After Oread kerfuffle, city suggests adding right to audit into future incentive deals

photo by: Mike Yoder

The Oread hotel, 1200 Oread Ave, is pictured on Jan. 22, 2016.

Future incentives agreements between Lawrence and those benefiting from special taxing districts should give the city the power to audit at its discretion, city staff is recommending.

The suggestion was added onto a list of changes city commissioners have said they want made to the policies that govern Lawrence’s economic development incentives. The City Commission voted Tuesday to send the document listing the potential changes to the Public Incentives Review Committee, the Joint Economic Development Council and Douglas County for input.

The recommendation to include audit provisions comes during an ongoing audit of Oread Wholesale, a tenant of the tax increment financing district at The Oread hotel.

Last year, city leaders demanded hotel developers pay nearly $500,000 auditors said was overpaid because of Oread Wholesale’s manipulation of the taxing district. Developers paid the amount “under protest” and have since agreed to hand over records that were previously withheld and amend their agreement to allow the city to audit them or tenants of The Oread without notice.

The city’s legal staff is advising audit language be added into agreements and tailored to future projects, rather than included only in overall policies. Staff is suggesting audit provisions be part of agreements for tax increment financing districts, transportation development districts and community improvement districts.

According to the written suggestion from city staff, the audit language should: grant Lawrence the right to perform discretionary audits; establish a length of time records should be maintained and how they should be maintained; and require developers to add right-to-audit language in all of its subcontracts and leases.

The city should bear the cost of any audit, the document states, unless “the audit identifies that the city has been substantially shorted funds.”

The city has demanded — and The Oread developers have agreed — that developers pay for the city’s cost of hiring the auditing firm to look into that special taxing district.

Auditors are continuing their review of financial documents recently released from Oread Wholesale. City Manager Tom Markus said earlier this month he hoped the review would be complete within several weeks.

The changes to city incentives policies will go back before the City Commission for a final decision. Britt Crum-Cano, Lawrence’s economic development director, said she wants the process to be complete by the end of May.