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Archive for Saturday, July 21, 2012

City mulling $12M incentive package for proposed Ninth and New Hampshire development

July 21, 2012

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There’s a new number to focus on with the proposed redevelopment of Ninth and New Hampshire streets.

After weeks of debate about whether a proposed hotel/retail building should be allowed to be four stories tall, the focus now shifts to a larger number: $12 million.

City commissioners at their meeting on Tuesday will consider an approximately $12 million package of incentives that developers say is needed in order for them to undertake about $44 million worth of redevelopment at the intersection.

Mayor Bob Schumm said an independent financial analysis of the proposed redevelopment — it would include both the hotel/retail building at the southeast corner and a multistory apartment and office project at the northeast corner — indicates the project likely won’t happen without the incentives package.

“Without the incentives, I doubt they would do it,” Schumm said of the development group, which is led by local businessmen Doug Compton and Mike Treanor. “You could almost do as well leaving your money in the bank. Whether you support this or not probably comes down to whether you think the project provides an economic advantage and enhancement to downtown.

“Will there be a positive spillover into other parts of downtown and the community. I think there probably will be.”

At their meeting on Tuesday, commissioners will be asked to take a key vote that will allow the incentives package to move forward. The incentives would still have additional hearings, and likely wouldn’t be up for final approval until this fall.

But here’s a list of some of the talking points city officials have been making in regard to the incentives package, which would be one of the larger ones offered for a downtown project:

l City commissioners won’t have to find $12 million in their current budget or future budgets to pay for this incentive package. The incentives are proposed to be funded by two types of tax mechanisms that rely on new tax revenues rather than existing revenues.

The first is called Tax Increment Financing. How a TIF works is that the new property and sales taxes generated by new development will be used to pay for the incentive. Here’s a simplified example: If a piece of property generates $10 in property and sales taxes now, but will generate $100 in property and sales taxes once a new building is constructed, then the city, the county and the school district would get to keep its current $10 in taxes, but the remaining $90 in taxes would go to pay for the incentive.

The second method is called a Transportation Development District Tax. This mechanism would create a new 1 percent sales tax that would be charged only on purchases made in the new buildings constructed as part of the redevelopment.

l The city is making the developers take the risk on the project. The developers don’t get their $12 million up front. The city will pay the developers annually, based upon the amount of tax revenues the new development actually creates. If the development produces less tax revenue than projected, then the developers are out of luck. The city is under no obligation to make up the difference.

Both mechanisms will require the developers to use the incentive money to pay for costs related to either public infrastructure or private parking. Both the hotel/retail building and the apartment/office building are each planned to have about 120 underground parking spaces.

The incentives package is expected to draw opposition from the East Lawrence Neighborhood Association, which also fought the design of the four-story hotel/retail project.

Leslie Soden, president of the neighborhood association, said her group’s members — who have contended the height of the hotel building will damage an adjacent historic neighborhood — shouldn’t move forward if has to receive public assistance.

“I don’t see how this is pro-business,” Soden said of the incentives package. “There are so many businesses in this town who function and survive on their own merit. If they come up with a business plan that isn’t feasible, they work up a new business plan.”

City officials, though, have said they are concerned about how long the property at the southwest corner of the intersection has been vacant. The property has been vacant for more than two decades.

Commissioners meet at 6:35 p.m. Tuesday at City Hall.

— City reporter Chad Lawhorn can be reached at 832-6362. Follow him at Twitter.com/clawhorn_ljw

Comments

Lawrenceks 2 years, 5 months ago

Are they CRAZY!!!! How about some tax cut incentives as many of us haven't had a raise in five years! I am about to march my a$$ down to city hall and have a talk with some of these stup[id people that think money grows on trees!! No more taxes until the economy recovers!! How about we rely on your new tax idea's to lower the personal property taxes in this town to attract retirees? Right now all you’re doing is running the retirees out of town with all your new tax rates and new tax idea’s!! I am having to buy everything on the internet right now to save money by not having to pay sales tax in order to get by the way it is now! If you want that area developed let Doug Compton pay for it himself!

kansasredlegs 2 years, 5 months ago

Not to just pick on you, but the problem with all this is found in your statement. That is, "I'm about to march my a$$ down to city hall". This is nothing new and has been going on for years. It's the same old tired crew that call commissioners and show up at meetings to hold them accountable without results. So I invite you to the meetings and the rest of the bloggers here to march your collective a$$es down to the meetings and vent your frustrations otherwise it will remain just business as usual.

Funny how this town hates the One-percenters at the national level but never come out to oppose our homegrown 1-percenters. Go figure. Typical hypocrites.

jafs 2 years, 5 months ago

The idea that these are"new" tax revenues is questionable.

For example, if somebody goes to a retail store in this building instead of another one, which is likely, the city loses the sales tax it would have collected at the other one, and gets none from this one.

So, it's not actually "new" revenue, it's just moving it around.

And, in this scenario, the city is in fact losing tax revenue, not even breaking even.

The property taxes may not work exactly the same way, but if other businesses go out of business as a result of new developments (there are only so many hotels, stores, etc. a town of this size can support), I imagine the property taxes from those failed businesses decline - is the city collecting property taxes from the empty Borders at the same rate they were when it was in business?

lunatic 2 years, 5 months ago

jafs. the taxes are the same, empty or occupied

jafs 2 years, 5 months ago

Thanks.

If that's true, it's very hard to understand why so many commercial buildings sit vacant for so long.

irvan moore 2 years, 5 months ago

jack is right, worst city commission ever

just_another_bozo_on_this_bus 2 years, 5 months ago

"City officials, though, have said they are concerned about how long the property at the southwest corner of the intersection has been vacant. The property has been vacant for more than two decades."

If the city gives all of the tax breaks that are being discussed here, this "lot" will be paying exactly the same taxes for the next twenty years that it has paid for the last 20 years.

And, as jafs has pointed out above, local governments will LOSE taxes as business is diverted from existing businesses (who get no tax breaks) to this development. All this while creating an increase in demand on the city services everybody else has to pay for.

just_another_bozo_on_this_bus 2 years, 5 months ago

The headline is misleading-- there is no "mulling" going on. The upcoming city commission meeting will be a formality wherein they do little more than pull out the rubber-stamp.

just_another_bozo_on_this_bus 2 years, 5 months ago

A side note to this whole development-- The Marriott family is a major funder of Republican and far-right causes.

http://fundrace.huffingtonpost.com/neighbors.php?type=name&lname=Marriott

flyin_squirrel 2 years, 5 months ago

Marriott's are franchised, so even you bozo can own one with obama's help....

COjayrocks 2 years, 5 months ago

What does Marriott's political affiliation have to do with it? That's his point, bozo.

just_another_bozo_on_this_bus 2 years, 5 months ago

It's a Marriott hotel-- money funneled through this hotel will in turn get funneled into the GOPP (Grand Ole Party of Plutocracy.)

Currahee 2 years, 5 months ago

The huffington post is like FOX News for democrats. Except somehow it ends up being 10x worse.

woodscolt 2 years, 5 months ago

Nothing is like faux news. ie. huffington reported Obamas comments in full context and Fox along with the Faux family changed Obama's comment to say what they wanted it to say and the entire right wing extremist wackos have been parroting it ever since. Reporting news and making it up. Big difference curry

just_another_bozo_on_this_bus 2 years, 5 months ago

Huffington has become somewhat of a sellout, but nowhere near the degree that Fox is. Regardless, there was no commentary at the link-- just a listing of (known) political donations by the Marriotts. Do you dispute its factuality?

tomatogrower 2 years, 5 months ago

These people have the money to develop this area. And if they don't, let's leave it an empty lot. They still have to pay taxes on it. Or they could sell it for what it is really worth, and someone else could develop it.

Compton and his cronies took their big money and paid inflated prices for downtown property. They came in and offered deals that previous owners couldn't refuse. This raised the taxes on surrounding buildings so much that they other owners either had to raise rents or sell too. This has pushed out the locally owned retail stores that made downtown unique. Now they don't want to risk their riches to develop the property. There are still owners downtown who are holding out and refuse to sell to him, but it's not easy for them. Where are the incentives for these people?

just_another_bozo_on_this_bus 2 years, 5 months ago

That's a good point-- one of the reasons this lot hasn't been developed is because the owners want so much money for it that it takes a huge development to cover that cost.

logicisking 2 years, 5 months ago

that sure sounds like #1. creating a problem, and #2. offering the solution. and they make money with both #1 and #2. would that be considered a monopoly?

tomatogrower 2 years, 5 months ago

If the value of a property has been pushed artificially high, then the city and state charge more for taxes, which are passed on to renters. So the city is a factor on rents. All though the takeover of downtown property by people who paid more than the property was really worth forced the property into a higher property tax.

kernal 2 years, 5 months ago

Is the commission counting on someone dying and leaving Lawrence a boatload of money? Are we getting a military base? Is a Fortune 500 company moving its headquarters here with 1,000 employees plus 1,000 new jobs? Has an oil field been found below one of the city parks?

ljwhirled 2 years, 5 months ago

Even if an oil field was found. City staff would think up a process that would make it uneconomical to extract without a subsidy.

pizzapete 2 years, 5 months ago

TIFs should be used to bring truely unique and innovative new business and industry to Lawrence that offer well paying jobs. We already have hotels and the low paying jobs they support. It's a shame the city is wasting an opportunity to bring something of greater value to our community.

Currahee 2 years, 5 months ago

I don't see anything wrong with this. We're not directly paying them $12 million and it forces them to be competitive to get the incentives. I'm in favor of charging 1%+ sales tax generated on the property because it forces them to bring in stores people actually want to go to. People here complain about the property developer and any business that wants to set up shop in Lawrence. The thing is, we NEED these businesses. We need jobs. Everything helps, so let's take what we can get.

seriouscat 2 years, 5 months ago

Bend over Lawrence! The more we give them the more they will take take take. Oread hotel with it's frat-boy bar and fake grass, parking lots built by the taxpayers and gifted to developers, this and more just in the past few years.

Griftopia right out in the open.

Pathetic that we have so little imagination and so little spine amongst the leadership in this town.

pizzapete 2 years, 5 months ago

Little imagination, how about no imagination? Our city commission actually pays a consultant $50,000 a pop to come up with new ideas for them. Money that is ill spent.

Patricia Davis 2 years, 5 months ago

Oh, the irony. Read the Saturday column lambasting Obama's comment that businesses don't succeed by themselves. Then reread this. Try to make sense of the two existing in one place at the same time. Genius or lunacy? I know what I think. It's behind door number 2.

seriouscat 2 years, 5 months ago

"The test of a first rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function. " F. Scott Fitzgerald

"It appears to me that one defeats the fanatic precisely by not being a fanatic oneself, but on the contrary by using one's intelligence." George Orwell

pizzapete 2 years, 5 months ago

I posted this yesterday, but think it worth repeating.

There are many things that bring people to Lawrence to visit and to live. A hotel is not one of them. You wouldn't expect anyone to say, for example, I think I'm going to go to Chicago, I heard they have this new hotel downtown that I'd like to visit. No, people go to Chicago for the same things that bring people to Lawrence. They go to see a sporting event, a concert, to visit a museum or other attraction, for a unique shopping experience, etc.

When I have friends and relatives visit from out of town they want to eat at Free State, Miltons, Pachamamas, Wheat Fields, etc. because they offer something different from the chain restaurants that dominate many other towns. I have friends that love shopping downtown because of stores like Weavers, Waxman Candles, Love Garden Sounds, Sunflower Outdoor and Bike, Phoenix Gallery, etc., all locally owned businesses with employees that go out of their way to help their customers. Many people come to Lawrence to watch our Jayhawks play basketball, football, and other sports. People come from all over Kansas to see a concert at the Lied Center, Liberty Hall, Bottleneck, etc., places that bring in music you won't see in other similarly sized cities. In short, Lawrence has many things that bring people to our city and a hotel is not one of them.

We should be using our TIF money to bring something that will actually bring people and well paying jobs to Lawrence. An aquarium downtown would be such an attraction. A fudge factory or candy manufacturer downtown could be such a place. A Ferris wheel or open air concert/theatre venue could be such an attraction.

Yes, a hotel is going to give people a place to stay while they visit Lawrence, but it isn't going to bring any additional people to our city that wouldn't otherwise make a visit. We should reserve our TIF money for a business or project we can all be proud of. One that brings quality jobs and encourages more people to come to visit and live in Lawrence. Why should we squander our TIF money on a hotel that by the developers own admission isn't economically feasible? Lawrence, we can do better

flyin_squirrel 2 years, 5 months ago

All those businesses you mentioned above are for this development because they know we need more people staying and living downtown. Without more people, they will not be around for your friends to visit.

pizzapete 2 years, 5 months ago

Your right, people staying at the Hampton Inn or living in an apartment on 23rd never shop downtown. I don't know how our downtown has survived this long with only the people who live or rent a room downtown supporting local business. It's more likely that businesses downtown would rather have their own taxes lowered than support a project that is competing with them unfairly in this limited marketplace. Why would a visitor to our city eat at Wheatfields when there's a restaurant conveniently located at the hotel?

woodscolt 2 years, 5 months ago

"City commissioners, it appears, believe this project won’t happen without the financial incentive." say the big wide eyed commissioners, so wide they can't see the obvious.

Simple answer: the project is not feasible:

"Commissioners have received reports from an outside consultant they hired, which say the projects can’t be expected to make an average rate of return for the developers, unless the incentives are granted." say the big wide eyed commissioners, so wide they can't see the obvious.

Simple answer: the project is not feasible:

If the private sector can't afford to build their building and the city doesn't have the 12 mill without using the same smoke and mirrors they used that didn't work to build the parking garage , then there is only one answer.

Face up commissioners: Regardless of how much of a benefit to Lawrence you think this project would be, the developers can't afford it without the 12mill you don't have to give them.

Simple answer: the project is not feasible:

Bigdog66046 2 years, 5 months ago

So i guess the commission doesn't care about the other hotels or apartments downtown that aren't getting all these breaks. What happens when they go out of business and then sit empty?? The commission is creating unfair Competition for the benfit of the "golden boy". who can't make money any place else expect for Lawrence with all his buddies giving him OUR tax money.

flyin_squirrel 2 years, 5 months ago

This comment might hold weight if you said the apartments outside of town, but downtown apartments wIll benefit from a vibrant downtown.

Richard Heckler 2 years, 5 months ago

Yet the largest group of stakeholders in this and other similar circumstances is we the taxpayers who are being strong armed into supporting a real estate project we do not support for many reasons.

Taxpayers are providing millions of tax dollars to make a real estate project profitable which apparently cannot be accomplished standing on its' own which begs the question "How is this a fiscally responsible use of tax dollars?"

The real estate market is still on shaky ground. Which is to say this property could lose value anytime. Why are taxpayers throwing money at this project? We're not voluntarily.

Nothing has changed much since the meltdown and banks are still playing the same risky investment schemes as before from what I read.

Do the Lawrence cookie jars need ALL of the tax dollars related to any property? Of course they do let's not pretend.

If these tax incentives were put to a city wide vote the incentives would be voted down ..... aka go down in flames. This is why government does not provide the opportunity to the stakeholders.

Then there are guidelines that which are being ignored. Then there are the neighbors quality of life issues and perhaps doing more damage to their property

Richard Heckler 2 years, 5 months ago

Is it the taxpayers responsibility to guarantee the real estate industry and developers a nice tidy profit on their speculation and/or risky investments? absolutely not!

I believe all incentives to sell and/or develop property should come from:

  1. Real estate agencies
  2. Property owners
  3. developers
  4. building contractors and suppliers
  5. bankers
  6. investors

Never from the taxpayers!

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