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Archive for Friday, May 20, 2011

EN Engineering leaving Lawrence for Olathe after failure to reach deal

May 20, 2011

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A promising engineering firm and its 65 high-paying jobs are leaving Lawrence for Olathe after local leaders weren’t able to put together a deal to keep the company.

Economic development leaders confirmed that EN Engineering — formerly known as Wheatland Systems — is close to signing a deal to leave its longtime offices at 2110 Del. for an office building in Olathe.

Lawrence Chamber of Commerce president and CEO Tom Kern said the loss was a disappointment for a community that is trying to attract more high-paying jobs.

“These are the type of jobs we want to attract to Lawrence and they certainly are the type of jobs we want to keep in Lawrence,” Kern said.

The company has 65 employees, with many of the positions — sources said — paying between $60,000 to $100,000 per year. But the company was looking for new space because it expects significant new hiring — perhaps 20 to 30 employees — in the coming years.

No deal

Leaders with the city, county, chamber of commerce and private developers worked on several deals to keep the company in town. Proposals to expand the company’s existing offices on Delaware Street and to build a new 20,000-square-foot building either in East Hills Business Park or in the Fairfield Farms development at 23rd and were presented to the company, which insisted on a location on the east edge of Lawrence because some employees commute from the Kansas City area. The company also looked at the vacant downtown Borders location.

But then late in the process, Lawrence leaders were told the company had decided to sign a lease for a vacant building in Olathe.

“I think the chamber, the city and the county all were trying to find ways to enable them to stay in Lawrence, but unfortunately we never were really given the opportunity to work out a specific deal,” Douglas County Administrator Craig Weinaug said.

Disagreement

There is some disagreement in the private sector about whether economic development leaders did enough to strike a deal. Longtime Lawrence businessman Duane Schwada is a landlord for the company at its Delaware Street offices. Schwada said a key element in the project was extending EN Engineering’s lease — which expires in October — in order to give the company enough time to construct an office building in Lawrence.

Schwada said he offered to extend the company’s lease for two years to ensure it had enough time to get the building project through the city’s planning process and constructed.

According to multiple sources, EN Engineering officials wanted a shorter lease. A deal for a shorter lease wasn’t struck, but Schwada said he alerted local economic development leaders that a deal possibly could be helped along if the city, county or chamber — or some partnership — would agree to buy the company out of its Delaware lease, if necessary.

Sources said that a buyout of the lease likely would have been in the $30,000 range.

But Weinaug said the economic development team was never asked by EN Engineering to consider such a lease buyout provision, and Weinaug said he was uncertain whether he could recommend it to elected leaders.

“I personally couldn’t come up with a justification to pay a landlord for a lease for a purpose that wasn’t a public purpose,” Weinaug said.

Lack of communication

Some economic development leaders involved in the negotiations said they would have considered the deal, but by the time the option came into play, EN Engineering’s leadership — which is based near Chicago — already had decided to go in a different direction.

Some city commissioners, however, said they were disappointed they weren’t given the opportunity to make a stronger push on the deal. Both commissioners Mike Amyx and Mike Dever said they were never made aware that a lease buyout provision might have kept the company in Lawrence.

“When a business that has been in Lawrence for more than 15 years is considering leaving, we need to be made aware of what might be necessary to solidify their long-term relationship with the city,” Dever said.

Amyx and Dever said they were made aware that economic development leaders were working to keep EN Engineering, but both said they would have liked more information about how elected leaders could have stepped forward to seal a deal. Both said they would have given serious consideration to a lease buyout, especially if the amount was in the tens of thousands of dollars range.

“We work hard all the time to attract businesses from out of town,” Dever said. “The same effort needs to be put into retaining businesses, too. That means creative packages sometimes need to be put together.”

EN Engineering designs automation systems for industries nationwide. The business has been growing, in part, because it has strong footholds in the lucrative oil and natural gas industries. The company was known as Wheatland Systems until mid-2010 when it was purchased by Illinois-based EN Engineering.

Comments

Ron Holzwarth 3 years, 7 months ago

"Schwada said he offered to extend the company’s lease for two years"

"EN Engineering officials wanted a shorter lease."

"Schwada said he alerted local economic development leaders that a deal possibly could be helped along if the city, county or chamber — or some partnership — would agree to buy the company out of its Delaware lease"

"a buyout of the lease likely would have been in the $30,000 range."

"“I personally couldn’t come up with a justification to pay a landlord for a lease for a purpose that wasn’t a public purpose,” Weinaug said."

I think that Mr. Weinaug made a very valid point!

bankboy119 3 years, 7 months ago

Define public in this instance....because it was not a public works project? What were the tax revenues that this company was bringing to the city?

85 employees at 60k/yr = $5.1 million in salaries alone. Without any other information I'm going to safely assume that this firm brought more than $30k/yr revenue to the city of Lawrence. We definitely didn't have to pay their lease, and they went elsewhere. City is run by fools.

deec 3 years, 7 months ago

So maybe the building owner could have negotiated the lease the co. wanted without trying to put the arm on local government, and they would have stayed?

Lee Eldridge 3 years, 7 months ago

Sounds like landlord got greedy. Wanted two years and got nothing. No reason not to negotiate a one year lease with an existing tennant.

happyhippy 3 years, 7 months ago

I wonder how many of EN's employees commute from the Kansas City area? What would be the financial reasons to keep a business here when the employees don't live here?

LadyJ 3 years, 7 months ago

I agree, how many of the "high paid employees" lived in Lawrence and how many taxes did they pay?. I seriously doubt they shopped much here since there's not much on the east side. Hope the building sits empty for two years and the city raises his property taxes.

Dan Blomgren 3 years, 7 months ago

Short-sided reply on your part Hippy. With an extension of their lease and a commitment to keep the company here perhaps the commuters would have decided to move here. Regardless they were still putting money into our city via gas, food purchases, etc....The city just lost 65 good paying jobs and future growth for more. No matter how you try to spin it Lawrence lost and Olathe gained.
The story shows the poor communication between our city officials. Schwada, for what ever reason, only seemed to consider a two year lease. There were many factors that contributed to EN leaving and Lawrence, once again, came up short.

Has anyone else noticed Lawrence comes up short way too often?

Chris Ogle 3 years, 7 months ago

“We work hard all the time to attract businesses from out of town,” Dever said. “The same effort needs to be put into retaining businesses, too. That means creative packages sometimes need to be put together.”

Um........ so what was this "creative package" that you proposed???

Robert Rauktis 3 years, 7 months ago

What do they want !?!?!? Are they a professional sports team !?!?!

John Hamm 3 years, 7 months ago

Problem? "Duane Schwada." Why? Silly landlord insisted on a two year lease - all he had to do was agree to a one year lease. But no........ Not too many others to point the "fickle finger of fate" at in this fiasco.

somebodynew 3 years, 7 months ago

Well to me it looks more like a money grab by ONE person. Schwada. He wanted his cake (2 yr lease) and to eat it too (taxpayers on the hook just in case). Sounds like the "Powers" were never even told of this, so it sounds like the company didn't want to deal with Schwada anymore. (Don't blame them)

WildbigH 3 years, 7 months ago

Lawrence IS losing good corporate citizens, and could possibly lose more. I have been commuting from KC for 12 years now to Lawrence for work. I know I have spent plenty in Lawrence during that time and I am sure those employee have also. The Lawrence Chamber needs to get serious about retaining businesses and attacting others, or there will be more just like this one. Schwada may have to pay taxes whether the building is empty or full, but that is just a drop in the bucket that is being lost.

WildbigH 3 years, 7 months ago

Correct, most of my money is spent locally in KC, it is where I live. However, the percentage I spend here is significant, as well as the other 60 employees. In addition to that, the money spent with customers in hotel rooms, resturants and shops while here is significant also.

Bud Stagg 3 years, 7 months ago

It's short-sighted thinking like this that is killing Lawrence. We need every corporate citizen we can get. At least the people whol live in KC were probably eating lunch here, buying gas here, spending some money here. For example, if 30 employees spend $10 a workday on lunch/gas that amounts to $80,000 a year to the local economy.

I bet more of those 65 employees lived here than not. Why else would they have been here? They were paying property taxes, sales taxes, etc. They were shopping at our stores, spending money here. Of the employees not living here, there was potential they might move here eventually. Now with the company out of town, the people living here will be more likely to move to Olathe. Lawrence will get nothing and have a chance at nothing. So our property taxes will go up to cover the money these people were spending.

newmedia 3 years, 7 months ago

At least they didn't move to Missouri. The glass is always half full!

timeforachange 3 years, 7 months ago

Ain't that the truth! Tom Kerr go put on an apron and start serving food at your next luncheon. I have never seen such false posturing in my life.

just_another_bozo_on_this_bus 3 years, 7 months ago

It's certainly Schwada's right to insist on whatever terms he likes on his property, but clearly the main reason this company left town lies with that insistence, and the fact that they found a deal on a building they liked in Olathe.

It most certainly would have been inappropriate for the city to buy out the last year of that lease. Once the city becomes the last resort between commercial landlords and their tenants, we're on a slippery slope to the city becoming a (paying) party to every lease agreement in town for those landlords with the biggest political pull at city hall. (and Schwada would be on that list.)

homechanger 3 years, 7 months ago

Schwada -the greed got him this time. Chamber is asleep at the wheel ad usual. What does the chamber of commerce really do anyway ?

ivalueamerica 3 years, 7 months ago

Why do corporations want so much welfare and why does the right think corporate welfare is a good use of our tax dollars.

By the time we give them hundreds of thousands of dollars in tax abatements, leas concessions, and other subsidies and tax breaks, they add no more to our economy than a McDonalds.

Bob_Keeshan 3 years, 7 months ago

So Schwada picks up the phone and calls Lawhorn to start spinning tales about how the city and the county have screwed him out of a client.

That's called CYA, a pretty stupid move by Schwada.

guess_again 3 years, 7 months ago

Schwada....

I've had experience with their remodeling in my neighborhood. I learned how little zoning, historical preservation review, and building permits matter to them. They intentionally violated the law with impunity through an un-permitted structure demolition conducted on a weekend.

akt2 3 years, 7 months ago

Olathe is a good choice. Engineers don't sit in the office all day. They have to go out to the various jobs and projects. Those projects are not in Lawrence. Olathe is less travel time to and from projects in the KC area and closer to the airport for the out of town trips.

steveguy 3 years, 7 months ago

This is our Lawrence leaders at work, HA.

jhawkinsf 3 years, 7 months ago

In a vacuum, yes, it would be good if we did not provide benefits such as tax abatements for businesses. But we don't live in a vacuum, do we? If other cities or other states or other countries are providing incentives to businesses to relocate there, then Lawrence can either do likewise or see business get up and leave.
What Lawrence needs to do is have an objective bean counter weigh the benefits and costs of each deal and then make good business decisions based on those analysis. Standing firm to some ideological point of view might make us feel good but having a bunch of well educated people with well paid jobs in our community might make us feel good too.

just_another_bozo_on_this_bus 3 years, 7 months ago

If you support such corporate/business welfare from government, then you must also support the permanent condition of governments' being unable to meet the needs of its average citizens. Either governments can collect and spend the money required to meet the needs of the community, or it can't. If it's primary purpose is to guarantee the profitability of businesses and corporations, it won't be able to meet those needs.

You can't have it both ways.

jafs 3 years, 7 months ago

That's just not true if the analysis shows the benefits outweighs the costs.

The problem is that we don't have any objective people doing those analyses, and that politicians are unlikely to hold businesses to their end of the bargain.

jhawkinsf 3 years, 7 months ago

I called for an objective analysis of the costs and benefits to the city, not the business. If it benefits the city as a whole, it seems foolhardy to not do it.

just_another_bozo_on_this_bus 3 years, 7 months ago

OK, I can go along with that.

But any such analysis should be codified in city policy, and the same benefits should be available to any business in town that qualifies, including (especially) homegrown mom-and-pop operations.

They shouldn't be limited to corporate "white knights" who essentially threaten the city with looking elsewhere, and even pulling up stakes and moving, should the deal not be as sweet as the next town (or state) over has offered. We've got to figure out what a fair bottomline is, and have the courage to stick with it.

Adrienne Sanders 3 years, 7 months ago

Meh, it sorta sounds like the already wanted to move to the KC area and Lawrence would have had to offer a SUPER sweet deal to change their minds.

George Lippencott 3 years, 7 months ago

dulcinea, it sure sounds like it. Why? Are our taxes too high so that the only way we are competitive is if we exempt businesss from them? Are our rules to tight? have our schools failed to keep up?

A business like this can go anywhere. What do they have over in JOCO that we don't have or what are we doing that their not that drives business to them?

rwwilly 3 years, 7 months ago

I love blogs. It exposes areas human pysche and behavior that are difficult to observe anywhere else. Only in a blog can you read well meaning citizens truly laughable attempt to put a positive spin on a city (in this case Lawrence) losing 65 high paying jobs.

just_another_bozo_on_this_bus 3 years, 7 months ago

What would be the justification for paying Schwada off for the company's breaking the lease? Is there any city or state statute that allows such transfers of payments from the city to a private landlord? It certainly doesn't seem to qualify under abatement policy or TIF financing.

rwwilly 3 years, 7 months ago

There is a reason this company relocated to Olathe. There was no timely counter offer made by the city, lack of communications, confusion on behalf of those involved, whatever, who cares? It resulted in a failure on behalf of the city I witness into this phenomena everyday at my workplace...put even a small roadblock in most people's way and there goes any chance of a meaningful resolution. Creative thinking is dead. Get 'er done and stop worrying on whose toes you step on. The city failed...period.

just_another_bozo_on_this_bus 3 years, 7 months ago

It looks to me that the dispute was between the company and Schwada.

Otherwise, what was the company expecting the city to do for them? What did the city of Olathe give to this company, if anything? Is it based on a city policy?

jayhawklawrence 3 years, 7 months ago

I don't know how you can "blame" anyone for this.

They were bought by a company in Chicago and they are in the automation business. They don't have any ties to Lawrence that make any sense as far as I can see.

You are going to have wins and losses. You have to have more wins to make up for losses.

The biggest problem I see in Lawrence is the negativity and lack of gratitude for the work that some of our community leaders try to do. Talented people are going to want to go elsewhere.

You can't get anywhere in this world by complaining all the time and looking for someone to blame.

George Lippencott 3 years, 7 months ago

Two points

Attracting jobs by paying a business to come/stay here is stupid unless the cost to all of us is offset by the return on the jobs generated. If they do not pay taxes, the rest of us must pay more. The employees who live here draw services here – supposedly paid for by their taxes – you cannot count those taxes twice. Yes they may frequent other merchants here but who exactly benefits from that – the taxpayers or the merchants?

High end business that employs skilled people must consider the environment offered. If there is an equivalent or better environment nearby we could lose. People in their thirties or older have different interests than people who are younger. Private sector employees are motivated differently than public sector employees. Step back and put yourself in the mind set of a mid years couple with kids seeking a nice home, responsible services and good schools and ask yourself how well we compete with JOCO.

jhawkinsf 3 years, 7 months ago

"Yes they may frequent other merchants here but who exactly benefits from that - the taxpayers or the merchants?" Answer - Both.

George Lippencott 3 years, 7 months ago

How do you figure that? The small sales tax increase offset by the big property tax decrease?? Most of these companies are small - the ripple effect will be small

We are being sold a bill of goods by those who will benefit at our expense.

jhawkinsf 3 years, 7 months ago

Let's say the merchant they go to is a restaurant, they are going out to lunch. The restaurant purchases food, hires a cook who cooks it, it's taken out by a server who has to be hired, busboys, dishwashers, etc., all earning money and then spending it, where, here. That dollar gets spent several times, each time with a sales tax attached. Besides, the tax abatements are not free rides, tax free business forever. They are usually modest concessions so they are not hit with taxes so high that they are forced to look elsewhere. We're talking about a win/win situation. Unless you think Lawrence wins when an employer with 65 well paying jobs moves out. Then, Olathe wins. If you don't believe me, go to your favorite restaurant or clothing store or whatever. Ask the owner if he would like it if a business with 65 well paid jobs moved in next door to his place of business. Ask a business owner if they would like for that type of neighbor to move away.

jhawkinsf 3 years, 7 months ago

There shouldn't be a need to raise his taxes. As I stated earlier in this thread, a cost analysis should be done weighing the benefits and costs to the city. A modest tax abatement will be offset by an increase in business activity, producing equal or greater revenue to the city. As I said, the waitstaff, cooks,restaurant owner will pay taxes on increased income. Wherever the cook, waitstaff, etc., spend their money, that too will generate revenue. And there is every reason to believe that they will spend locally. The alternative is watch this business move to Olathe, the next to Texas and the one after that to China. We can then all start flipping burgers and serving them to each other.

George Lippencott 3 years, 7 months ago

He said yes but he also said that that assumed they came to his place regularly. If they went elsewhere probably no one would get enough of a boost to hire anyone. Even if we got more hires what do they contribute. Their taxers may not offeset their costs.,Just ask merrill

Richard Heckler 3 years, 7 months ago

"A deal for a shorter lease wasn’t struck, but Schwada said he alerted local economic development leaders that a deal possibly could be helped along if the city, county or chamber — or some partnership — would agree to buy the company out of its Delaware lease, if necessary.

Sources said that a buyout of the lease likely would have been in the $30,000 range. "

This was the Schwada responsibility not the taxpayers. Blame all on Schwada Schwada Schwada!

All Incentives should come from the real estate industry and the property owners NOT the taxpayers.

The Schwada group are tax dollar moochers moochers moochers! Blame half on the company for looking to get a tax dollar handout. They are all tax dollar moochers.

I cannot afford Schwada or any other tax dollar moochers.

jayhawklawrence 3 years, 7 months ago

Just to set the record straight; I couldn't give a rat's behind about the Chamber of Commerce.

I doubt if I know anyone over there. Their politics are a little too extreme for my taste.

But I don't think socialism or its evil sibling, Communism, works very well and the vibes I get in Lawrence from a lot of the chronic complainers seem very out of touch with business reality.

In fact, oftentimes, the vibes are very anti-business.

It is fairly obvious to me that the writing was on the wall when this company was sold to someone in Chicago.

George Lippencott 3 years, 7 months ago

Anti business is way too much regulation and way too high taxes.

Giving a business a tax break to create jobs is IMHO corporate welfare

George Lippencott 3 years, 7 months ago

Do you believe in our economic systeM? Sounds like you view government as the primary jobs creator. Also sounds like you think that private money in business should be controlled by the state.

George Lippencott 3 years, 7 months ago

People will cheat. That includes businesspersons, government employees, welfare recipents and so on.

The balance is between enough regulation to dampen the zeal to cheat and too much that limits job creation and growth.

I think thta in some cases Lawrence goes too far in others not far enough. Mayber thta is the best I can hop for??

Richard Heckler 3 years, 7 months ago

We've subsidized local profiteers at such a basic level for so long, that many people believe that status quo is actually fair and neutral. This is false-what we think of as a level playing field is tilted steeply in favor of local profiteers driving and laughing all the way to the bank.

Taxpayers are over extended on corporate welfare. All we get in return is expanded economic displacement which is a drag on the economy. Meanwhile our taxes and user fees escalate.

jafs 3 years, 7 months ago

The definition of socialism is an economic system with no private property.

Much of what is called socialist is not socialist at all.

George Lippencott 3 years, 7 months ago

Whoops there may be more than one definition. My version is government ownership of the means of production. Communism comes to mind whne there is no private property

jafs 3 years, 7 months ago

That's the first part of the definition in my dictionary - the next part is as I stated.

Communism takes it a step further, and assumes the state has "withered away".

Socialism is often described as a stepping stone to communism.

Anyway, the point is that it seems very popular today to call many things "socialist" that simply aren't - for example, it is not "socialist" to give a company a tax abatement.

George Lippencott 3 years, 7 months ago

The dictionaries define it my way. Where does your definition come from?

I am not addressing your legal vs ethical comment as I bet we have a definition problem there too.

George Lippencott 3 years, 7 months ago

Since I am a product of a technical education I will have to do my homework

George Lippencott 3 years, 7 months ago

Found a code of ethics by Vangents Corporation. Read it. Pretty standard for the industries for whhich I have worked. Have seen and been under similar codes at least four times in my working life.

Bottom line - very subjective.

George Lippencott 3 years, 7 months ago

As defined by whom? Corporate leaders are responsible to their stock holders (many of us) to deliver a return on investment. While I am willing to tolerate some social expenditures by the companies whose stock I hold I am not willing to ask them to assume the role of governemnt or of proclaimed charities.

JackMcKee 3 years, 7 months ago

It sounds like they were on the right track with the Borders idea. As we've all seen time and again, if you want handouts from the city you just have to find a way to make it sound like it benefits downtown. But seriously, who does Schwada think he is asking the city to buy out one of his tenants? Lawrence would be a far better place without business people like Schwada and a few other developers. For Schwada to blame anyone but himself for the loss of EN is delusional. Hey Scwada, next time instead of calling the newspaper to whine why don't you have a long look in the mirror.

sherbert 3 years, 7 months ago

“I think the chamber, the city and the county all were trying to find ways to enable them to stay in Lawrence, but unfortunately we never were really given the opportunity to work out a specific deal,” Douglas County Administrator Craig Weinaug said

Did the City ever ask 'what will it take to keep you in Lawrence?' Wondering if they ever even sat down together to discuss it. Sounds like a major lack of communication and then they wonder, 'what went wrong?'

Catalano 3 years, 7 months ago

That's what the city and the county pay the chamber to do. What a monumental waste of money.

Richard Heckler 3 years, 7 months ago

Why do so many in the real estate industry and people like EN Engineering whine about taxes and tax dollars and government yet always show up at city hall looking for OUR tax dollars?

Aren't these groups among tax dollar evaders? Aren't these folks known as tax dollar moochers?

Why in the world should any applicant have access to OUR tax dollars without voter approval?

What do we get in return? Perhaps when the tax favors expire the tax dollar moochers suddenly must leave Lawrence and Douglas County. When will these profitable business management corporations learn to stand on their own?

George Lippencott 3 years, 7 months ago

Any support or just another rant a la merrill

Richard Heckler 3 years, 7 months ago

BTW there is a Schawda in the chamber as well as a member of their legal counsel.

Same with First Management.

Can we say big time conflicts of interests?

BigPrune 3 years, 7 months ago

We must not forget that engineers are involved in the decision making process.....which means these people think with the wrong side of the brain.

George Lippencott 3 years, 7 months ago

Yes, engineers are reputed to be left brained while Lawrence liberals are reported to be right brained.

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