Compliance report on city’s economic development incentives will be used in deciding policy changes

This file photo from Nov. 4, 2015, shows the beginning stages of construction on a seven-story apartment and office building at the northeast corner of Ninth and New Hampshire streets in downtown Lawrence.

Skepticism about how Lawrence is using its economic development incentives has been raised in City Commission conversations on a few recent projects: The Eldridge hotel expansion, HERE Kansas and an apartment development at 800 New Hampshire St.

Now, the City Commission’s acceptance at its weekly meeting Tuesday of a 103-page report detailing Lawrence’s economic development incentive work in 2015 will kick-start a review — and potential changes — to policies that govern those incentives.

“I always think of this report as historical record: what we’ve done, how did it work, is that the way it’s going to go in the future or are we going to do something different,” said Britt Crum-Cano, Lawrence’s economic development coordinator. “I think it provides context for that.”

The Economic Development Support and Compliance report is produced every year and details what the city provided in assistance and whether companies met measures necessary to receive their incentives, such as the amount of capital investment and job creation. In 2015, Lawrence paid out a total $981,400 in “pay-as-you-go” incentives, comprising tax increment financing and transportation development districts, neighborhood revitalization areas and tax abatements.

Projects receiving incentives in 2015 ranged from historic renovations to the development of manufacturing plants, hotels and apartment and retail projects.

Crum-Cano said all of the entities receiving incentives were in compliance in 2015.

“We’ve got a variety of programs, each designed to work on certain goals,” she said. “I think, overall, they’re doing exactly as they’re designed to do.”

City reimbursements to The Oread hotel, the site of a tax increment financing district and transportation development district, have been suspended during an ongoing investigation into how developers are using those incentives.

Because it’s still under construction, reimbursements have not started for HERE Kansas, the apartment and retail development near Kansas University’s Memorial Stadium. The city’s performance agreement with HERE developers is in the process of being amended.

City boards will use the report when reviewing Lawrence’s overarching economic development policies in the next month.

In January, commissioners held a meeting to name changes they’d like to make to the policies, including scaling back the cap on the amount of property tax that the city would rebate a project to 50 percent over 10 years.

Assistant City Manager Diane Stoddard said at the time that the action could limit Lawrence’s potential for attracting large-scale manufacturing companies and the jobs that accompany that type of development.

Another proposal was to add a stipulation to the issuance of industrial revenue bonds that, in order to receive them, developers have to prove they could not complete their project otherwise.

It was also suggested the city raise the application fee for incentives; add a special provision to require affordable housing for some deals; and add a policy that provides rules on “payment in lieu of taxes” deals.

The Joint Economic Development Council, Public Incentives Review Committee and Douglas County will discuss the changes and provide their recommendations. Then, they will go back to the City Commission for a final decision.

Crum-Cano said she’d like the changes to be decided on by the end of May.

Upcoming event

The Lawrence Chamber of Commerce is hosting a free, public event Thursday about economic development incentives in the region.

Tim Cowden, president of the Kansas City Area Development Council, and Steve Kelly, deputy secretary of the Kansas Department of Commerce, will speak. The program runs from 3:30 to 5 p.m. at The Carnegie Building, 200 W. Ninth St.

Here’s a rundown of the Lawrence’s incentives disbursements in 2015:

• Four Lawrence entities received property tax abatements in 2015: Amarr Garage Doors; Grandstand Sportswear and Glassware; Sunlite Science & Technology; and Rock Chalk Park.

Those receiving the abatement offered an average wage of $37,760, $6,234 more than projected and about $7,000 more than the average full-time, private-sector wage in Lawrence. They’ve created a total 354 full-time jobs.

The city abated $21,182 for Sunlite last year, $99,422 for Grandstand and $28,593 for Amarr.

About the incentives, Crum-Cano and City Manager Tom Markus said they wanted to make clear that the city pays recipients with property and sales taxes they’re generating with their projects, not with existing resources. They also noted the companies must pay a portion of property taxes.

The abatement for Rock Chalk Park is 100 percent of real property for 10 years. Stoddard said the project does not have to adhere to job or wage requirements because it wasn’t incentivized for job creation.

• Six companies had industrial revenue bonds in 2015, giving them a sales tax exemption on construction materials. Those projects were: Bowersock Mills and Power Company’s hydroelectric power plant; manufacturing facility Prosoco Inc.; Rock Chalk Park; HERE Kansas; the apartment and retail development at the northeast corner of Ninth and New Hampshire streets; and the Dwayne Peaslee Technical Training Center.

The companies saved an estimated total of $907,477 in 2015, $214,610 of which would’ve gone to the city, $36,367 to the county and $656,500 to the state.

The Eldridge hotel also received approvals for industrial revenue bonds for its expansion, which was canceled. Bonds for Pioneer Ridge Assisted Living and the 800 New Hampshire apartment and restaurant project were authorized in 2015 but had not closed.

• Lawrence has seven neighborhood revitalization areas, which contain developments eligible for property tax rebates. Those eligible for rebate in 2015 were: Eighth and Pennsylvania streets (the Warehouse Arts District); Treanor Architects’ headquarters at 1040 Vermont St.; and the Cider Building, at 810 and 812 Pennsylvania streets.

The Eighth and Pennsylvania area was reimbursed $13,617 in 2015, Treanor Architects headquarters $29,718 and Cider Building $26,370.

This map from the city of Lawrence shows the locations of projects and companies that received economic development incentives in 2015.

• Lawrence has three transportation development districts, in which public improvements fronted by the developer are reimbursed through a 1 percent tax on goods or services purchased within the district. Those districts are: Bauer Farms; The Oread hotel; and Ninth and New Hampshire streets, which includes the TownePlace Suites development and the apartment and retail project just north of it.

In 2015, the southern development in the Ninth and New Hampshire district garnered $21,622 in TDD funds. But the city is keeping the first $850,000 generated in that area as a contribution toward the city-owned parking garage at 10th and New Hampshire streets. Bauer Farms earned $115,851 through its TDD in 2015, and The Oread generated $93,559. Developers of The Oread have not received the $93,559 because the city has suspended all reimbursements in that district during an ongoing tax dispute.

• There are three tax increment financing districts in Lawrence: The Oread hotel; the developments Ninth and New Hampshire streets; and the “Downtown 2000” redevelopment, a block-long district created in 1999 to support the 10th and New Hampshire parking garage.

TIFs allow projects to receive rebates on sales and property taxes from the city in exchange for public improvements fronted by developers.

The apartment and retail development at 901 New Hampshire St. was reimbursed $28,085 in 2015 through the “Downtown 2000” district. The southern portion of the Ninth and New Hampshire district — the TownPlace Suites hotel development — received $50,786 in sales tax rebates and $22,685 in property tax rebates. The Oread hotel was set to receive $181,009 in sales tax rebates and $270,490 in property tax rebates; however, as previously stated, payments to that district have been suspended.

• The city also offered other assistance in 2015 to drive economic development, including relocation assistance to Integrated Animal Health for its global headquarters and business expansion assistance to PROSOCO, among other direct support.