photo by: Nick Krug

Lawrence City Hall, 6 E. Sixth St., is pictured on May 3, 2016.

City staff defended its procedures for economic development incentives Tuesday after a presentation by the city auditor that cited “gaps.”

City Auditor Michael Eglinski listed to the Lawrence City Commission 14 recommendations to better the process, including scrutinizing business-provided data. He also recommended that the city more logically set application fees and gather the same information from every company seeking incentives, among other things.

City officials responded that some of the recommendations would be too time-consuming and resource-intensive to implement.

Assistant City Manager Diane Stoddard said some of the extra analysis necessary to follow through on the recommendations would involve more time, money and external resources. She said that’s justified when the city is lending up-front funds to businesses. With pay-as-you-go programs, in which businesses receive incentives after they’ve followed through on stipulations such as providing so many jobs, the costs of extra resources outweigh the risks, she explained.

One recommendation was to have city officials communicate more about the risks — financial and otherwise — associated with incentives before commissioners choose whether to incentivize a project.

Eglinski used the HERE Kansas apartment and retail development as an example. He noted the development group contracted with a robotic parking company that filed for bankruptcy before completing the job. Since last fall, the City Commission has held several meetings about the issue, hearing from residents with concerns about how the loss of parking spaces would affect the rest of the Oread neighborhood.

“Right now you have been dealing with the parking at the HERE project. That’s not financial risk, but you guys are having to deal with it, and it’s causing difficulty and concern,” Eglinski said. “So there’s a risk there.”

Mayor Mike Amyx responded: “So why weren’t you down here telling us about that while we were dealing with it?”

Eglinski replied that the city needed to “develop a process so we look at this systematically.”

Britt Crum-Cano, the city’s economic development director, said there’s “no way” she could list “every potential risk” for every project.

“I can’t stand here in front of you guys and project two years down the road that some business is going to go out of business, that some contractor is going to go out of business. There’s just no way,” she said. “I don’t have a crystal ball. I can list risks that could potentially happen, but I think that would inundate you with too much noise.”

Crum-Cano went on to say that the city’s current process includes “extensive due diligence” before an incentive request is presented to commissioners.

In his report, Eglinski also noted a history of the city not collecting some economic development-related payments on deadline. He said in the report approximately $450,000 in special assessments for property at East Hills Business Park was due in May 2014 from Douglas County, but was never received.

In August 2015, the City Commission waived $45,000 of the special assessments. Eglinski said commissioners needed to be presented with options on collecting the rest of the payment, deferring or waiving it.

Amyx dismissed it as an issue of getting the decision in front of the commission. Stoddard reported that the county would come before commissioners in the next couple of months to ask that the assessment either be waived or continue to be deferred.

“There was no risk to the city of either not collecting these payments or forgetting about these payments,” Stoddard said. “Staff and the county has been in regular discussions about that dating back to 2014. It was the intention of both parties to handle this issue. It’s important to note that the county isn’t waiting to hand a $400,000 check to the city, that they’re likely to request continued deferral and/or waiver.”

The audit report came at a time the City Commission is considering eliminating the position of city auditor for budgetary reasons.

Earlier on Tuesday, commissioners set a maximum budget for 2017, which included a 0.5-mill increase to the property tax levy, in part to fund Eglinski’s position. Commissioners still have time to go back and reduce the maximum budget — and to cut the position, if they so choose — before passing a budget in August.

Commissioner Lisa Larsen said if the auditor position makes the cut, she’d like commissioners to review Eglinski’s work to ensure he’s meeting job requirements.

“I think it is also a good time to look at whether the job duties are really being completed to the degree we need for them to be completed, as well as the quantity,” Larsen said. “We need to pay closer attention to that and come up with better guidelines for what we want him to do if this position stays with us. If — that’s an if.”

Before Tuesday, several people spoke to, or wrote to, commissioners, criticizing City Manager Tom Markus’ proposal to eliminate the position. A few said they didn’t think Markus had the authority to suggest the cut, as the city auditor works independently and reports only to the City Commission.

City Attorney Toni Wheeler said Tuesday “in my opinion, it is not inappropriate for the city manager to include in his recommended budget the elimination of the position.”

“The city auditor does not have express authority to oversee the city manager,” she said.

Lawrence resident Janet Gerstner spoke Tuesday, saying there was “tension” and “defensiveness” on behalf of the commission and city staff.

“I see it as, we have these audits because it’s all done in the spirit of inquiry, and we want to keep seeing how we’re doing,” she said. “We want to keep the door open to improve.”