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Opinion

Opinion

Business commitment

A new city policy aims to make sure taxpayers get their money’s worth on public economic development incentives.

October 9, 2011

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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in those four areas falls short, its incentives can be reduced; if it falls below 70 percent, the incentives can be withdrawn.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.

Comments

charlesbunker 2 years, 6 months ago

This letter written by a realtor states 30000sf of the building is to be leased to others. How does Grandstand qualify for any tax abatement at 3840 Greenway Circle when tax abatements are based on Grandstands sole use and occupancy of the building?

October 5, 2011

Ms. Diane Stoddard Assistant City Manager City Manager's Office City of Lawrence, KS P.O Box 708, Lawrence, KS 66044

Dear Diane:

We are getting down to a very few remaining items that will need to be completed in order for Chris Piper to close on the purchase of the former Sauer Danfoss building located at 3840 Greenway Circle in the East Hills Business Park. This is an exciting project and the city has been extremely helpful in this process, and I know that Chris and Sauer Danfoss are most appreciative of all of the timely assistance from you and your staff.

As you are no doubt aware, until last week a significant element of the project was the expectation that one of the other East Hills businesses would be leasing 30,000 SF of space in the building. Chris had counted on the income from that tenant to cover a portion of the unexpectedly high costs of building repairs. We learned on Tuesday September 27 that the tenant would not be able to commit to the lease after all, and this has left a gap in the project financing.

One of the most urgent repairs needed is to replace much of the concrete in the driveways and areas around the loading docks. These areas have suffered significant deterioration and it is imperative for the safety of drivers and other Grandstand employees that this basic infrastructure is in good condition.

The estimate for repairing this infrastructure is $38,000, and if the city could provide a forgivable loan to Grandstand in the amount of $25,000, that would fund the majority of the infrastructure repair costs.

All of the parties to this transaction, Sauer Danfoss, Colliers, and city, the county, and even Grandstand, have worked diligently over the last week to try to bridge this unexpected gap, and I know Chris would be extremely appreciative of this additional assistance. The city has already proved to be an outstanding partner in this project, and we all look forward to your continued support.

Please let me know if you have any questions or if I can provide you with any additional information.

Best Regards,
Marilyn Bittenbender

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Richard Heckler 2 years, 6 months ago

"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," Based on what? Real estate profiteers love pork barrel spending!!!

Think 5% interest on loans provided by the taxpayers = reduced taxes and user fees across the board. If the money were managed properly perhaps we could be looking at no charge for water,sewer and trash service in addition to new miles of hike and bikeways throughout Lawrence,Kansas.

Let's get on with it.

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jafs 2 years, 6 months ago

This is the very least we should do if we're going to approve these incentives/assistance to private projects.

I'm glad to see the commission doing this.

It's just common sense, especially if the decisions to grant assistance/incentives are based on a projected cost/benefit analysis.

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Richard Heckler 2 years, 6 months ago

Who is going to enforce the agreement? How will these pork barrel agreements be enforced?

Who will have the backbone to pull the tax incentive?

How will Lawrence taxpayers get their money back?

How many times should one location be allocated the pork barrel tax incentive? Lawrence lost money on Sauer Danfoss at this location. Once the pork barrel spending was over Sauer Danfoss hit the road in spite of the fact Sauer Danfoss was put up as a model and speaker for pork barrel spending at Chamber events.

Why support pork barrel spending at all? Think lending institutions to support for profit ventures.

Why should Lawrence taxpayers be an interest free lending institution?

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