A rendering of a planned expansion of the Eldridge Hotel in the 700 block of Massachusetts.

UPDATE: Finalizing tax break for Eldridge Hotel expansion eliminated from CIty Commission agenda, deferred to later date

City commissioners will decide at their Tuesday meeting whether to finalize a sales tax break for materials used on the Eldridge Hotel expansion — a type of incentive some commissioners campaigned against during elections this spring.

The resolution up for consideration finalizes a transaction started in February, when then-city commissioners approved a measure that signaled their intent to issue $12.5 million in industrial revenue bonds for the project.

Industrial revenue bonds would allow developers to receive an exemption from paying sales tax on construction materials, which would save them an estimated $460,000.

Of the $460,000 in waived taxes, approximately $108,000 would be city taxes and slightly more than $18,000 would be county taxes.

During the City Commission race in March, now-Commissioner Leslie Soden told the Journal-World that recent tax breaks for hotels and apartments felt too much like “trickle-down economics.”

Soden reiterated that position Friday.

“I’m not excited about using incentives at all, unless it has to do with affordable housing or permanent full-time jobs with benefits,” she said. “I don’t think incentives for these kind of projects is the direction we should be going; that’s one of the things I ran on.”

According to a memo from Interim City Manager Diane Stoddard, developers on the Eldridge project have already bought approximately $3.5 million worth of construction materials using an exemption certificate issued by the Kansas Department of Revenue.

If the City Commission were to vote Tuesday against issuing the industrial revenue bonds, Eldridge Hotel would be required to pay back any sales tax savings on those purchases.

“Denial of this step would send a negative signal related to economic development projects,” Stoddard said in the memo.

She went on to say that the resolution of intent passed in February was “a strong indication of support to proceed with the finalization of the required steps.”

Soden said it’s a “frustrating position.”

“If we did not approve it on Tuesday, they would have to go back and pay sales tax on the things they already purchased,” she said. “It seems to be more procedural since they already have it. I don’t want this to be seen as some kind of signal that I think these kind of incentives are the way we should go.”

Commissioner Matthew Herbert plans to meet before Tuesday’s meeting with stakeholders of the expansion project “in an effort to have a clean slate,” he said.

Herbert said Friday he was not ready to state an opinion on the issue.

“I want to go in with an open mind,” he said. “I want to be fair with everybody involved with this one.”

While running for the City Commission in March, Herbert told the Journal-World tax incentives were too commonplace but there were instances he would support them for new companies.

Commissioner Stuart Boley, a retired auditor with the Internal Revenue Service, said in March he wasn’t sure the public was in favor of using tax incentives for development that doesn’t produce a large number of high-quality jobs.

Boley spoke to the city commissioners about the Eldridge project Feb. 17, when they passed their intent to issue internal revenue bonds. At the same meeting, commissioners agreed that another waiver for the project — a 15-year, 95-percent tax abatement — was a good deal for the city.

Boley suggested the commission accept a tax abatement of only 10 years at 50 percent.

Mayor Mike Amyx — the only current commissioner who was on the City Commission when it discussed the tax exemptions for the Eldridge project — voted at the Feb. 17 meeting against the intent to issue industrial revenue bonds.

Amyx also voted against the 15-year, 95-percent tax abatement Feb. 17 but voted in favor of a lesser 15-year, 85-percent rebate at a later meeting.

“I want everybody to understand this is one of the tougher ones to have to deal with,” Amyx said Feb. 17, according to the meeting’s minutes. “I am as I was before a supporter of the industrial bond and the sales tax exemption. My concern happens to be the length of time and the amount of our investment.”

Boley and Amyx could not be reached for comment Friday.

Expansion plans for the Eldridge Hotel, 705 Massachusetts St., include adding an estimated 54 guest rooms and space for a banquet room. It would expand into the vacant parcel to the south.

Construction is estimated to start in October and run through December 2016.

Commissioners on Tuesday also will consider allowing the city to issue a right-of-way permit for the expansion project that would close some downtown parking.

Parking spots from 701 to 705 Massachusetts St. would be temporarily blocked off, as would the parking lot at Seventh and Vermont streets. The lot would be used as a staging and storage location for the duration of the project, a memorandum states.

The Eldridge Hotel has offered to pay the city $6,720 in parking fees for the 28 closed spaces.

Owners of Made, at 737 Massachusetts St., and Sweet!, at 717 Massachusetts St., submitted letters to the City Commission stating concerns about sidewalk and parking closures.

Managers of River City Holdings, 715 Massachusetts St., sent a letter saying they were worried harm would come to their building during the expansion. River City Holdings owns the building occupied by 715 Restaurant, which is located just to the south of the vacant lot into which the Eldridge Hotel will expand.

“River City Holdings has invested significant money, time, and effort into rehabilitating and preserving a historic building in downtown Lawrence,” the letter reads. “Any potential damage to the building or restaurant would be expensive, time consuming, and harmful to the building, business, history and community of Lawrence.”