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City Hall report finds firms with tax abatements exceeding expectations

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Perhaps you are like me and are still feeling a few aftereffects of consuming approximately 17 packages of hot dogs and a case of baked beans this Memorial Day weekend.

Well, there’s new a report out of City Hall, and although I’m not sure reading it will cure us, it won’t produce as much heartburn as our weekend did. The city has compiled its annual report on tax abatements and other economic development incentives, and the numbers generally are positive.

The city found all three companies that currently receive tax abatements from the city are meeting their targets when it comes to jobs, investments and wages paid.

In total, the three companies have made $7.3 million in real estate investments, up from $7.1 million projected; $10.3 million in equipment investments, up from $9.6 million projected; have used the abatements to hire 152 full-time employees, up from 141 projected; and paid an average wage of $36,226, up from $29,772 projected.

Here’s a look at each of the three companies:

• Amarr Garage Doors, a manufacturer in the East Hills Business Park, had 477 full-time employees in 2012, up from 340 prior to its tax abatement. As part of the abatement process, the company had committed to add at least 40 jobs. Average wages for full-time employees were $16.64 per hour, and 99 percent of positions had a wage that met or exceeded the community average wage for that type of position.

• Prosoco, an East Hills company that produces masonry cleaning and restoration products, had 67 full-time employees in 2012. Prior to the tax abatement, Prosoco had no Lawrence employees because it was based in Kansas City. As part of the abatement process, the company committed to bring at least 50 jobs to the city. Full-time employees had an average wage of $22.11 per hour, and 78 percent of positions had a wage equal to or above the community average for similar positions.

• Grandstand Sportswear & Glassware, an East Hills company that provides glassware and promotional products for the craft brewing industry, had 45 employees at the beginning of 2012. That was six fewer than the company had committed to as part of the abatement process. But the report notes the shortfall mainly is a result of timing. The company did not move into its new East Hills facility until December 2011. Once the company began operations in earnest at the new facility, employee totals grew to 71, which is 20 above its projection. The average full-time wage was $16.79 per hour, and 70 percent of positions had wages equal to or above the community’s average wage for similar positions.

In total, the three companies had $183,296 in property taxes abated in 2012. But since none of the companies are receiving 100 percent property tax abatements, they paid a total of $754,402 in property taxes for the year.

The report also provides details about other incentives besides tax abatements. One incentive that always gets questioned is the creation of special taxing districts. The city currently has two, with a third on the way. The Oread Transportation Development District, which covers The Oread hotel, has generated $321,000 in taxes from the special 1 percent sales tax since its inception in 2009. The Free State/Bauer Farm Transportation Development District, which includes the businesses on the northeast corner of Sixth and Wakarusa, has generated $141,000 since 2009 from its special tax. The third district will be for the new downtown hotel at Ninth and New Hampshire, which is expected to begin construction soon.

You can read the entire economic development report here. It is a good read for those with an interest in the world of incentives. Speaking of which, I could use an incentive to get through this day: A roll of antacids, perhaps.

Comments

tomatogrower 1 year, 7 months ago

Good. I'm glad they are following through. All of these tax abatement deals need to have a rider in them that says if the company doesn't meet or exceed specific criteria, then they not only lose the tax abatement, they have to pay back the city for any abatements they received.

ModerateOne 1 year, 7 months ago

You mean pay the property tax that was otherwise discounted, right? A tax abatement is a property tax discount for the company. What the company "receives" in a tax abatement is a discount below what it would otherwise be required to pay in property taxes. It's not unreasonable to suggest that the discount should be forfeited for failure to comply. But we need to be careful with language because many many people do not understand that an abatement is a tax discount -- not a cash payment to the company.

tomatogrower 1 year, 6 months ago

That's what I meant. Pay the taxes they would have owed without the abatement.

somebodynew 1 year, 7 months ago

Chad - I have a question about the special taxing districts. Forgive me if you have written about this before - memory can be a fleeting thing. Do these districts 'go away' after a period of time (after the infrastructure costs are covered), or do these things stay forever and make the businesses money ??

Thanks.

Keith 1 year, 7 months ago

It's part of the new feudalism, pay taxes to the lord of the land.

Chad Lawhorn 1 year, 7 months ago

The special taxing districts will stay in place for up to 22 years, or until they generate a certain amount of revenue to pay for the covered infrastructure — whichever is shortest. In the case of The Oread district, it can be used to pay for up to $11 million in public improvements and private parking. For the Bauer Farm area, it can be used to pay for up to $6.8 million in public improvements. Thanks, Chad.

jack22 1 year, 7 months ago

I'm glad to see that the three companies listed have exceeded expectations and have added a good number of well paying jobs. What about some of the other companies and people who we often read about asking for tax breaks? Why no mention of Compton, Fritzel, and DST? Are we expecting them to add a significant number of well paying jobs, too?

jafs 1 year, 7 months ago

I'm glad to see this. It hasn't always been the case in Lawrence.

Just a minor addition - the special "taxing districts" don't actually produce more tax revenue, the extra 1% is given to the private entities to spend. So it's wrong to claim that 1% has produced tax revenue.

That's one of the huge problems with that tax - another is the lack of transparency, as consumer notes.

jafs 1 year, 7 months ago

Do you have a source for that?

From my recollection, the extra 1% is given to the developers, who can then spend it on whatever they like, including things that would normally be their own cost.

Generally, I prefer to have public things supported by taxes, and private things paid for by private entities.

Also, the lack of signs informing customers that they're paying an extra 1% "tax" is troubling to me. Businesses at these locations could also just raise their prices by 1% - that would be a lot more transparent.

Well, a quick google search shows that in addition to "public" things like roads, the TDD money can also be used for parking lots, facade improvements, sidewalks, etc. all of which would generally be developer's costs. So it's kind of a mishmash.

Chad Lawhorn 1 year, 7 months ago

JAFS, there is another special taxing district called a Community Improvement District. It can be used to fund a much broader set of uses, including items that don't have anything to do with public infrastructure. The CIDs were the issue that received quite a bit of attention in the City Commission elections two cycles ago. The city doesn't yet have a Community Improvement District. A TDD is much more infrastructure-related, but it is worth noting that TDDs are allowed to fund private parking. Thanks, Chad

chootspa 1 year, 7 months ago

Good to see tax abatements used the way they should be. To make good jobs and not to get the latest chain store.

CountyResident 1 year, 7 months ago

The reporting of the $10.7 million in equipment is no longer relevant, as the law has changed that now makes equipment 100% exempt from property tax. Thus, when it goes back on the tax roles it will not be subject to tax. While the businesses did receive a tax abatement on the original equipment, they will not have to pay property taxes when the abatement period ends.

It would be interesting to know how the cost/benefit analysis would have worked out had it been known at the time that this equipment would not be taxed after the abatement period.

Richard Heckler 1 year, 7 months ago

Are any tax dollar moochers not doing as well as expected?

Is there any reason to provide these operations with preferential tax favors? Why were taxpayers forced to do this? It seems taxpayers should be receiving interest on the loans.

What could so wrong with collecting all of the tax dollars? to be put in the taxpayer owned cookie jars?

We taxpayers are going in the hole by not collecting 100% of the taxes. They keep saying taxpayers should be happy with getting some while loaning out the rest at no interest.

Jonathan Fox 1 year, 7 months ago

This is about creating jobs, immediate income, and future income.

The job creation is listed in the article. The immediate income is here: " But since none of the companies are receiving 100 percent property tax abatements, they paid a total of $754,402 in property taxes for the year." And the future income is when the abatement expires.

All of these jobs and tax income would never have happened since the business wouldn't have been created without the abatement.

So to spell it out, we're sacrificing about $183,000 dollars so that we can create 275 new high paying full time jobs (which are extremely scarce in Lawrence) and earn $754,000 dollars in tax revenue that would never have been created/accrued without the abatement.

George Lippencott 1 year, 7 months ago

Whose expectations.

As a taxpayer I would expect to see a reduction in my taxes because these companies (enjoying a tax reduction) have generated many high paying jobs that pay taxes and reduce what each of us needs to pay.

George Lippencott 1 year, 7 months ago

The system costs are the government costs for infrastructure to support the company and the new employees. That includes water, sewer, police, fire, ad nausea. Should even include costs for the implications on our water supply of all these new employees (rationing??).. Growth is costly.

That is offset by the taxes paid by the company and the new employees.

If positive than we can remit the savings to the taxpayers who financed the process to begin with. We are not doing tax offsets with the commissions' money. If negative - well w emade a bad bet.

jafs 1 year, 6 months ago

There's an assumption that these jobs are "new" employees in your post.

If they worked elsewhere in town and just changed jobs, it's not a net increase in jobs.

Otherwise, I agree with your general line of thought here.

George Lippencott 1 year, 6 months ago

No but then no new revenue so I picked the worst best case to justify the tax break

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