It seems that almost no economic development project gets done these days in Lawrence — or anywhere else — without some kind of direct public subsidy or tax incentive. For that reason, it’s good to see the city of Lawrence implementing a new policy that will help make sure local taxpayers are getting a fair return on their economic development investments.
On Tuesday, city commissioners will consider approving a $25,000 “forgivable loan” and a 10-year, 65 percent tax abatement to help support the expansion of Grandstand Sportswear and Glassware. The company, which is owned by former Kansas University basketball player Chris Piper, is planning to spend about $4.8 million to purchase land and a building in the East Hills Business Park and add about 84 employees over the next 10 years, bringing their total employment to 126.
If the company’s expansion goes as planned, it will be a good deal for the city, which will receive an estimated $1.40 in benefit for every $1 of incentives it provides. Unfortunately, for one reason or another, other companies that have benefited from city tax incentives in the past haven’t always been able to deliver on the additional jobs and other improvements that were projected in their applications for tax incentives.
Until recently, the city was limited in how it could respond to those shortfalls. Even though the companies didn’t meet their goals, they usually received the full benefit of their tax abatements. Beginning with the Grandstand project, the city is requiring companies receiving public incentives to enter into a “performance agreement” that sets specific conditions for a company to receive its full tax abatement. The agreement sets requirements for capital investment, job creation, wages and health insurance benefits that a company must meet to receive all of its incentives. If the company’s overall performance in those four areas falls short, its incentives can be reduced; if it falls below 70 percent, the incentives can be withdrawn. In recognition of the fact that a company’s performance can be hindered by unforeseen circumstances, any decision to reduce its incentives can be appealed to the Lawrence City Commission.
The performance agreement with Grandstand spells out its capital investment in East Hills and sets benchmarks for how much employment must grow each year for the next decade. It also requires those jobs to pay at least a “living wage” (calculated as 130 percent of the federal poverty threshold for a family of three) and pay at least 70 percent of the premiums for an employer-sponsored health insurance policy. All of these factors will make sure Grandstand is a good corporate resident of Lawrence, contributing quality jobs and building the city’s tax base.
There’s no reason to think that Grandstand won’t be able to meet all of the goals outlined in its request for public incentives, but the same could have been said of a number of other companies whose performance goals looked good on their incentive applications but were never realized.
Setting performance agreements is a sound business practice for the city. It’s only fair that companies asking local taxpayers to invest in a new venture be willing to make a significant commitment in return.