Archive for Thursday, March 8, 2012

Town Talk: Ninth and N.H. hotel project seeking incentives from city; more on the plight of the Lawrence Athletic Club; city wins transparency award

March 8, 2012


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News and notes from around town:

• When it comes to the proposal to build a multi-story hotel/apartment building at Ninth and New Hampshire, there is now a new question to fight over. Neighbors long have been gearing up to fight over the question of: How tall? Now, there also likely will be a fight over: How much?

Developers of the proposed project have filed a letter with Lawrence City Hall giving more details about what type of incentives the project will need to be feasible. It is no surprise the project is asking for some tax assistance. The development group — led by Lawrence businessmen Doug Compton and Mike Treanor — has said all along that it would request some incentives. But now, the group has gotten more specific.

In its letter to City Hall, the group asks for three main pieces of financial assistance:

— A special 1 percent sales tax on purchases made inside the building. The special tax would be charged on hotel rooms, food and drinks at the building’s restaurant, and also on any retailers located in the building. The special tax would not extend to any other building or property in downtown.

— Use of tax increment financing. A TIF is a type of property and sales tax rebate system. Basically in a TIF district, you look at how much property and sales taxes a property is generating currently. Then you look at how much property and sales taxes the property is generating after it has been redeveloped. The difference between the two — the increment —goes into a special city fund instead of being disbursed to the city, county and school district to be used for general purposes. The money in the special fund is then rebated back to the development group to pay for qualified infrastructure expenses. More on what that means in a moment.

This TIF has a twist. The proposed site of the hotel/apartment building — the southeast corner of Ninth and New Hampshire — is already in a TIF district. It has been since 2000. The district was created to help pay for the public parking garage that already is built across the street from this site. But the developers want to take it out of that district and create its own district. The current district is set to expire after about seven years. The developers want their new district to last for 11 to 12 years. The district would be set up as a “pay-as-you-go” type of arrangement. In other words, the developers will have to finance all the infrastructure improvements on their own. The developers then will be paid back as the infrastructure projects are completed. Some communities take out city-debt to pay for the infrastructure and then reimburse the city’s coffers from the special TIF fund. The city’s policy generally discourages that type of incentive.

— Use of industrial revenue bonds issued by the city. This is mainly a financing issue for the development. Industrial revenue bonds generally have a lower interest rate than a traditional commercial loan would offer. The bonds technically have the city’s name on them, but the city has no legal obligation to pay them, and commissioners generally are told they pose no great risk to the city’s credit rating even if they did default. Quite a few projects around town have used them, including even some hotels. The old Lawrence Holidome used them decades ago, for example.

All the money garnered from the incentives above must be used to pay for infrastructure items. In other words, it can’t be used to build hotel rooms or restaurants and such. But the law allows infrastructure to be defined as parking, even if it is not public parking. That is what the bulk of this incentive money will be used for. The project proposes to build two levels of underground parking to serve hotel guests and apartment residents.

Before you begin to yell too loud about the idea of using public incentives to pay for private parking, know this: It already has happened in Lawrence. The Oread hotel on the edge of KU’s campus used almost exactly the same set of incentives to build its below-ground parking and related infrastructure. That parking is not available to the public.

Bill Fleming, an attorney for Treanor Architects and the development group, said downtown projects likely are going to need some help if the city wants them to provide off-street parking.

“This is just a recognition that it is very, very difficult and expensive to provide off-street parking in downtown,” Fleming said.

Downtown zoning does not require any development in the downtown district to provide off-street parking. But the developers in this group have been honest and told the city that the hotel chain — Marriott — won’t move forward with the project unless it provides a significant amount of its own off-street parking.

City commissioners have been scheduled to hear an appeal of the Historic Resources Commission’s rejection of the project on March 27. But Mayor Aron Cromwell tells me that he wants to hear both HRC issues and the financial incentive request at the same time. That may require pushing a hearing on the entire project into April.

The city has hired a third-party consultant to review the numbers associated with the project to determine if it feasibly can be built without the incentives.

• I have not seen it yet, but I understand there is a 3-D, to-scale model of the proposed hotel/apartment building on display at The Percolator art gallery at 913 R.I., which is right behind the proposed site. The proposed hotel/apartment building is six stories in some locations and three stories as it gets closer to the neighborhood on the east. Neighbors have expressed concern about the height of the project. This model was built by folks generally opposed to the project, but I’ve been assured that the model is built to scale to give folks an accurate representation of how it will look on the site. When I talked to a representative with Treanor, the architects hadn’t yet seen the model.

The idea of models does come up at City Hall occasionally. (No, we’re not sitting around Tuesday nights talking about the Sports Illustrated swim suit issue.) Sometimes people argue City Hall needs to insist plans for large projects include a 3-D model because they contend simple renderings don’t give a good perspective on issues of size and mass.

• Here’s an update on the saga of the Lawrence Athletic Club. It looks like longtime owner Rick Sells is doing his best to keep hold of the club for the foreseeable future. As we reported last week, Meritrust Credit Union is seeking ownership of the property and business after Sells’ Junkyard’s Jym corporation defaulted on a $2.4 million note.

We also reported that Sells apparently remains involved in the management of the club, although Sells did not return phone calls seeking comment.

Well, Sells has begun distributing a letter to members that sheds a little more light on the subject. In the letter, Sells said he has formed a new company called So Big Fitness, LLC. That company has a lease with Meritrust to continue operating the Lawrence Athletic Club. Sells, in the letter, said the credit union understands the LAC property and name is worth more as an operating business than in a liquidation. Sells said he expects to work out a long-term arrangement with Meritrust.

“We expect and hope to be in the athletic club business at the LAC for many years to come,” Sells said.

As we reported, Sells Junkyard’s Jym corporation fell into financial difficulty after it lost a nearly $400,000 legal dispute with the Caspian Group, the landlord for LAC’s former East Lawrence location. Sells said in the letter that he is continuing to “work toward a resolution of its legal issues” with the Caspian Group.

• Hot out of the e-mail inbox, the city of Lawrence received a nice award Thursday morning. The city received a top award from a national group that promotes transparency in city government. Sunshine Review named the city of Lawrence's Web site one of the 214 best in the country for transparency about government operations. The city competed against other cities, counties, school districts and other government agencies from across the country. Lawrence's Web site received an A+ grade from the non-profit organization. I doubt there are many folks in Lawrence who use the city's Web site more than I do, and I can tell you there is an awful lot of information that the city provides. It does provide a good window into city government.

Several other Kansas governments also were honored by the organization. They included: the Derby school district; Johnson County, Kansas City/Wyandotte County, Overland Park, Sedgwick County, Topeka and the Wichita school district.


biggunz 6 years, 3 months ago

What's with all of the people in this town who act like they are entitled to money, changes in the rules, and other handouts. The homeless shelter and these developers who want to build stuff but want help paying for it. Screw that, we don't need a damn hotel down there. This Compton lives in a different reality, look at where he lives.....why in the hell should I help pay for his needless projects that do nothing but make him richer.

deec 6 years, 3 months ago

How do you think he got rich in the first place? By having the taxpayers subsidize his projects.

just_another_bozo_on_this_bus 6 years, 3 months ago

So the E. Lawrence neighbors get screwed, and the whole town gets to pick up a good hunk of the tab for it.

guess_again 6 years, 3 months ago

I don't see any $$ numbers in Chad's note about 9th & NH. I hear these items can easily total to $3 to $4 million dollars.

How is it that a project can go so far through the planning and discussion process before the developers even reveal to the public that they desire this kind of subsidy? The process itself is outrageous. Even now, the developers don't provide the cost estimate. What is up with that?

I used to have mixed feelings about the project. No longer.

You can now mark me down as a "Hell no. No way, Jose" Irrespective of the height and massing issues, if the use doesn't pay its way, it should not be built.

Chad Lawhorn 6 years, 3 months ago

As far as numbers go, the letter states the entire project is expected to be an $18 million project. The letter doesn't put a total value on the requested incentives. I'm sure that will be done as part of the third-party review the city is undertaking. Thanks, Chad

guess_again 6 years, 3 months ago

(Chad, I am calling BS on the developers, not you)

But I do think it is appropriate and fair for you to ask them for a fair estimate of the costs of these requested public incentives.

And if they refuse to provide that to you, I believe it is more than appropriate and newsworthy for you to regularly inform your readers that they choose not to providethis fundamental information which is not only of interest to your readers, but really a public finance issue. Just as much as any other expenditure made at city hall. (readers: am I wrong here?)

Thanks for work and your column.

guess_again 6 years, 3 months ago

Chad, thanks, but I call BS. The developers have already penciled out their estimates for these public subsidies. You know that. They are just choosing to not give those to you (assuming you have requested them).

It is laughable that this topic is being discussed in the same column about an "award-winning city web site" for transparency.

A city web site dosen't mean didly squat when the process and developers withhold fundamental information and drop things into the web-site hopper less than 24 hours before a city commission or other public meetings.

Actual estimates of multi-million dollar public incentives are really fundamental to a project like this. For these numbers to continue to be hidden from the public is not at all "transparent." Newspapers are supposed to shine the light on the darkness, right? Lets get that flashlight out.

Ask them for their $$ estimates. It is a fundamentally fair question. And if they avoid answering the question, this process is not at all transparent, or public, or fair. And as a good reporter, both you and your wife know that.

JackMcKee 6 years, 3 months ago

I was enthusiastic about the hotel until now. If it's not feasible on its own it shouldn't be built.

Keith 6 years, 3 months ago

He's playing us, asking for the moon, he'll settle for less. Classic negotiating tactic.

guess_again 6 years, 3 months ago

"All the money garnered from the incentives above must be used to pay for infrastructure items. In other words, it can’t be used to build hotel rooms or restaurants and such."

Haven't we previously established that in Lawrence that this type of money can be used to finance privately owned underground drinking and entertainment establishments and a privately owned parking facility? Aren't these the same public incentives which were obtained by the Oread?

Phil Minkin 6 years, 3 months ago

The Oread is still in hock to the city for all the breaks it received. Does it make sense for Lawrence to go further in hock to help finance the competition?

guess_again 6 years, 3 months ago

"Bill Fleming, an attorney for Treanor Architects and the development group, said downtown projects likely are going to need some help if the city wants them to provide off-street parking. 'This is just a recognition that it is very, very difficult and expensive to provide off-street parking in downtown,' Fleming said."

Parking is not the issue. The use of these public monies for privately owned assets is the issue.

Mr. Fleming, please use the previously constructed, and publicly financed parking facility across the street which was part of the now existing TIF which you have depended on to avoid any public review of the actual need for additional hotel rooms in the city.

If the developers want to rely on a process where no market-study analysis is made at any level of the city planning process (because the re-zoning for a hotel at that location occurred as part of the original TIF years ago which created the NH garage) their project should remain tied to that original TIF.

They want the benefits of the re-zoning associated with the NH parking garage, (no further economic review) but they now seek to divert the stream of monies (TIF) which were intended to support the debt service on the publicly owned garage and use those monies for privately owned parking.

This is outrageous in part because the same developers already sought preferential treatment for dozens of parking slots for the NH parking facility on the project across the street.

Misters Fleming, Compton and Treanor.....since the public will be paying for this "infrastructure" through public incentives, the parking should be publicly owned.

And the planning staff which allows for such a project to be considered without a real economic review should all be fired. Why do we even have zoning, or a plan, when it is always ignored at any developer's request?

puddleglum 6 years, 3 months ago

another compton TIF? and this time he wants to take away the parking garage TIF and make it his own?
How much money does this guy need? why don't we just put a Compton TIF on everything in the county of lets say 3% and we will just give it to him because he needs more money? heck, we could even subtract 5% of our paychecks and just send him the money, because he needs it. you know, it is so expensive to build infrastructure.
so he needs more money, its only fair that you and I should pay for it. so what if the Fritzels got away with it? just because someone let something stupid happen, we should allow it over and over? I think I need a TIF. every time some city employee steps on my land, I should be compensated by a $2.00 fee. after all, mowing my lawn and seeding it and watering it all cost so much money-not to mention that I actually had to do it myself-someone needs to pay me for my labor. Why not a TIF at the supermarket? why not a TIF on parking downtown? can't we just give compton all of our money? he could ride around in a golden chariot and hand out twinkies and ho-hos to the crowds! when will he build an astro-shield over his property? Then it will never snow inside compton-land. we could get Bill Self to hang out in there and teach basketball to everyone, then we wouldn't need flunky recruits from big cities, we could grow our own.

Boston_Corbett 6 years, 3 months ago

Maybe we can get some of those Oread Hotel-style secret cell towers out of deal for downtown.

somedude20 6 years, 3 months ago

Yo, city chiefs, I want you to pay for part of my car repairs so that I have reliable transportation that will allow me to keep on working and paying all of your taxes. Heck, If ole Doug can get money, that at the end of the day makes him better off than the city, then I sure want some too!

George_Braziller 6 years, 3 months ago

The the financing requests coming at the same time the commission is set to review the entire project is interesting. I'll bet the plan is to offer to lower the height and mass of the building in exchange for getting the city to help pay for it. The HRC has twice already denied approval of the project so approval by the commission is the last procedural chance he has. After that I think his only option is to sue the city.

WilburM 6 years, 3 months ago

Between the incentives and the impact on the historic neighborhood directly to the East, this whole thing should be a nonstarter. I'm not against going up downtown, but this project needs too much help and has too many negative impacts to be worth the effort.

puddleglum 6 years, 3 months ago

westar just called, they want money for their electricity that they SAY I used last month. electricity is so expensive, like infrastructure. Its hard being as pretty as I am. can't I charge people that look at me a TIF, since my beauty no doubt eases their tensions and releases euphoria-making a better day for all which come in contact with my radiant incredibleness? it is so expensive being pretty these days.

gl0ck0wn3r 6 years, 3 months ago

I, for one, am waiting for Merrill's cut-and-paste.

Catalano 6 years, 3 months ago

Sorry. It was my day to watch him and I said NO.

Carol Bowen 6 years, 3 months ago

It looks like a hotel is not feasible. Parking is a given for guests. It's not an extra, and not the city's concern. Parking should be part of their development plan.

Carol Bowen 6 years, 3 months ago

P.S. This development was nixed by the Planning Department (or was it the Planning Commission?) and the Historic Resources Commission. Was this development approved by the city commission? Why is this still being discussed?

pizzapete 6 years, 3 months ago

I like the idea of TIF paying for things that would otherwise not be economically feasible. I hope none of you crybabys are around when I propose my own TIF to the city to pay for things I can't afford. Right now I'd like to drive an expensive European sports car and I'd like to eat an expensive restuarant every night. Since the car and fine dining are out of my price range I'd like a TIF to cover these necessary expenses.

I know you're thinking, why should the city pay me for these things? Just think of the jobs I'll be saving by spending your money for you. I promise I'll tip the waiter/waitress well with your money.

another_view 6 years, 3 months ago

I'm not opposed to "going up" downtown...but was kinda concerned like others at the scale at that particular location. But the incentives is a deal-buster for me.

The city should benefit from development by the economic activity of paying property taxes to the city and school district for streets, police, fire, parks, libraries, and education. If I understand it correctly, those property taxes would be diverted with a TIF, and in essence the developers would be using the vast majority of property tax payments to pay down their debt for this "infrastructure" (parking etc).

So this is actually stealing from the city, county, school district, library, parks, etc, and the money goes back to the developers. As someone else pointed out, maybe they should use that money to help pay off the New Hampshire garage, as original plans for that area would require, or in the alternative, to finance other public owned parking.

jafs 6 years, 3 months ago

That's exactly how it looks to me.

They want the city to pay for a private parking garage for their hotel.

Where's jhf to explain to us all why this should be done?

irvan moore 6 years, 3 months ago

does anybody really think cromwell will say no to compton

irvan moore 6 years, 3 months ago

i know grandma but it just seems like whatever cromwell wants is the way it goes with this commission, i guess i'm a whiner but it sure don't seem like things are getting better

Catalano 6 years, 3 months ago

You are correct, however, appointments to the Planning Commission, Historic Resources Commission and Board of Zoning Appeals (which is a quasi-judicial board) CAN make a difference in the long run, depending on how long the terms are and who gets appointed or re-appointed. That said, I have no knowledge of Cromwell's appointments to any of these boards.

I kind of look at it like Supreme Court appointments...your legacy is in tact years after you're out of office.

juma 6 years, 3 months ago

Having left Lawrence about 40 years ago to live in a small rural town. I got fed up with all of the 'mafia' style BS between rich guys and the city officials. So, I decided to move back to Lawrence. A friend told me that Lawrence is just as 'screwed-up"; just way more money involved. He was right. It is unbelievable what corruption is going on in this town!!!

Richard Heckler 6 years, 3 months ago

We have created in the United States and Lawrence,Kansas, largely in the last thirty years, a whole series of programs — a few of them explicit, many of them deeply hidden — that take money from the pockets of the poor and the middle class and upper middle class and funnel it to developers. And these are policies that either have not been reported on or the news reporting on them generally has not informed people about what they really are.

Well, what is tax increment financing? I’ll tell you what it is. You go to the store with your goods, you pay for it and there’s a very good chance that that developers have made a deal with the local government that the sales taxes you are required to pay, that government requires you to pay, never go to the government. Instead, those sales taxes are kept by developers and used to pay the cost of the project. And typically in those deals, the development is tax exempt, just like a church.

Now, there are two ways that it’s important to think about this. One is, that means your kid’s schools, your police department, your library, your parks are not getting that money. And you’ll notice we keep saying we’re starved for money. We’re twice as wealthy as we were in 1980, but we’ve we’ve got to close schools, and we don’t have money for all sorts of things like after-school programs, even though we’re twice as wealthy.

The second thing to think about is, imagine that you own Amy Goodman’s or Juan’s department store across the street. You suddenly have to compete with people whom the government is giving a huge leg up on. You think you would go broke after a while? Well, in fact, somebody will.

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