City commissioners suggest changes to development incentives

Lawrence City Hall, Sixth and Massachusetts streets.

Developers looking to build in Lawrence would have to better prove their need for industrial revenue bonds from the city — and potentially receive less in property tax abatements — under changes city commissioners proposed to its economic development incentives policies Tuesday.

In a study session preceding their weekly meeting, commissioners proposed scaling back the cap on the amount of property tax that the city will rebate a project, among other changes.

Commissioners have two weeks to provide to the city manager any more changes they’d like to make. The changes have to go through city advisory committees and gain public feedback before they are made.

“We want to make sure there’s enough opportunity for discussion,” Mayor Mike Amyx said. “Just having them come before this body would be very wrong.”

Commissioner Matthew Herbert proposed giving, at maximum, 50-percent, 10-year tax abatement to projects. According to the current city policy, the incentive starts at that amount, and developers can receive more based on certain criteria, such as meeting Leadership and Environmental Design (LEED) criteria or a business providing exceptional wages to its employees.

In recent years, the City Commission has approved 85- and 95-percent property tax abatements for projects.

Herbert said the city needed a “firm ceiling.”

“There have been projects done where we’ve debated 85 percent versus 95 percent, and, to be honest with you, I think that ceiling is way too high,” Herbert said. “Those are numbers I don’t think should ever come to the table.”

Interim City Manager Diane Stoddard said that action could limit Lawrence’s potential for getting large-scale manufacturing companies — and the jobs that accompany that type of development — into the city.

“I just want to make sure the commission knows the competitive environment we’re in, in our region, as far as incentives for industrial primary jobs,” Stoddard said. “We’re in a region where there’s a lot of land that is available, developed and ready for industrial development. Many communities are up to 100 percent on an abatement, depending on what kind of business it is.”

Commissioners Lisa Larsen and Stuart Boley, as well as Vice Mayor Leslie Soden, expressed their support for the idea.

Amyx said he was concerned about applying the 50 percent maximum to manufacturing development.

“We use these to attract a new employer to Lawrence,” Amyx said of the property tax abatements. “We have flexibility there in our policy that allows us to go out and bring that business here.”

Another proposal from Herbert 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 the project otherwise. Industrial revenue bonds allow developers to receive a sales tax exemption on construction materials.

That condition is already part of the applications for all other city incentives.

Herbert also suggested raising the application fee for incentives so it better compensates the city for the analysis staff is required to do when it receives an application.

The fee to apply for tax abatement is currently $500, and it’s $1,000 for industrial revenue bonds and $2,500 for community improvement districts.

Another change proposed by Herbert was omitting an option for businesses to opt out of providing employer-sponsored health insurance by paying employees $1.50 more per hour than what’s required by the city to receive a property tax abatement.

Soden suggested disallowing certain types of businesses in transportation development districts and tax increment financing districts. Referencing the Oread hotel district, which has come under scrutiny from City Hall, Soden said a wholesale company and nightclub were examples of what should not be allowed.

“I’m not happy, myself, knowing my public tax dollars are going to support a nightclub, which is often a drain on city services like police,” Soden said.

All of the commissioners agreed they wanted incentives to be used primarily with the purpose of creating permanent, full-time jobs that offer good wages and benefits.

City commissioners set the study session after debate during recent project proposals about how incentives should be used.

“Sometimes the use of public incentives grabs each one of us a little bit different, and I think we ought to have that discussion,” Amyx said as a preamble to the meeting.

Amyx said he’d look into how the City Commission should handle the incentives requests that will come up before the changes to policies and procedures are made.