Lawrence tax abatements debated at public discussion

A few dozen people gathered at the Lawrence Public Library on Thursday to hear arguments for and against using tax abatements and other subsidies as tools to grow or attract Lawrence businesses.

The event, hosted by the library and the Lawrence League of Women Voters, was intended to explain tax abatements to attendees so they could better form opinions on their use, said Lawrence League of Women Voters member Janice Friedman, in her opening comments.

The topic has recently been debated at City Hall. Commissioners in March approved a 15-year, 85 percent tax rebate for the expansion of The Eldridge Hotel. Last month, the new City Commission — a few members of which had campaigned against such tax breaks — narrowly passed an ordinance finalizing the distribution of industrial revenue bonds for the project.

Other disputed tax abatements went to the Rock Chalk Park project and the new apartment and retail building across from Kansas University’s Memorial Stadium.

Allen Ford, an accounting professor at KU, said Thursday that tax abatements were “converting our business community to subsidy seekers.” Larry McElwain, president and CEO of the Lawrence Chamber of Commerce, said when used effectively, they are a tool that can attract businesses and jobs to Lawrence.

“I look at tax abatements as a tool, not a rule,” McElwain said. “It can be used effectively, but it needs to be used sparingly.”

City Attorney Toni Wheeler explained to the group the basics of tax abatements. Under the Kansas Constitution, tax abatements allow businesses that get them to receive a tax exemption on all or part of the appraised value of land, buildings and other property.

Businesses eligible for the abatements, according to the state constitution, must be either new or existing ones that are expanding to create new jobs.

According to the city’s 2014 economic development support and compliance report, five Lawrence businesses were supported by tax abatements last year. About a dozen more businesses were receiving other types of subsidies, such as industrial revenue bonds and tax increment financing.

McElwain said 2015 has been “a great year” for the city’s economic development, but that public incentives were not a major part of that success.

He noted USA800’s new call center in Lawrence that is expected to create more than 300 jobs.

“They’re not incentivized with public money,” McElwain said.

McElwain went on to say that incentives such as tax abatements help draw businesses to the city when other amenities cannot.

Arguing against tax abatements, Ford said they lack fairness. He also told the group that many times a business receives subsidies for something its owners were going to do regardless.

“They have to convince you they can’t do it without the subsidy, and many times that’s based upon assumptions that are debatable,” Ford said.

Yet, incentives such as tax abatements have become so common they’d be hard to get rid of, he said.

If they were no longer used, Ford said, the city would be labeled as “anti-business.”

“In some ways, it’s become an entitlement program,” he said. “The business community expects it.”

Commissioners Lisa Larsen, Stuart Boley and Matthew Herbert were in the audience at the discussion.