Archive for Monday, April 30, 2012

Town Talk: City report details dollar totals for tax abatements, incentives for The Oread, other projects; city staff recommends approval of 9th and N.H. building at tonight’s HRC meeting

April 30, 2012

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News and notes from around town:

• When folks find out I cover Lawrence City Hall, a frequent question I receive (other than concerns about my mental state) is how much money is the city “giving away” to companies? Usually the question is in the context of tax abatements or some other form of economic development incentive.

Well, the city compiles such numbers annually, and its latest report is out. City commissioners at Tuesday’s meeting will approve the 2011 Tax Abatement and Economic Development Incentives Report.

Perhaps there are some numbers that will surprise you. Here’s a look:

— Five companies received a property tax abatement in 2011. The five companies received a grand total of $116,917 in property tax breaks. The companies paid a total of $973,173 in property taxes.

So, even though most of the companies were approved for a 50 percent tax abatement or greater, in total, the actual abatement was much less than that. It actually was about 10.7 percent in the aggregate.

How’s that possible? Well, when a tax abatement is approved, it is only for a specific project — such as a specific building expansion or a specific piece of equipment. That means, in many cases, the company still has property or equipment in Lawrence that is being taxed at the full 100 percent rate.

In case you are wondering, the $116,917 in property tax breaks amounted to 0.7 percent of the city’s total property taxes in 2011. For the year, the city collected $15.45 million in property taxes.

— The performance of companies that received tax abatements was a mixed bag. In summary, the five companies didn’t produce as many full-time jobs as they had projected, but the average wage per job was higher than projected. The companies, in total, projected to create 332 full-time jobs as a result of the tax abatements. In reality, 264 full-time jobs had been created at the end of 2011. The companies, though, did create 225 part-time jobs, well above the 11 that were projected.

On the wage front, the companies are paying more than they originally projected. At the end of 2011, the average full-time wage at the companies totaled $41,000. That’s about 9 percent higher than the $37,600 — which has been adjusted for inflation — that was projected by the companies.

The report also notes that at $41,000 per year, the average wage is about $12,000 higher than the average, full-time, private-sector wage in Lawrence.

Technically, because some companies did not meet their job projection totals, the city could consider adjusting the abatement amounts for some of the companies. But staff members are not recommending any such action. Instead, the report notes it appears some companies had legitimate reasons for switching to a more part-time oriented work strategy as they tried to “balance labor demand with recent recessionary pressures.”

— The performance of individual companies varied significantly. Here’s a look:

  1. Allen Press: Full-time positions projected: 13. Full-time positions created: 13. Average wage projected: $33,757. Average wage paid: $46,016.
  2. Amarr Garage Doors: Full-time positions projected: 80. Full-time positions created: 40. Average wages projected: $30,531. Average wages paid: $33,699.
  3. DST Systems: Full-time positions projected: 175. Full-time positions created: 122. Average wages projected: $51,812. Average wages paid: $39,388. DST also created 214 part-time positions, which weren’t projected as part of its tax abatement application.
  4. Prosoco: Full-time positions projected: 50. Full-time positions created: 62. Average wages projected: $28,446. Average wages paid: $45,152.
  5. Reuter Organ Co.: Full time positions projected: 14. Full-time positions created: 27. Average wages projected: $43,610. Average wages paid: $39,592.

— Two companies — Allen Press and DST Systems — had their tax abatements end in December, and are now on the tax rolls at 100 percent. At least one company is expected to join the tax abatement list in 2012. Grandstand Sportswear and Glassware was approved for a 65 percent tax abatement to facilitate its expansion from South Lawrence to East Hills Business Park.

— Tax abatements aren’t the only type of incentive City Hall offers these days. The city in 2008 created a special taxing district and a tax increment financing district for The Oread hotel project. The special 1 percent sales tax has generated $184,500 since 2009. The tax increment financing provision — which is a type of property tax and sales tax rebate to pay for parking and public infrastructure for the project — has rebated $782,973 to the development since 2009. In case your calculator is broken, The Oread has received $967,473 in tax rebates since 2009. The report doesn’t provide details of how much the project has received by year, but I believe it is safe to assume in 2011 The Oread project by itself received more tax breaks than all five of the industrial tax abatement projects combined.

The city also created a special taxing district for the Free State Transportation Development District at the northeast corner of Sixth and Wakarusa. The development — which includes the CVS, a Taco Bell and a few other businesses — charges a special 1 percent sales tax to pay for transportation-related projects at the development. Since 2009, the district — which is only about 25 percent built out — has received $81,490 from the special tax.

City commissioners meet at 6:35 p.m. Tuesday at City Hall. They’re expected to approve the tax abatement and incentives report as part of their consent agenda.

• In case you have forgotten, tonight is the night the city’s Historic Resources Commission will consider the fate of a proposed multi-story hotel/retail building at the southeast corner of Ninth and New Hampshire streets.

Well, at least, tonight is supposed to be the night. I would guess there is a pretty good chance the HRC won’t take a final vote on the controversial project proposed by Lawrence businessmen Doug Compton and Mike Treanor.

The East Lawrence Neighborhood Association, I believe, will lobby the HRC hard to delay a vote on the project. The association has taken an official position that it doesn’t yet have an opinion on the new plans because it hasn’t had enough time to review them since they were first presented publicly last week. Delay has never come difficult at City Hall, so who knows whether the HRC actually will produce much news tonight.

But the city’s historic resources staff has had enough time to review the project, and it is now recommending approval. The key issue has been whether the size and mass of the building is compatible with the historic neighborhood directly east of the site.

The new plans reduce the height of the building, and the city’s staff says it now meets the necessary guidelines to co-exist with the historic neighborhood.

Specifically, staff notes the HRC directed the developers to design a building more similar in size to the Lawrence Arts Center, which is directly south of the proposed site. The staff compares the two in several ways:

— The height of the Arts Center is 38 feet at its highest point. The proposed hotel/retail building is 63 feet at the corner of Ninth and New Hampshire, but is 40 feet tall along its edge closest to the neighborhood.

— The Arts Center is 206 feet long from north to south. The proposed hotel/retail building is 225 feet.

— The Arts Center is 115 feet from east to west. The proposed hotel/retail building is 116 feet.

But perhaps most interesting is that staff notes the proposed hotel/retail building has a large U-shape cut out of its backside — the portion facing the neighborhood. That U-shape houses a courtyard. Because of that U-shape, the staff report notes “the overall size and mass of the structure is less than the overall mass of the Arts Center.”

That may be a key selling point for the project, or it may create a question of why the project doesn’t reduce its height more and fill in the U. Of course, I’m not sure that would meet with the approval of neighbors of either.

We’ll see how it goes, but it appears the project is on much firmer political footing than it was a week ago. If the HRC rejects the plan, the City Commission could reverse the decision on appeal.

The HRC meets at 6:30 p.m. today at City Hall.

Comments

akuna 3 years ago

Are there renderings of the proposed building on the site? I'd use the search engine built into this site, but it has proven very inadequate for finding anything in the past.

jafs 3 years ago

And all of that money was given to the Oread, pretty much.

Also, why can't they meet their projections as far as jobs created? It's great that they (or some of them) are paying decent wages, and part-time jobs are ok too, but why not do what they said they would do in exchange for the abatements, etc.?

akuna 3 years ago

Try owning a business and projecting your finances for the next few years. You'll find out real quick why it is hard to meet projections.

jafs 3 years ago

Ok - then we shouldn't give tax breaks based on those projections.

That's been part of my argument for some time - these sorts of things aren't able to be predicted with any certainty.

akuna 3 years ago

If you risk adverse, then, yes, the prudent action is to not give tax breaks.

If you find risk acceptable, then a carefully measured response is the correct course. In this case, the commission must of found the proposal to have merit. Right or wrong. Only time can tell.

jhawkinsf 3 years ago

Think globally, act locally. Jobs, jobs, jobs. Want to blame China's lack of minimum wage? Want to blame Obama? Brownback? I'll act locally and blame our resident obstructionists.

jafs 3 years ago

Blame anybody you want, for whatever that's worth.

Did you notice the part in the article that describes how much the Oread project has received with their tif's? It's virtually identical to the tax revenue received by those companies you like so much.

So, the city hasn't received any net tax revenue from these various projects.

What's happened is that the taxes the five have paid have gone, instead of to the city, to the Oread, essentially, if you want to look at it that way.

jhawkinsf 3 years ago

Read Chad's clarification below. But beyond that, I'd like to know how much was paid to construction workers during construction of the building? Where did they spend their wages? My guess is that much of that was spent in local stores, local restaurants who in turn hired workers, paid them wages and they then spent their wages. And that cycle continues, on and on. And with each transaction, there is a tax. The city gets some, the state some. Washington gets some. All this business activity helps stimulate the economy. Many millions were pumped into the local economy. The risk you are so averse to is that unemployment will have to be paid to those construction workers, that the waitstaff at local restaurants won't be hired, that local stores will wind up looking like the old Panda restaurant on Iowa St. (the proposed Olive Garden).
Why do you focus on a few hundred thousand dollars of property taxes lost via abatements and not see the many millions of dollars of business activity that then generates even more money into city coffers (and Topeka, and Washington)?

jafs 3 years ago

I agree there may have been some benefits of the kind you mention.

Although as you say, it's a "guess" that it was spent locally.

And, "many millions"? Source?

Again, if they hadn't conditioned us to believe that we had to provide those abatements, etc. we'd have the benefits of the activity without the downsides.

jhawkinsf 3 years ago

Come on, Jafs, use a little common sense. I don't need a source to know that the Oread took millions to build. Not thousands, not billions. Nor is a great leap to know that money would have been spent locally. Really? Do you think those carpenters and plumbers flew in from Sudan each and every day and then went back home to spend their wages? And to comment on an above comment of yours, the one about projections. It's a tool. And it might be the best tool available, even if somewhat unreliable. If you have a better tool, please mention it. But if it is the best tool available, use it.

jafs 3 years ago

It is in fact a leap - many people may spend the money in Eudora, or other surrounding communities, rather than Lawrence.

See a post below - many people work in Lawrence but can't afford to live here, and live in surrounding communities.

I'd like to see your source that "many millions" have been "pumped into the local economy".

If it's unreliable, it's not a good tool to use - would you use a hammer that didn't work?

jhawkinsf 3 years ago

Right, maybe some do work here and live in Eudora. And some live here and work in K.C. Now you're really sweating the small stuff while missing the big picture. Maybe those Eudora residents bowl here or go to the movies here. Maybe some Lawrence residents like to shop at Crown Center. We'll never know all the small stuff. What we can say is that building a structure with an real cost of "X" millions of dollars is likely to produce a very real benefit to the community. If you really want to deny that, then you're the one who's going to have to track every dollar spent. Maybe they all dug a hole in their backyard and buried their money. I don't think so, though, do you?

jafs 3 years ago

You know, there's an easy and much better way to do these sorts of things, I just realized.

Why not give abatements, etc. to business that in actuality create jobs, etc. rather than by projections.

For example, if we said that 10 new jobs paying $30,000/yr qualify for a 10% abatement, then let the business show they've created those, and then they get the abatement.

And, we could make them proportional as well - if they created 5 jobs paying $30,000/yr, they'd get a 5% abatement.

Etc.

Then we're not taking the risks based on unreliable projections, and they still get their abatements.

There are other problems that would have to be worked out, and I'm still not a huge fan, but it would be significantly better than the way we do it now.

jhawkinsf 3 years ago

Listen, those buildings didn't build themselves. Somebody built those walls, someone poured that concrete. Someone put those wires inside those walls. Jobs most certainly were created. And those people didn't work for free, so wages were paid. What's the problem seeing that. Whether it's the Oread that's already built or the proposed structure at 9th. and N.H. or previous applicants (Olive Garden, Masonic Temple). Someone will build it/renovate it. Jobs, jobs, jobs. Now once completed, will those businesses cannibalize existing businesses, I don't know. The market will decide if that happens and to what degree. But the initial investment in jobs is a certainty and can never be taken away.

hujiko 3 years ago

As an added bonus your tax dollars are being spent dispelling weekly brawls involving underage patrons at the Cave. It's only a matter of time until someone is killed considering that weapons have been involved in past rumbles.

Fill in the hole.

true_patriot 3 years ago

As long as we have people that can't afford dental care or health care or food for their families and children we should put any taxpayer dollars that city can afford to give away into those programs rather into protecting investments from wealthy monopoly players.

I'm all for growth and incentives, as long as they are a part of a comprehensive long-term plan and that those sorts of welfare for the rich are suspended during difficult economic times such as the current one.

jhawkinsf 3 years ago

"I'm all for growth and incentives" - but then you state that in these difficult times, we should not be giving out the incentives. Now is exactly the time, specifically because the government is unable to spur the economy. The government is having a hard time meeting it's obligations because of the poor economic conditions. Now is precisely the time to get a significant amount of private money into play. Encouraging that, through incentives, will reap rewards well above the initial incentive. Jobs will be created at a time when the government is having a hard time creating jobs. Business activity will be created at a time when government is having a hard time creating that environment. As the article suggests, the amount of the incentives is much smaller than the amount of property tax generated. Vacant lots, boarded up buildings, underperforming properties generate the smallest possible return into city coffers. I understand no one wants to give money to people who really don't need it. But if the price for shooting them in the knee is for us to shoot ourselves in the foot, I say find another way.

jhawkinsf 3 years ago

I agree with you. I think government and private business should work together to find win/win situations. I'm all for these incentives if they make sense for the city. And job creation and higher taxes generated for the city make sense.

jafs 3 years ago

And virtually the same amount was given to the Oread with their tif's, etc.

Kind of a wash there.

Chad Lawhorn 3 years ago

Please don't take this as me weighing in on this issue one way or another. But I do want to make sure people are reading the numbers correctly. The $973,173 in property taxes paid by the five industrial properties receiving tax abatements is for one year. Th $967,473 in property tax rebates given to The Oread is basically the total for three years. Thanks, Chad

jafs 3 years ago

Thanks for the clarification.

What other businesses also received tax rebates, abatements, tif's, etc. during that period, if you know?

true_patriot 3 years ago

No, that's extortion. Cities should not capitulate to threats by wealthy investors that want to further pad their investments. If the business proposition in not solid enough to be profitable in the marketplace without raiding the local tax coffers, then the investors need to come up with a better business plan. You assume that no taxes would be paid if the city doesn't capitulate - the only way that's true is if the business plan is so awful that it would fail immediately without receiving any investor welfare.

You say private money should come into play because the government is unable to create jobs (in actuality this is because funding for government has been slashed). Then you say we should be throwing public funds at rich investors. Private money would be the investors themselves bringing money into play, not relying on handouts from the public. I'm saying that public money needs to go where it is needed most right now, not to insure an even higher rate of return or a better bottom line for well-off investors during these times.

In general, there is little evidence that shorting services and allowing families to go hungry and be bankrupt by medical bills in favor of giving away public funds to the top of the income ladder is a good business investment for government; in fact, on a federal level, the evidence is overwhelming that about 40 cents on the dollar for every dollar invested in welfare for the rich is the average rate of return, versus $1.50 for every dollar invested in help for working class Americans. Which ROI would you choose, from a business perspective?

Even if you throw away the moral and ethical issues of favoring the rich over the less well-off and heading back to disastrous Gilded Age policies, welfare for the wealthy is a really poor business decision. It's ironic that Big Business must promote its own welfare by pushing approaches that are unwise and foolish business decisions.

jhawkinsf 3 years ago

Let me give you a hypothetical. A vacant lot pays $10,000/yr. in property taxes. If something is built on the lot and the tax assessment is now $200,000/yr. but with an abatement, the owner will have to pay $20,000 in the first year, increasing by $20,000/yr. until it reaches the assessed value of $200,000, is that a giveaway? Well, maybe, but only if it is guaranteed that the project will go forward with or without the abatement. However, if without the abatement, the vacant lot languishes and stays at $10,000/yr., who wins? And none of that takes into consideration the number of jobs created to build the project. How many carpenters and plumbers, how many laborers and electricians. And where they will spend their wages and where will the recipients then spend their wages.

jafs 3 years ago

Interesting - so if we help the poor/middle class it's socialism, but if we help the rich, it's capitalism?

Hmmm.

And, again, many poor people provide labor, and many poor/middle class people provide a customer base, so that businesses can thrive.

JayhawksandHerd 3 years ago

"...so if we help the poor/middle class it's socialism, but if we help the rich, it's capitalism?"

Funny how that works out, isn't it?

true_patriot 3 years ago

Since you support capitalism, why are you getting all "whiny and complaining" when people question giving welfare and government assistance to wealthy investors when there are critical needs being unmet in the community?

true_patriot 3 years ago

Some of us read the words and then think for ourselves.

cummingshawk 3 years ago

Read the article for god's sake, the only business receiving a tif was The Oread. How many jobs did they create? Did they have to project the number of jobs they would create with the tif? The other businesses received tax abatements based on the projected number of jobs created after remodeling/building a new workplace.

ajdelinquent 3 years ago

Great article Chad!

@true_patriot, although I appreciate your opinion, I have on good authority that some leading citizens fight against hunger in Douglas County are very pro-growth as that growth means more jobs and less hunger. Also more often than not, the reason the rich are rich is by their own means. This country is great because anyone can get ahead. I believe that is called meritocracy. No one makes the poor spend their money on frivolous expenditures, and no one stops them from seeking gainful employment. I also have that on good authority.

Regardless of the side of the issue you're on @true_patriot, I'm sure will see a true patriot like yourself attending tomorrow night's City Commission meeting to express these strong opinions. Because if there's anything Lawrence really does need is more citizen involvement.

true_patriot 3 years ago

I understand that it's possible to be pro-growth and concerned about the hungry at the same time. I myself fit both definitions.

I'm talking about the poor business decision to pad wealthy investors' pockets and paying to shift the risk of their free market investments onto the public in dire economic times which has nothing to do with any individual's personal ethics.

Have you noticed anything strange about the Tanger Outlet Mall or the Riverfront Mall or the Borders store?

And if you think the rich are getting ahead by their own means, I will have to think of you like an endearing little child and dread for the time when your bubble is burst. The irony in your naivete is especially strong in this case, where one of the investors earned his money the good old-fashioned way - by marrying into it.

OMG, we are lost indeed.

Only_The_Facts 3 years ago

"The Oread has received $967,473 in tax rebates since 2009"

@KansasLiberal This is not money that has been a "giveaway to a rich guy." These are revenues that the City would never have realized without the development. The special taxing district and the TIF financing recognizes the extra ordinary expenses sometimes required by a development that will, in turn, provide additional taxing base for a City. The amount of money indicated is a portion of the revenue collected by this development. The development generates revenue for the community through property, sales, and Kansas State Transient Guest Tax (“bed tax.”) None of these revenues, including those rebated, would had not been possible without the development.

JayhawksandHerd 3 years ago

Interesting points. Here are a few more facts:

1) When I was in grad school, I lived on 11th Street. During The Oread's construction, mud would flow down Indiana and into my parking lot nearly every time it rained. Inconvenient? Sure, but perhaps it was a small sacrifice to endure for the greater good.

2) The occasional college house party that may have been a little boisterous - but otherwise harmless - was largely replaced by drunken brawls outside The Cave multiple times a week. Now, I don't doubt that the revenues you mention wouldn't exist without The Oread, but I am curious about the costs associated with the increased presence of law enforcement in the neighborhood. Perhaps it's negligible, but I have no desire to spend any time or money in that area these days.

JayhawksandHerd 3 years ago

Also, I'm curious - construction jobs aside, what kind of jobs has The Oread produced? Are we talking high-wage, professional positions, or low-wage, part-time jobs? I would suspect most are the latter, but maybe I'm mistaken.

JayhawksandHerd 3 years ago

crickets

Surely it can't be that difficult to provide the numbers. Right?

jafs 3 years ago

Tif's give what would/should be tax revenue back to developers to use for what should be private expenses.

true_patriot 3 years ago

Wrong. That nearly-million dollar figure you quote are not revenues at all, they are an expense to the taxpayer. In terms of opportunity cost, the figure is much, much higher.

scaramouchepart2 3 years ago

The construction jobs produced as well as most of the regular jobs produce on a project like 900 NH will not pay well enough for those people to live in Lawrence. Check it out. Where do the electricians and the other workers live, not the owner of the company, the actual workers? Not many in Lawrence. Same for the wait staff, maids and so forth. So in reality we are supporting jobs for out of towers who take local dollars out o town. This includes grocery and most other daily needs. I know several and they don't buy in Lawrence, they buy in KC, Eudora, Topeka and so forth. Jobs are used as a tool to get the city commission to say yes and give money.

Carol Bowen 3 years ago

The design of the building already built is very attractive. More buildings of that calibre would really benefit the downtown. My concerns are these:

-The business within the buildings should support themselves. The city should not be involved. -The development should follow the building codes rather than requesting variances from the code. The code is really quite simple: 1) The height should be equivalent to surrounding structures; 2) There is a required set back on all sides; 3) Use should be compatible; 4) Emergency access should not be compromised.

The new brick building at 19th and Mass. remained empty for a long time, because it did not have the proper setback between buildings. How can the city be so stringent with one builder and not another?

The new buildings would improve the 9th and New Hampshire intersection, but the strength of the adjacent neighborhood is also important. If the building code is followed, there will be no encroachment. Our current development practices (always requesting variances) will eventually challenge every neighborhood we have. Businesses looking for a new location will be looking at the stability of our neighborhoods for their employees. If those businesses see one conflict after another in our local news, they will think twice about coming to Lawrence.

nativeson 3 years ago

TIFs are effective in certain situations. The tax revenue rebated is from property value and sales that would not otherwise be generated. The construction spending and jobs created during that time alone were accretive to the economy.

The other important part of the Oread TIF is that it is pay-as-you-go. In other words, the City did not take on any liability for the bonds used for construction. If the TIF revenue falls short of expectations, the developer must make up the difference. This is a clear contrast from Kansas City Missouri and the Power and Light District. They are on the hooks for debt service without a corresponding revenue stream.

The City also received a return on the infrastructure investment in the street scape on the intersection. Remember 12th and Indiana prior to the Oread? It was a very difficult intersection that had a number of accidents due to the curve and deteriorating pavement.

Another point. If variances are not considered for infill projects like the Oread and the hotel at 9th and New Hampshire it leads to suburban sprawl. Land areas within the city core are not easy to develop since they have surrounding structures with odd-shaped footprints. Without some negotiation on variances, you end up with empty spaces and an ever-expanding city limit.

jafs 3 years ago

It's from property values, etc. that "might" not have been generated otherwise.

The jobs, construction, etc. were a good thing.

Do you have a source for the Oread being responsible if the revenues anticipated don't materialize? That would make a difference in my view of it, perhaps.

We can easily just fix the streets without creating tif districts, can't we?

Infill projects can be done on smaller scales, and in ways that fit with the surrounding areas - everything doesn't have to be big.

pizzapete 3 years ago

I'm not saying the numbers are wrong, but the average wage at DST is nearly $40,000? I know a girl who has worked there full time for over 3 years and she is making around $24,000. I also talked with a co-worker who after 10 years with the company became a supervisor and was finally pulling in around $32,000. The starting wage there is $11 an hour. They must be including their Boston and Kansas City executives salaries to come up with an average that high. I know for a fact the Lawrence office prefers to hire mostly part time college kids so they don't have to offer benefits or pay more than $11 an hour.

jafs 3 years ago

Nice trick there for them to camouflage the actual situation involving local Lawrence jobs.

Thanks for mentioning it.

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