The former site of Pachamama's, located at the southeast corner of Eighth and New Hampshire streets, bottom right in photo, will serve as the base on which three floors of apartments will be added. Some city officials are concerned, however, that no plans have been made for additional parking.

The development group behind a planned apartment building at 800 New Hampshire Street will receive a sales tax exemption on construction materials for the project.

The Lawrence City Commission voted 3-2 on Tuesday to approve the incentive, which is estimated to save the development group approximately $317,000 on the almost $7 million remodel.

Mayor Mike Amyx and Commissioners Stuart Boley and Lisa Larsen voted in favor of the incentive. Vice Mayor Leslie Soden and Commissioner Matthew Herbert voted against it.

Bill Fleming, a Lawrence attorney representing the development group — which is led by Lawrence businessmen Doug Compton and Mike Treanor — told commissioners that if the incentive were approved, developers would make a $75,000 contribution to the city’s affordable housing trust fund.

That stipulation was included in the commission’s vote.

The $75,000 is about the same amount the city will be losing in sales tax revenue because of the project. The sales tax exemption will cost the state about $227,000 and Douglas County about $13,000.

“It’s a kind gesture,” Amyx said of the contribution. “This is kind of a wash the way I see it for the city of Lawrence, financially. I think in this particular case at this particular time, this project is good for the community.”

The project includes adding four floors comprising 55 market-rate apartments to the building at 800 New Hampshire St., formerly Pachamamas restaurant. The ground level would be restaurant and retail space.

The distribution of industrial revenue bonds, the type of exemption granted, does not require developers to prove that they wouldn’t move forward with the project without the incentive.

Fleming told the commission it’s “probably true we’re going to build this project anyway, because we’re pretty committed to doing it.”

Fleming went on to say that having more apartments and residents downtown would strengthen the district.

“As a city we should do infill development,” he said. “It provides resources and makes sense. Frankly, if we’re going to encourage this type of development, we need these types of development tools to make this work.”

Herbert spoke in opposition to the exemption, saying Fleming “showed their hand” and there was not “a whole lot of reason to issue it.”

He noted that the project does not include much parking; the apartments are priced at market rate; and the project would not be rehabilitating a blemished area.

“There’s no benefit to the community here,” Herbert said. “If we’re handing out sales tax incentives, there ought to be a community benefit.”

Soden said she agreed with Herbert’s comments.

Boley said it was “really important” for the city to increase its tax base and build residential density.

Larsen, who voted in October against finalizing the same type of incentive for the Eldridge Hotel expansion, said the fact that developers in this project were building the apartments to meet LEED-certified requirements was “extremely important.”

“The money for housing is, to me, icing on the cake,” Larsen said. “That money is going directly in lump sum. So, for that reason, I’m for it.”

Fleming presented commissioners with a list of things Treanor Architects and Compton had done in the past to benefit the city, including paying approximately $100,000 to renovate the Social Service League building and their ongoing work to install a new waterline along New Hampshire Street as part of the project to build a seven-story apartment and office building at the northeast corner of Ninth and New Hampshire streets.

Fleming also said that if the project were denied, commissioners would be working against their own policies. As is, Lawrence’s economic development policy states residential infill projects and projects located downtown meet the criteria for exemption.

Amyx asked that the commission talk early next year about any desired changes to the city’s incentives policy.

“We have a written policy that says we want people to look at these kind of projects in our downtown. They’re following our process,” Amyx said. “If we want a change in the public incentive policy, we need to have that discussion, separate from this. This policy has gotten us a long way and done some pretty good things in this community. If it’s time to discuss a change, let’s talk about it. Let’s clear the air.”

Amyx also asked that the commission soon have an in-depth discussion about downtown parking — an issue that sparked debate Tuesday among commissioners and residents of the neighborhood who spoke to the commission.

Plans for the apartment project at 800 New Hampshire St. include the addition of only eight parking spaces.

A city parking report included with the commission’s materials stated that city-owned lots northeast of Ninth and New Hampshire streets consistently have vacancies.

But, Herbert said, residents parking at the Riverfront garage — an area noted in the report as having vacancies — would require people walking several blocks to get to the apartment building.

Amyx also cited concerns about parking. Fleming said developers are “going to be good neighbors and come up with parking solutions.”

Tuesday’s vote allows the city to apply for an exemption certificate through the Kansas Department of Revenue. An ordinance to officially issue the bonds will require another vote from the City Commission, but that step is typically treated as a formality.

In other business, commissioners:

• Voted 3-2 to rezone the former Sunrise Garden Center property at 1501 Learnard Ave. from residential to light industrial, allowing the Sunrise Project to revamp the area. There are plans for the site to house the project’s existing youth programming, as well as after-school gardening programs. It could also include a tofu processing facility, seed store and retail space.

Commissioners Lisa Larsen and Matthew Herbert voted against the rezoning, citing concerns about a factory being placed in a residential neighborhood. Some residents of the area also spoke against the plan.

• Unanimously voted to advance a public incentives request from Menard Inc. for development of its proposed production plant in Lawrence VenturePark. The city’s Public Incentives Review Committee will review the request. A public hearing is set for Jan. 5.

• Unanimously authorized the Parks and Recreation Department to adjust fees at city-owned Eagle Bend Golf Course without the commission’s approval.

A reference to Leadership in Energy and Environmental Design (LEED) certification has been changed to the correct spelling.