A new idea to improve the behavior and accountability of businesses that receive tax breaks will be put to the test at Lawrence City Hall on Tuesday.
City commissioners will consider about $5 million in incentives for a seven-story apartment and office building planned for the northeast corner of Ninth and New Hampshire streets. But city staff members have inserted language into the proposed agreement that would give the City Commission the authority to revoke or modify the tax breaks in future years if the project's businesses violate laws related to alcohol, drugs or other such issues.
The new language comes about two weeks after city officials expressed concern that The Cave — a nightclub in The Oread hotel, which receives about $500,000 a year in tax breaks — was the subject of a state investigation that alleges multiple alcohol violations at the establishment.
"My sense is that there is a real opportunity to open up a conversation about who we give incentives to, and making sure they don't do anything to give a black eye to our community," said City Commissioner Jeremy Farmer. "That is an important conversation to have."
But it was unclear Monday whether the conditions proposed by staff would win City Commission approval. The development group for the apartment and office building, led by Lawrence businessmen Doug Compton and Mike Treanor, plans to oppose the language.
"It is using a chainsaw to cut off a sapling," said Bill Fleming, an attorney for the project's development group. "It is not the appropriate remedy for the problem that exists."
The development group for the apartment/office building is different than the development group for The Oread and The Cave, which was led by Lawrence businessman Thomas Fritzel.
Fleming said the use of the downtown apartment building will be significantly different than The Oread/The Cave. The apartment building is not expected to house a bar or nightclub. Its main business tenant is expected to be a bank.
Fleming said the city has other methods to bring problem businesses into line, but threatening to pull tax breaks after a project is built will make it difficult to finance future projects.
But the tougher language has some backing.
"It is probably something that needed to be in there all along," Mayor Mike Amyx said of the proposed wording. "There is a public incentive involved here. This business, though, is going to be a very good business, and it won't be a problem."
Under the proposed contract, the city could "revoke, modify or suspend" the tax incentives for six reasons:
• Allowing underage persons to consume alcohol on or around the project;
• Failure to control disorderly conduct;
• Maintaining a public nuisance;
• Failing to remove or report any illegal drug use;
• Failing to remove or report incidents of assault or other violent crime;
• Permitting other offenses that may adversely impact the health, safety and welfare of the downtown area.
The rest of the proposed incentives package is largely unchanged from when commissioners last reviewed the project. It would provide an estimated $4.75 million in property tax rebates over 20 years through a tax increment financing district. The development group would receive a 95 percent rebate on the new taxes generated by the project. The rebated taxes must be used for infrastructure projects. In this case, the largest use will be for a private, underground parking garage to serve the development. The project also would receive $24.5 million in industrial revenue bonds, which would make it eligible for a sales tax exemption on the materials used to construct the building.
The project is expected to add 114 apartments downtown.
"It will bring a lot more people to downtown on a daily basis," Fleming said, "which is what I think all of us want to do."
Commissioners meet at 6:35 p.m. on Tuesday.