City advisory board recommends tax abatement for LED firm

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.