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Lawrence and Douglas County

Lawrence and Douglas county

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

Richard Heckler 1 year, 4 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.

chootspa 1 year, 4 months ago

Agreed. Average salaries are misleading, but I'm a) not sure where the $64,000 figure is coming from and b) going to point out you can get to that figure by having two people work at $32,000 jobs.

Carol Bowen 1 year, 4 months ago

Or, one person making $320,000 and four people unemployed.

cowboy 1 year, 4 months ago

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

nick_s 1 year, 4 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.

chootspa 1 year, 4 months ago

I complain about food chains and discount retail joints getting TIF. This project seems appropriate for the abatement.

cowboy 1 year, 4 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.

nick_s 1 year, 4 months ago

As am I. Im not attacking anyone here, as your concerns are legitimate, & the city hasnt had the best track record when it comes to these kind of ventures. Chances are your concerns will turn out to be legitimate, however, those 20-40+ individuals that are said to be employed will most likely diagree with you. Until we are willing to work for less than $40 an hour companies will never build factories here.

Thomas Bryce 1 year, 4 months ago

$40 an hour jobs? Where are they and what field are they in? That is a little over $80,000 a year w/o overtime. Skilled Trades Masters don't even make that much around here. 25-30 dollars an hour is best I have seen. Must be upper administrative jobs Or IT Techs because Blue collar jobs do not pay that high a wage.$16-$18 an hour seems to be the average.

jafs 1 year, 4 months ago

And, of course, given the ridiculously low labor costs overseas, it's easy to see that even at much lower, and more reasonable hourly wages here, companies will still outsource if they can.

Seems unreasonable to me to blame Americans who want to make enough to live on here for that practice, given the disparities in labor costs and costs of living in different countries.

Thomas Bryce 1 year, 4 months ago

Greed. Corporations care more about Profit for the Shareholders and the Managing staff and CEO's, CFO's Etc. than they care about the people that made that company or corporation a Reality. Greed. Almost all of our economic problems in this country can be traced back to this. Greed. If I recall correctly, it is one of The Seven Deadly Sins. Greed. It is an epidemic in this Country and around the world. Greed. If you beleive "Greed is Good", You are part of the problem. Not directed at you JAFS, just to the anonymous reader.

nick_s 1 year, 4 months ago

Im clearly exaggerating w/the $40 an hour wage. What point Im making, & seems to be in somewhat of a consensus, is that Union wage manufacturing jobs will never return because companies will still outsource when the US wage is $16-18 an hour because it is still cheaper.

I am not blaming anyone for wanting to make a better life for themselves & holding themselves to a higher standard than minimum wage & no benefits. I guess it is a personal decision one has to make. Id say that some wage is better than no wage (unemployed), & Im sure that there are 5.9% of Kansans (the current KS unemployment rate) who would most likely agree.

Would a Union worker demanding $30-40 an hour be lumped into the greedy category when some would argue that they dont need that high of a wage to maintain a decent starndard of living? Just a question, not stating my belief by any means.

Thomas Bryce 1 year, 4 months ago

I AM Blaming the people in the Positions who made a choice and decided that they Need/Deserve more than any body else. Trickle Down economics ceased to exist when the Top Decided that the workers Really didn't need/deserve raises that these profits produced. They Kept it for them selves. Greed. They Made a Conscious Decision. Greed. It didn't have to be this way. When workers are an asset, you have a company or corporation. When workers become an adversary to the management, Eveyone loses, includung management.

nick_s 1 year, 4 months ago

US consumerism could be blamed in tandem. We cant have it both ways. We all want our 32 gig I-Pod but dont want to pay $900 for it. We all want our nice new 1080p 3-D Sony television, but dont want to pay $10,000 for it. There has to be some middle ground. Unfortunately the city of Lawrence giving a non-manufacturing company tax abatements to bring jobs, while not up to some peoples standards, might just be that middle ground.

Thomas Bryce 1 year, 4 months ago

Living within your means and being paid a wage you can live on are two different subjects. Living within your means is about making good choices with your resources to enable you to live comfortably on what you make. If the wage is not enough to live on in the first place, Living within your means becomes day to day survival. Wages have not kept up with COL or inflation. Skilled trades and manufacturing wages have been stagnant for 3+ decades. If the Middle Class stops spending because it is broke. The Economy is Done.

jafs 1 year, 4 months ago

Greed is defined as excessive or reprehensible acquisitiveness.

So, it's clearly a subjective call, and people may have different views. As far as the rest, you describe the problem clearly, but not a solution. As long as companies outsource labor to find the lowest labor costs, Americans can't make enough to live on. That's a real problem, and should be addressed, at the level of the federal government, because that's the only place that can address it.

"Some wage is better than no wage" leads directly to employers taking advantage of and abusing the labor force, by using the desperation of people needing jobs.

nick_s 1 year, 4 months ago

I completely agree with you. My argument was to the tune that we complain about no jobs, then complain when there is the possibility of a company bringing jobs. Things are never so cut & dry, & everything has a cause & effect, especially when it comes to the economy. You cant take from one area & give to another without some reprocussion or reaction. I dont claim to have a solution, but at least this is a possible step towards a sliver of a solution, or possibly a slippery slope. Only time will tell. Id venture to say there are 20-40 individuals who will be very greatful for an opportunity to put their skills to work though.

I agree with your comment below as well about consistency in application of the rules that we ourselves wrote. But we all know the city of Lawrence's track record when it comes to this particular issue.

Bud Stagg 1 year, 4 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...

jafs 1 year, 4 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.

jafs 1 year, 4 months ago

Well, yes - of course, that's not what I was thinking of, as I'm sure you know :-)

Matthew Herbert 1 year, 4 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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