Lawrence chamber of commerce opposes changes to financial incentives

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The Lawrence chamber of commerce sent a letter to city commissioners Thursday, warning of “unintended consequences” from proposed changes to economic development incentives.

According to the letter, The Chamber’s board of directors opposes all of the potential changes to the city’s incentives policies.

The changes include: adding a requirement that developers requesting a sales tax exemption on construction materials prove they can’t do the project without it; capping the amount of property tax rebated to developers; adding a requirement that residential developments receiving financial incentives include affordable units; and increasing application fees.

“The overarching idea is that when we look at these revisions, we’re not necessarily seeing a lot of benefit to the community for adding these,” said Hugh Carter, The Chamber’s vice president of external affairs. “And the potential unintended consequences of taking any of the tools out of our economic development toolbox, we feel, outweigh the perceived benefits of these changes.”

The city did not request The Chamber’s input on the changes, but Carter said the organization had been “monitoring it closely.”

In January, the City Commission initiated a process of reviewing the existing financial incentives Lawrence gives to those developing in the city or bringing their businesses here. Some commissioners noted large tax abatements had recently been awarded to projects and that a “firm ceiling” was needed. Some also said they wanted to give incentives only for projects accompanied by a “public good,” such as job creation.

The City Commission’s position on financial incentives was seen earlier this month, when it refused to consider an 85 percent tax abatement for a proposed downtown residential, retail and office development. A majority of commissioners told the developer, former City Commissioner Bob Schumm, that they would contemplate only a 50 percent abatement.

“A lot of people are unhappy that past commissions have been lax on giving public assistance,” Vice Mayor Leslie Soden said at the time. “Part of why we were elected is to rein that back.”

One of the changes proposed would require any residential development receiving public assistance to offer some units for low-income households. For residential developments with four to 49 units, the requirement would be 10 percent of units. Developments with 50 or more units would have to provide at least 35 percent of them to low-income households. The units would have to be maintained as low-income for a minimum of 15 years.

The Chamber stated in its letter that the affordable housing provision, together with a 50 percent cap on property tax rebates, was cause for concern.

The letter calls the affordable housing provision “arbitrary” and says it could lead to fewer new housing projects if developers were allotted only a 50 percent abatement to build them.

The Chamber suggests the city do a study to “better define and quantify the affordable housing issue.” The letter states some “community stakeholders,” such as the Lawrence Board of Realtors, are willing to “help underwrite the costs of such a study.”

“We need a multipronged approach. Incentives should be one way to go about it. They should be part of a well-thought-out plan to attack the issue of affordable housing; we’re supportive of that,” Carter said. “But we need to start with a very good study so we can move forward with a plan we’re all on board with.”

Members of the local Joint Economic Development Council, which comprises Chamber leaders and has also provided input on the incentives changes, have said the percentages of affordable units required in developments are too high.

City Manager Tom Markus and the city’s Affordable Housing Advisory Board have also conceded that a 35 percent requirement may be too aggressive.

Also in their letter, The Chamber board of directors said increasing application fees for incentives could rule out small developers who can’t afford to pay them.

“Increased fees will be an impediment to smaller projects that meet community goals such as historic preservation,” The Chamber’s letter reads. It goes on to say “only large developers will have the wherewithal to pursue these incentives.”

City leaders have said the fee increase was intended to better compensate Lawrence for staff time spent analyzing applications.

The Chamber’s letter also states industrial revenue bonds, which provide a sales tax exemption on construction materials, could be used to entice developers to add elements to their projects that provide public benefit. That option would be eliminated if a business were required to undergo a “but-for” analysis, which determines if the exemption is necessary to complete a project, the letter says.

“We may want to incent them to do something to improve the project by adding certain elements of public good,” Carter said. “But a but-for clause kind of ties your hands as far as that goes.”

Besides the Joint Economic Development Council and the Affordable Housing Advisory Board, which have already given their input, the city’s Public Incentive Review Committee will weigh in on the incentives changes.

After it has received feedback from all of those boards, the City Commission will again discuss the changes. City leaders have said they want to complete the process in August.