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Archive for Tuesday, August 20, 2013

City advisory board recommends tax abatement for LED firm

August 20, 2013

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Smaller companies may find themselves in the running for tax breaks previously not available to them in Lawrence, after a key recommendation from a city advisory board Tuesday.

Sunlite Science & Technology won a unanimous recommendation from the city's Public Incentives Review Committee for a 50 percent, 10-year tax abatement that will facilitate the company's move into a vacant building near Wakarusa Drive.

"In a lot of ways this is what we hope many projects will look like in the future — a homegrown business that is providing good jobs," said Douglas County Commissioner Mike Gaughan, who serves on the review committee.

But it is not exactly the type of deal the city's tax abatement policy envisions.

Committee members agreed to waive two requirements in the city's tax abatement policy to accommodate the request: that a company invest at least $5 million to be eligible for a tax abatement, and that a cost-benefit analysis shows the city will receive at least $1.25 in new economic benefit for every $1 in property tax that is abated.

Sunlite, which manufactures a type of LED lighting that is signficantly smaller and eventually may become less expensive than traditional LED technology, plans to invest $2.3 million and add 40 jobs over 10 years as it moves into the former Midwest Graphics building at 4811 Quail Crest Place.

Even though the company projects the average salary for the new jobs will be about $40,000 per year, a cost-benefit analysis showed the city would receive only $1.15 in benefits for every $1 it abates in taxes. Part of the shortfall, city staff members said, is because Sunlite is moving into a building that is fully on the tax rolls today. The abatement will eliminate half the taxes on the building for 10 years.

Members of the city's Public Incentives Review Committee had no problem in recommending the tax abatement. Several committee members said the main problem with the company is that is just smaller than what Lawrence normally has considered for a tax abatement. The company currently has just five Lawrence employees.

But Mayor Mike Dever, who chairs the committee, said it may be time for the city to consider tax abatements for smaller projects. Dever said he doesn't think there was any real reason that the city chose a $5 million size requirement before projects receiving abatements. He said in today's economy, communities may need to be open to smaller deals.

"I think this could alert smaller companies that Lawrence is a place to grow," Dever said.

The advisory board, however, stopped short of recommending a formal change in the city's tax abatement policy. It asked city commissioners to discuss whether a change is needed.

As for Sunlite, the committee is recommending the city simply waive its policy. It cited several factors to justify the waiver. They included:

• The company is in the green energy industry;

• It currently is housed in the Bioscience & Technology Business Center incubator on Kansas University's West Campus;

• Although the company fell short of the $5 million investment threshold, its projected 40 new jobs exceeds the minimum jobs threshold of 20.

• The company is occupying an industrial building that has been vacant for more than a year.

City commissioners will consider giving final approval to the tax abatement at their Tuesday evening meeting.

Sunlite, which was founded in Lawrence in 1997, is projecting that it will create one new job in its first year in the new facility, and five new jobs in its second year. The remainder of the jobs are projected to be created in the final eight years of the deal.

Over the 10-year period, the company is projecting 20 production jobs with an average salary of $27,300 a year, 17 engineering and technical jobs with an average salary of $44,333 per year, two administrative positions at $33,005 per year and one new executive position with a $100,000 annual salary.

The company currently has a manufacturing plant in China that produces the chip technology and other components for the lighting. The company doesn't envision in the near future moving that work to Lawrence. Assembly operations, however, will be located in Lawrence, along with research and development, warehousing and administrative functions.

Any approved tax abatement will include a performance agreement that would allow the city to reduce the size of the abatement if the company fails to meet growth targets. But Jeff Chen, president of Sunlight, said he was optimistic that the company ultimately would exceed the estimates.

"The kind of light we're making has tremendous potential," Chen said. "We think it can have a large presence in the LED market."

Chen said he hopes the company will be moved into the West Lawrence building within six months.

Comments

Matthew Herbert 8 months ago

Classic example of what this city does far too often....We sure do love to develop codes and regulatory bodies in this community and when forum posters like myself complain about these unnecessary regulations, we are reminded of how important they are.....until suddenly the city decides they aren't anymore. If you develop an equation to decide when an abatement happens (i.e. the $1.25 rule) you had better be prepared to actually apply and enforce that rule. Suddenly deciding that the rule doesn't apply in this case is neither fair nor acceptable. Either have the rule or don't. "Sometimes" should not exist in legal language.

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jafs 8 months ago

My problem with this is just that they're wanting to exempt this company from existing city policies about tax abatements.

If we think that the policies should be changed, then we should change them. Otherwise, we should apply them consistently.

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Bud Stagg 8 months ago

This City has a terrible reputation for relocating businesses. We have to start somewhere to turn that around. We need jobs and I am not going to raise my nose at any job someone brings to this town, minimum wage or otherwise. I prefer better jobs, but will take whatever we can get. So what if these guys win a little bit on this deal, it gets the ball rolling...

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cowboy 8 months ago

nick ,I think folks are weary of the city / state handing major dollars over to company ownership while the job creation aspects are dubious at best. Show me a project that can employ our youngsters and young parents in Lawrence and I'll start the bandwagon parade.

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nick_s 8 months ago

Im no economist or policy maker, nor can I say whether this is right or wrong. I can say that we always complain that the city doesnt do enough to bring businesses & jobs. Now that they are doing something, we want to complain about that. Not sure if this was an inside deal, or is someone who is a somebody's brother in-law owns Sunlite & is getting their back scratched, but what would make everyone happy to get new jobs here? Until Americans are willing to work for less than a Union wage of $40+ an hour we will never entice manufacturers to build factories here.

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cowboy 8 months ago

The city grants an abatement for manufacturing in china , brilliant.

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Number_1_Grandma 8 months ago

.15 cents on the dollar is what Lawrence would make ? Is this really worth the long term investment ?

Then Lawrence really is in bad shape!

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Richard Heckler 8 months ago

Lawrence,Kansas requires a real salary of $64,000 a year to raise a family and buy a house for under $100,000.

What are the real salaries? Average salary suggestions are misleading.

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Beer Guy 8 months ago

Tax abatements for all. Its the trickle down effect. Tax burdens belong to the poor.

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