clothing stores, etc. while the staff at those stores will then be spending their wages around town.
"Potential" - Sounds like an acceptable risk to me.

just_another_bozo_on_this_bus 6 years, 2 months ago

If "jobs" is the only consideration, why not just give everybody whoever hires anyone to build anything a tax break?

jafs 6 years, 2 months ago

Ok - then let the developer take the risk.

You assume a lot of things in your view - first, that it will be a choice of no development at all or a tif-financed one.

Next, that the jobs will be local, and that the workers will spend their money in Lawrence.

Tif's are supposed to be for revitalizing blighted and underdeveloped areas, when private investment won't be interested in them without one - does this area of Lawrence really qualify as that sort of thing to you?

jhawkinsf 6 years, 2 months ago

And if the developer decides not to take the risk at all, then the city loses out on all that "potential" tax revenue. Carpenters, plumbers, electricians all lose out on jobs. The millions spent here will either go unspent or spent elsewhere.
Instead of seeking lose/lose situations, I'd rather seek win/win situations. Even if that means a tax break to a well healed developer.
As to the choice of development vs. non-development, we can look around and see several examples. The proposed Olive Garden site comes to mind. The crystal ball I'm looking into says that in five years, that site will look much as it does today if there is no tax consideration given. Not blighted, just underutilized. That's my prediction, anyway.

just_another_bozo_on_this_bus 6 years, 2 months ago

If taxes that would otherwise be paid by new development are nothing more than and investment fund for the developers, who picks up the tab for what those taxes would have paid for-- you know, little things like salaries for police and firemen, schools and the teachers that work in them, and who pays for fixing the roads that'll be worn down by all the construction and (supposed) new traffic?

There is no free lunch, but that's what you want to claim a TIF would be for this and similar projects, when in reality, it'd be you and I picking up the tab while Compton and Treanor eat on our dimes.

jafs 6 years, 2 months ago

"Potential" means possible, not guaranteed.

I don't think these sorts of tax breaks are "win-win" situations.

Tax breaks that are intended for use in "blighted" areas shouldn't be given for "underutilized" ones.

jayhawkinsf 6 years, 2 months ago

Listen, my interest in projects like this are very small. No more than just an ordinary citizen who would like to see progress. I'm not in the "trades", I have zero financial interest in any of these projects. It's just that the next time people who are opposed to projects like these start complaining about jobs, jobs, jobs, look in the mirror. Opposition to projects like these stifle job creation more than any policies Brownback or Obama could possibly do. Local policies have a far greater impact locally. I guess there could be exceptions like if we had a mega defense contract here. But we don't. We talking jobs and millions pumped into the local economy. If you don't want that, fine. Goodbye jobs. Shine up that mirror for the next time you complain that's it's jobs, jobs, jobs.

jafs 6 years, 2 months ago

I also have no particular "stake" in these projects, and am just a regular resident of Lawrence, who has lived in the area for about 15 years.

I would prefer sustainability over continued growth and development, which always have negative as well as positive aspects.

I find it extremely distasteful that businesses have managed to extort communities into providing "incentives", and frightened them into thinking without those, there will be no jobs.

Compton, from what I know, has done extremely well, and is very well off financially - he has no actual need for incentives, other than his greed.

When you give in to this sort of extortion, it rewards it, and it will undoubtedly continue as long as that's the case.

The other project they're doing was a better one - they requested some help from the city, but the plan wasn't contingent on it.

What ever happened to cities providing infrastructure and basic services through taxation, and the private sector engaging in various development projects on their own dime?

just_another_bozo_on_this_bus 6 years, 2 months ago

If they want to build something that respects the existing neighborhood, and they do it on their dimes, I have no objection to it.

And the notion that the economy is going to collapse if they don't get to cram this down the throat of E. Lawrence on 100% their terms is utterly simplistic. If they have money they want to invest, they'll figure out how to do it-- there are plenty of other locations downtown that would be more appropriate for what they propose.

just_another_bozo_on_this_bus 6 years, 2 months ago

We already have excess hotel capacity in downtown Lawrence. This will NOT be a hotel. It will be apartments and condominiums. And as for the restaurant, does anyone believe that there is a shortage of eateries, even of the fine-dining type, in downtown Lawrence?

If Compton wants to create jobs by building on that lot, let him build something of appropriate scale, and do it on his own dime. No one complained too loud about the behemoth he built across the street, so I guess he just assumed that meant he could do anything he wants on these lots.

just_another_bozo_on_this_bus 6 years, 2 months ago

"If someones building more restaurant, apartments and hotels, then there obviously isn't enough capacity if someone can make money doing so."

No, it's not obvious at all. Bad assessments are made everyday about the state of any given market sector. And even if this new development manages to make money, if it pushes other downtown businesses out of business, that's not good for downtown or the city as a whole.

"The only reason to disagree with this project is whether the guy gets TIF and how much he gets."

Wrong again. This isn't just a matter of giving Dougie what he wants just because he demands it. There are many other considerations, even if you aren't getting paid to acknowledge them.

just_another_bozo_on_this_bus 6 years, 2 months ago

If they really think there's a demand for a new hotel downtown, there are several other sites that are much more appropriate than this one.

just_another_bozo_on_this_bus 6 years, 2 months ago

So what we need to do is just say "no," setting a new precedent.

Richard Heckler 6 years, 2 months ago

A downtown development group has dropped one project and is gearing up for a public fight over another with a local free-market group that opposes public subsidies for private development.

The disputes between Tulsa developer Paul Coury’s group and Americans for Prosperity center on the use of transient guest tax revenues – a tax paid by hotel guests to stay in Wichita hotels, not a tax levied on all taxpayers – to redevelop old buildings into hotels.

One Coury project could be headed for a public vote, if AFP generates 2,528 verifiable signatures to place on the ballot the use of guest tax revenues for the Ambassador Hotel Wichita, a 117-room boutique hotel proposed for the old Union National Bank building at Douglas and Broadway. AFP, which opposes government involvement in private development projects, wants voters to decide

Read more:

Richard Heckler 6 years, 2 months ago

So so many new hotels in quite recent times. Where is the market which is required? Nowhere to be found.

Violates downtown guidelines as well. A definite intrusion into someone's back yard which none of us would want.

A repeat performance is on the table for the River Levy/Johnny's.

Interesting facts regarding YOUR tax dollars AND MINE being spent recklessly on local for profit construction projects aka local development:

How the Wealthiest Americans Enrich Themselves at Government Expense (And Stick You with the Bill)." Johnston reveals how government subsidies and new regulations have quietly funneled money from the poor and the middle class to the rich and politically connected.

Well, what is tax increment financing? I’ll tell you what it is. You go to the store with your goods, you pay for it at Wal-Mart, and there’s a very good chance that that store has made a deal with the government that the sales taxes you are required to pay, that government requires you to pay, never go to the government.

Instead, those sales taxes are kept by Wal-Mart and used to pay the cost of the store. And typically in those deals, the store is tax exempt, just like a church.

Now, there are two ways that it’s important to think about this. One is, that means your kid’s schools, your police department, your library, your parks are not getting that money. And you’ll notice we keep saying we’re starved for money. We’re twice as wealthy as we were in 1980, but we’ve got to close hospitals, and we’ve got to close schools, and we don’t have money for all sorts of things like after-school programs, even though we’re twice as wealthy.

The second thing to think about is, imagine that you own Amy Goodman’s or Juan’s department store across the street. You suddenly have to compete with people whom the government is giving a huge leg up on. You think you would go broke after a while? Well, in fact, you will.

FlawontheKaw 6 years, 2 months ago

Please stop posting your ignorance for all to see tp. You are interrupting my reading of Merrill's work. You need to read a book. Preferably a grammar book.

Richard Heckler 6 years, 2 months ago

Build a project that the city could depend on for new economic growth.

Lawrence is a college town which the primary focus is education. That is where the money is so why not focus on more institutions of education? Build a business college,an art institute,a Vo Tech campus and a ASE automotive certification institute.

25,000-30,000 college kids bring lots of economic growth and tax dollars to town. Let's bring 45,000 students to Lawrence and watch economic growth take place.

Build a two maybe 3 story art and design education building. Transfer management to the quite capable Art Center director and let's bring more students to Lawrence,Kansas. Watch that corner pay back the community.

Richard Heckler 6 years, 2 months ago

College Hill Taxes Unpaid

One of the principals who is developing the corner at 9th & New Hampshire in Lawrence was quoted in the Journal World a few weeks back as asking for 'help' from the city with regards to financing the project. That same person was noted in a Capitol Journal article a month ago as being behind on and in default on a loan and property taxes associated with a development project in Topeka.
Quotes from the article:

Developers for a project to revitalize central Topeka's College Hill business district are in breach of their contract with the city because they failed to pay Shawnee County $130,196.77 plus interest for property taxes due May 10.

"First, the developer is currently in default under its loan obligations in excess of $16 million to the private bank group led by CoreFirst," he wrote. "In the event default of the loans is not remedied, the private bank group may move to foreclose on the property or appoint a receiver."

Topeka's city council voted in 2006 to provide about $5 million in tax-increment financing for a $30 million project in which Washburn-Lane Parkway Renovation built 183 apartments and 24,000 square feet of retail space on property it had acquired in the College Hill district, just northeast of Washburn University.

Developers Bill Newsome, Doug Compton and Steve Roth, of Lawrence, and Henry McClure, of Topeka, agreed to pay off TIF bonds issued by the city over a period of up to 20 years using the increase in property tax and sales tax revenues the city collected after the project was constructed versus the tax those same properties generated before the development was built.

Link to the article:

Richard Heckler 6 years, 2 months ago

If not paying taxes is a matter of preferential treatment granted to the real estate industry how many local developers are not paying their taxes in Lawrence,Kansas?

Taxpayer deserve to know.

And where does one apply for this "Preferential Treatment" ?

Kirk Larson 6 years, 2 months ago

Another Riverfront Mall anyone? Tanger Outlet Mall?

supersonicf111 6 years, 2 months ago

The problem is, that too many people in Lawrence unrealistically think that Lawrence can compete, or be like some larger city (Insert the name of your choice here).

The major reasons this will never happen are many. I listed just a few below.

1) You are sandwiched between a major metropolitan area, and a significantly larger town. 2) You have virtually no major manufacturing or industry. 3) No major airport nearby. The one North of town is not long enough, or wide to enough to safely handle any aircraft larger than a business jet during the hot and humid summers in Kansas. 4) Even a large portion of the visiting college sports teams that play in Lawrence, don’t stay in Lawrence. Most stay at the Sheraton on College Boulevard & I-435 in Overland Park. Most of their fans know this as well, and will book a room at the teams hotel anyway.

Why not be happy being a midsized university town, and build upon the quaintness of that, instead of wasting money chasing pipe dreams??? Spend money improving infrastructure and such.

Believe me, if you have something special, or make it something special, then people will be banging down your door to join in. Not banging on it to ask for help with their pipedream project so that they can make themselves richer. I have no issue with people making money or any amount of it, just use your own money to do it!

Don’t worry this is a all too uncommon disease for a city to have. I grew up in Ottawa, and they have the same problem there. That is wasting money chasing pipe dreams about main street or this or that.

If a company needs public financing to build something, then the public ought to get a significant stake in the company/property in return. That’s how it works in the venture capitol world!

pizzapete 6 years, 2 months ago

Good points especially #2.

A new hotel isn't going to help either. We really don't need more hotel maids, diswashers, or waitress jobs in Lawrence. What we really need is manufacturing, information technology, and other industries to come to town.

But to his credit Compton does hire a lot of construction crews, grounds crews, and zebra feeders. Doug has a plan for Lawrence, soon enough we'll all be paying him rent, subsidizing his taxes, or working as his personal waiter/pool boy/zebra feeder.

supersonicf111 6 years, 2 months ago

My comment above is not meant to be a dig on Lawrence.

I like Lawrence, but you need to be realistic about what you have as a town.

Find your niche as they say in the business world.

Carol Bowen 6 years, 2 months ago

  1. The construction jobs would be beneficial, but short lived.
  2. We have an abundance of low-paying jobs. We need jobs that pat at least $20//hr. We also need mid-range jobs that pay $35 to $75k.

I agree with supersonic. Lawrence cannot sustain the development we have become accustomed to.

wtchdr46 6 years, 2 months ago

Are the Eldridge, and the place at Riverfront Mall both full occupancy every night, week, month?

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