Archive for Friday, July 1, 2011

Olive Garden’s future cloudy after board rejects financial incentives

Downtown building project receives $280,000

Work is under way on a seven-story apartment, office and retail building at the southwest corner of Ninth and New Hampshire streets. The city’s Public Incentives Review Committee on Thursday recommended giving a development group led by Lawrence businessman Doug Compton about $280,000 in incentives related to the project.

Work is under way on a seven-story apartment, office and retail building at the southwest corner of Ninth and New Hampshire streets. The city’s Public Incentives Review Committee on Thursday recommended giving a development group led by Lawrence businessman Doug Compton about $280,000 in incentives related to the project.

July 1, 2011

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A key city board rejected proposed financial incentives for a South Lawrence project that would feature an Olive Garden, leaving the restaurant’s Lawrence future as tangled as a large plate of spaghetti.

The city’s Public Incentives Review Committee rejected on a 4-3 vote a request for a property tax rebate for the project that would build on a vacant lot at 27th and Iowa streets.

“At this point, we just don’t know what we’re going to do,” said Matthew Gough, a Lawrence attorney representing the Kansas City development group that owns the property. “We need to sit down and evaluate where we are at.”

Future murky

The decision wasn’t the final one for the project. City commissioners still could vote on the request. But two city commissioners — Mayor Aron Cromwell and Commissioner Bob Schumm — serve on the PIRC board, and both voted against the request. Because of a conflict of interest by City Commissioner Mike Amyx, only four city commissioners will vote on the request — meaning either Cromwell or Schumm will have to change his mind in order for the request to have a chance with the City Commission.

Cromwell left some question about whether he could be persuaded to think differently. He indicated he was torn by the request, saying he was “at a five on a scale of one to 10.”

Schumm, who is a longtime restaurant owner in downtown, left no such doubt.

“The applicant’s admission is he paid too much for the property,” Schumm said. “To the public, this just looks like a bailout.”

The applicant argued that the vacant property is in need of redevelopment, and that an Olive Garden restaurant would give the city a major sales tax boost. The restaurant is expected to generate about $5 million in sales, and Olive Garden estimates 40 percent of the sales would be new business to Lawrence, rather than just sales that are taken from other Lawrence restaurants.

Cromwell and Schumm both questioned those numbers. But the developer — M.D. Management — said that even if the percentage fell to 20 percent, the city’s own analysis showed that the city still would receive $1.27 in benefits for every $1 in costs the project created.

Other incentives?

County Commissioner Mike Gaughan voted against the incentives request — which sought 10 years of partial property tax rebates through the Neighborhood Revitalization Act. But Gaughan said he thought the project could be a financial benefit to the community if it used a different type of incentive.

He suggested the city consider allowing the development to form a Community Improvement District, which would allow for the creation of a special sales tax that would go to the development group.

Gaughan said he understands the idea of a special taxing district is opposed by some members of the public, but he said special signs alerting all customers that a higher sales tax is charged could help alleviate some of the concerns.

Cromwell, though, said he still views the idea of special taxing districts as extremely unpopular with the public.

Other members on the PIRC include: former City Commissioner Rob Chestnut, outgoing school board member Scott Morgan, and local banker Brad Burnside, who all voted for the incentives package. Former City Commissioner Boog Highberger voted against the package, joining Cromwell, Gaughan and Schumm.

Downtown incentives approved

In other business, the PIRC approved, on a 6-1 vote, $280,000 worth of incentives for a new downtown apartment, office and retail building. Highberger opposed the request.

PIRC members said the seven-story building at Ninth and New Hampshire streets would be a good addition to downtown, and would boost business by bringing more residents to downtown.

The committee also sided with the developers — a group led by Lawrence businessman Doug Compton — who said the project should receive $280,000 in property tax rebates to help pay for public improvements such as sidewalks, sewers and streetlights.

The property is part of a Tax Increment Financing district that was formed in 2000. At that time, city commissioners said future private developments could be eligible to receive tax rebates for public infrastructure expenses.

PIRC, however, did recommend that the $280,000 be paid out over a 10-year period, beginning in 2013. The development group also had asked for reduced parking rates in the adjacent public parking garage. PIRC did not consider that request Thursday.

Comments

Bob Forer 3 years, 9 months ago

The vote was not surprising. Morgan, Chestnut and Burnside are all lackeys for the developers. Am a little surprised that Cromwell voted against his monied friends. That took some guts. Good for him.

Hoots 3 years, 9 months ago

It has to do with a labor dispute. It says "Shame on First Management" yada...yada. It must be some union thing. Why does government big and small insist on giving all of our money away to people who don't need it nearly as much as we do? I have no faith in our system anymore. This isn't a Democrat or Republican thing...it's the way the entire system works now thing.

MagisterTempli 3 years, 9 months ago

So Olive Garden may not open a location in Lawrence just because the incentives proposal was voted down? Glad to hear it!!! The last thing we need is yet another morally bankrupt national chain knocking down profits from giving our friends and neighbors kidney disease and diabetes by serving the all-carb toxic waste that consitututes Olive Garden's specific specialty. Speculation about potential sales of some $5 million per annum and a presumed tax bonanza are nothing more than wishful thinking that does not take into account the economic and social cost of a diet that many doctors warn will give our youth shorter lives than their own parents and grandparents. Lawrence is supposed to be a progressive community. Tax policies related to restaurants should be geared not toward making money but toward discouraging such businesses from opening in such appallingly large numbers in the first place.

Alabamastreet 3 years, 9 months ago

Would unlimited breadsticks change your mind. Bottomless salad?

polo66606 3 years, 9 months ago

How about go across the street to Paisano's?

Bassetlover 3 years, 9 months ago

"Morally bankrupt"......seriously? That's quite a stretch.

Eric Neuteboom 3 years, 9 months ago

Fantastic! Best post I've seen in a while.

nativeson 3 years, 9 months ago

The property at 27th and Iowa will now fall into disrepair. The development would produce at least $250,000 of new property taxes over the first 10 years even with the rebate.

Boston_Corbett 3 years, 9 months ago

Exactly. And if you want the best Italian around, go to that place in the gas station on 6th near Kasold....I can't remember the name. Great stuff.

Drew Alan 3 years, 9 months ago

Will NOW fall into disrepair? Have you seen it lately? That is about as bad as it gets. Lawrence doesn't need an olive garden that badly, there is a locally run Italian restaurant across Iowa street even!

irvan moore 3 years, 9 months ago

i thought it was interesting that the commissioners want to give away our money to enhance or promote downtown but not south iowa. it would seem that some of the commissioners should have a conflict of interest with voting on downtown taxpayer subsidies.

jafs 3 years, 9 months ago

It is interesting.

But I think it's because that whole area was slated for TIF in 2000.

Of course, they still could have denied it if future developments "could" qualify for it.

Jstanobservation 3 years, 9 months ago

Only if one of them owned a food establishment in town,oh yeah,that's right.

Bob_Keeshan 3 years, 9 months ago

Doug Compton was smart, he hired Ben Dover to work these folks over.

Olive Garden needs to call Ben Dover and have him get to work.

Bob_Keeshan 3 years, 9 months ago

Ben Dover is the powerful lobbyist at city hall who manages to finagle tax breaks that put the burden on the rest of us.

Like tax breaks for a building that is clearly not going to be torn down halfway through construction.

nativeson 3 years, 9 months ago

The development at 9th and New Hampshire came under an existing TIF district created when the parking garage was built back in 2000. The request was actually patterned after what was already agreed upon between the City and the developer that originally put together the deal.

I am not sure if the decisions were driven by location, but more by the fact that an existing agreement was in place for the downtown project versus a new proposed agreement for 27th and Iowa.

My hope is that decisions are driven based on policy versus who the tenant happens to be that is occupying the space. The fact is that the developer (out of KC) drives the incentive agreement, not the Olive Garden. The same type of proposal would have been made whether or not the tenant was local, regional or national.

pizzapete 3 years, 9 months ago

More business as usual for Compton and the city of Lawrence. I say we rename Massachusetts Street, Compton Ave., in his honor.

no_thanks 3 years, 9 months ago

I find it odd that we can rationalize the Ninth and New Hampshire incentive as it was part of the TIF (which I firmly agree with the deicison), but we criticize the developers of OG for pursuing the NRA incentive, which as I read the requirements, that sight clearly qualifies. It seems that the leaders of our so called progressive city (those who believe Lawrence is progressive are spending too many nights at the Hookha House) has become increasingly in the business of trying to restrain commerce. Increasing regulations, increasing taxes, denying applications from major chains, not being competitive for major projects (MARS plant in Topeka, Hills plant that went to Emporia, etc...), and no vision for the future is not the road map for increasing our tax base. Congratulations PLC or whatever your "no growth" party campaign was, as your agenda continues to carry the day!

Boston_Corbett 3 years, 9 months ago

CVS did infill development at 23rd and Iowa and didn't need incentives. Crown did infill of the old lumber yard and didn't need incentives. Infill development on South Iowa simply does not require tax breaks.

OG says they will generate $5 million per year, which is pretty successful. Why do they need any assistance for any location. The term bailout is exactly correct. Tax incentives should not be used to fix bad decisions (paying too much for the property).

Incentives should be given to that which you want to attract How could anyone ever justify incentives for a restaurant, unless it would be a historic structure or something. This town easily has more restaurants per capita than the average city.

This is the same developer who wanted a CID sales tax district for Hobby Lobby, when Hobby Lobby didn't even want one.

jesse499 3 years, 9 months ago

Bob Schumm doesn't have a conflict sounds like a good way to stop competion to me.

somebodynew 3 years, 9 months ago

You know I can't quite figure out this conflict thing. Why is it that Amyx has a "conflict" over property that his parents apparently sold, yet Schumm who is a restaurant owner doesn't have a conflict about another restaurant coming into town??? Something just doesn't seem to add up correctly to me.

somebodynew 3 years, 9 months ago

No that is customer choice. Schumm happens to own a restaurant and this is direct competition to him. Anmy on the other hand apparently never owned this land and it was sold by his parents - just why is that a conflict.?? It doesn't sound like he will either make, or lose, any money on this project (Schumm might through loss of sales). Just doesn't quite sound right to me.

Scott Morgan 3 years, 9 months ago

How about a little sunshine of truth. Olive Garden is the largest chain Italian Restaurant in the world. McDonalds same in a niche way. And, last but not least the soul sucking Walmart chain is king (or Queen) too)

I do not like any of them, but........

This arrogant group think we have the luxury of picking and choosing has got us where we are today. Broke and going broker.

Getaroom 3 years, 9 months ago

Olive Garden says "40% of new sales" will be generated by their presence in the community. You mean they want us to believe out-of-towners and locals are going to come out of the woodwork to flock there to eat rather than stay in KC/Topeka to eat? No, that is not going to happen. The same people who eat out here already would be the same ones eating there. OG being here is not going to increase the number of people eating out, just the number of bread sticks and carbs consumed by already bulging oversized American bellies. If they want to be here bad enough for their market share of profit taking, they will plant themselves here no matter what and if their projections are that grand and solid.
If we are going to give tax incentive let's make them count for something! Bring Lowe's in please, they are a far better choice and better run organization than HD. Isn't it convenient how the "free market" works in favor of those who are already sitting in the high income brackets! And the poor keep playing the lottery in hopes of winning out of reach riches and getting sicker by the moment eating overpriced bread sticks.

jesse499 3 years, 9 months ago

I'd rather have a Menards I still think Lowe's is connected to Walmart somehow.

jhawkinsf 3 years, 9 months ago

Interestingly, an earlier article on this subject "city analysts" estimated that that the project would return $1.48 for every dollar invested. This article has Olive Garden estimating that 40% would be new sales.
Let's assume that if Olive Garden does not get the tax abatements and that the property is left essentially as it is now for some period of time (let's say five years), then what?
Remember, we're talking about taxing the property owners at some rate or at some higher rate. We're "giving" them nothing. If independent analysts (the city) deem that the project will generate new revenue, then we're cutting off out nose to spite our face just because we can justify not giving a (chain restaurant), (developer), (rich fat cat), whatever. If it makes sense, do it.

jafs 3 years, 9 months ago

Projections involving the TIF Arts Center income have been way off.

I'm very skeptical of projections of future income - it's a gamble.

Also, it's the development company MD development that gets the tax breaks, not OG - I wish they'd stop reporting this so sloppily.

And, finally, if we instituted policies that discourages developers from buying property and letting it sit vacant and deteriorate, we'd have a lot fewer of these situations to deal with.

jhawkinsf 3 years, 9 months ago

You say projections, I'm not familiar with whose those projections are. As I said, in this case the projections come from city analysts. Hopefully, they are using the best available information and that they are always done with the best interests of the city in mind. And that they are independent of outside influence. If those things apply, then the city should make decisions in the best interests of the city.
I don't think the city should be cozying up to business interests. Neither should they be hostile to business. The city should be neutral.
Just for the sake of argument, say the city charges $1.00 per year property tax as the property now sits, but would charge $2.00 if improved. If an abatement had the property after improvement paying $1.05 the first year, $1.10 the second year, etc., compared with $1.00 per year if the property sits as it is for many years, then it's in everyone's best interest to give the abatement.

jafs 3 years, 9 months ago

The projections were done by the city, I imagine, with all of the good intentions you ascribe to them.

Unfortunately, the development didn't work out as planned, so instead of taxes from various developments paying the costs of the parking garage, we're shelling out tax money to do that today.

It's in another article on-line - I'm sure you could get more information about it.

The point is, of course, that predicting the future is inherently unreliable, and I'm a bit risk averse, so I don't want to gamble taxpayer money on that sort of thing.

And, as I've said numerous times, we could and should institute policies that discourage developers from buying property and then letting it sit vacant and deteriorate. That would either increase revenue or discourage the behavior, both of which would be good things.

jhawkinsf 3 years, 9 months ago

Risk averse - If the property stays essentially as it is, it will generate a fixed amount in property taxes. And that amount is at the lowest level possible, it's current level. In fact, should the value continue to decline as property values throughout the country are, then the owners could get a lowering of the valuation with a concurrent lowering of property taxes. An abatement which would increase the property value could only raise the property value. There's no risk that I can see. The risk is that the property lays dormant, not bad enough to warrant government intervention but not improved. An eyesore, but not much else. Then the city gets the lowest possible return.
The only possible downside comes from competing businesses. But I'm not sure that's a valid argument. Restaurants want to be near other thriving restaurants. Some will go to one, some to another. If Olive Garden is busy, customers will go across the street, not to Kansas City. Go to a mall's food court. No one wants Panda Garden only. They all want multiple choices. Some will go to Panda, some for pizza, etc. It becomes a destination, not unfair competition. Again with the mall scenario, but what Sears wants is another department store at the other end. Some will go here, some there. But they will come.

jafs 3 years, 9 months ago

Again, and probably for the last time, I'll say that we should implement tax policies that punish developers who let their properties sit and become blighted. That would increase the revenue on those properties, and/or discourage the behavior.

If and only if we can be confident in future projections should we even consider tax abatements based on them. And, given the poor record of predicting the future,...

Scott Morgan 3 years, 9 months ago

Well said, also we have a new building where rubbish stands now. Rubish on Iowa, not on the corner of some obscure junction as Greensleeves Road and Poochface Ct.

true_patriot 3 years, 9 months ago

I wonder why we are subsidizing with public funds private investments by rich people when we can't even keep the local SRS facility that serves thousands of citizens in need in Lawrence and Douglas county? It is literally a case of giving to the rich and taking from the less well off and those in need.

In a free market, Compton would be asked to pay to build more downtown parking elsewhere or pay for part of the library project to offset the public parking in the parking garage that he is asking be used for staff employed in his investment project building. Instead, the public ends up paying him instead. In a free market, his investment would stand or fail based on its own merits, but in the fake free market Lawrence taxpayers have to fork over hard earned dollars to make this private investment profitable.

nativeson 3 years, 9 months ago

Closing the SRS facility and municipal incentives have nothing to do with each other. State government is doing a facility consolidation and it is very unfortunate they chose such a large population center to close.

The parking facility was built based on serving both public and private purposes, but it was definitely not a very good plan. The building on 9th and New Hampshire is actually fulfilling the part of the initial concept.

jafs 3 years, 9 months ago

What "public" purposes is Compton's new development serving?

jafs 3 years, 9 months ago

Any new business will do that.

Should we give all of them tax breaks?

If not, why not? And, how do you choose which ones to help and which ones not to help.

Scott Morgan 3 years, 9 months ago

Yes, until we stop the tailspin we are in.

jafs 3 years, 9 months ago

And, of course, if we give property tax abatements to encourage development, we cut into (or eliminate) the property tax advantage of the developments.

true_patriot 3 years, 9 months ago

I had a glimmer of hope for Cromwell and Schumm but when put to the test they've shown their true colors. They voted to favor profits for private investors, but in this context they are supposed to be looking out for Lawrence's best interests. Only one member did that.

bevy 3 years, 9 months ago

If you're talking about SRS, those jobs aren't lost. They will be relocated. Still sucks.

dogsandcats 3 years, 9 months ago

If they're going to make $5 million in sales, why do they need tax breaks? Greed.

Scott Morgan 3 years, 9 months ago

oletimer, exactly. I feel bad, but do take my wallet out of town often in the past few years.

It really ticks me off when somebody lectures me about being satisfied with what we have here.

bevy 3 years, 9 months ago

I say good for these folks for standing up against special interests. We need another special tax zone like we need two governors! If they paid too much for the property - Too Bad! They should not have banked on special treatement from the city. Buy local, eat local as much as you can. OG is no great loss.

irvan moore 3 years, 9 months ago

i used to like downtown 20 years ago before it turned into an entertainment zone, now not so much.

rockchalker52 3 years, 9 months ago

C'mon, now. Let's get this rolling. Can't OG put some more pressure on these MD guys, get this done?
Hey, City, start citing them for blight or something.
Hey property owners, you're not s'posed to retire off of every dadgum real estate deal, guys. Surely, you are astute enough to realize the longer you mothball this site, the less your return will be. If you cain't make a return w/o this tax deal, then you overpaid. Stem the tide, staunch the bleeding, cut your losses & move on. Keep messing with my marinara & I'll call you a lot worse than Shirley. If everything goes to hell, tho, I'll take a Denny's.

Kelly Johnson 3 years, 9 months ago

Olive Garden should be able to see from the comments that there are plenty of people who will eat there. Many people have been wanting an OG here for about 20 years...just build it already!! Stop being greedy, I'm sure $5 million in profit should be pretty comfortable.

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