Request for tax break on downtown project to create debate; a closer look at supposed parking problem in downtown

Rendering of proposed retail/apartment building at Eighth and New Hampshire. Plans call for a development team led by Lawrence businessmen Mike Treanor and Doug Compton to add four stories on top of the former Pachamama’s building at Eighth and New Hampshire streets.

All we’ll need on Tuesday night at City Hall are the “Solid Gold” dancers because I suspect commissioners will hear a couple of classic tunes: a debate about downtown parking and questions about whether the city is business-friendly enough.

Commissioners at their Tuesday evening meeting are set to finally hear an incentives request for the proposed remodeling of the Pachamamas building at Eighth and New Hampshire streets. As we previously have reported, a development group led by Lawrence businessmen Doug Compton and Mike Treanor have plans to add four stories onto the existing one-story restaurant building. The four new stories would house about 55 apartments, while the ground floor would continue to be used as a restaurant, although a tenant hasn’t yet been found.

I say the commission is “finally” going to hear the incentive request because this item has been sitting in the commission’s to-do box for awhile. The development group asked for the approximately $300,000 in incentives — the city is being asked to exempt the project from paying sales taxes on construction materials — in May.

The city’s Public Incentives Review Board recommended in August that the incentive request be approved, but Tuesday night will be the first time the commission deals with the issue. That delay probably is not a good sign for the development group. Commissioners have been known to delay taking action on items that they really don’t want to do.

Bill Fleming, a Lawrence attorney who is representing the development group, told me he expects an uphill battle with the commission.

The tea leaves are not hard to read on this one. In April, voters elected Leslie Soden, Stuart Boley and Matthew Herbert to seats on the commission. All three campaigned on the idea that the city had been too loose with its tax incentives, with some of them particularly noting that apartment developers don’t need any incentives to build in Lawrence.

There’s one problem, though, Fleming says. The city’s economic development policy says otherwise. He notes that the city’s policy specifically talks about providing industrial revenue bonds to residential projects. The policy lists three preferred qualities for residential projects to receive the sales tax exemption that the project is seeking: 1. An infill or redevelopment project; 2. A mixed-use project; 3. A downtown location. A City Hall staff report notes the Pachamamas project meets all three of the preferred qualities.

As you may have guessed, this is where the argument about whether the city is business friendly enough is likely to begin.

“The city expects us to follow all their processes and procedures, so we we expect the city to follow its own process and procedure,” Fleming said. “The reason you have a policy is to send a message that if you do these things, we’ll do these things in return.”

Of course, policies can change, and that may be what is set to happen on Tuesday. Fleming, however, will argue that if the city changes its policy, it shouldn’t change for projects that are already in the pipeline. Changing the rules in the middle of the game has been a longtime rallying cry for folks who believe the city isn’t business friendly enough.

It will be interesting to watch what the commission does. This particular type of incentive — an industrial revenue bond that allows construction materials to be bought sales tax free — has been used a lot. In fact, here’s a number to help you remember just how much: $9.5 million. That’s about how much sales tax the state, city and county have given up since 2010 as a result of this incentive program.

The city put together a handy list of projects that have used the IRB sales tax exemption since 2010. The projects have totaled almost $212 million. The city uses a rule of thumb that about half of a project’s costs are related to building materials. That would mean about $106 million worth of construction materials were purchased with a sales tax exemption. At the current sales tax rate of 9.05 percent, that’s about $9.5 million in sales taxes that went uncollected. (I concede that the sales tax rate has been lower than that at times during 2010 to 2015 period, but there is only so much math I will do on a Monday morning.)

Now, folks at City Hall quickly will point out that not all of that money would have ended up in city coffers. The city only gets a portion of total sales taxes collected. The local sales tax rate — the city and county combined — is 2.55 percent. That calculates to $2.7 million in sales taxes that didn’t end up in the city or county’s coffers. That’s a little more than $500,000 a year that local officials would have had available for spending, if the exemptions weren’t granted. Of course, on the other side of the ledger, the community has more than $200 million worth of new projects, which surely are creating some benefits.

A question that is tough to answer, though, is whether any of those projects would have not proceeded if they would have been forced to pay sales taxes on their construction materials. Unlike some other city incentive programs, this one doesn’t make the builder show that the project would be unfeasible without the incentive.

We’ll see what type of line this relatively new City Commission takes on Tuesday. It will be a night where we will learn something about the economic development philosophy of commissioners.


• I’m also predicting a parking debate as well. That too is related to the proposed Pachamamas renovation. Plans call for adding about 55 apartments to the building, but there are no plans to add any private parking as part of the development.

Downtown zoning regulations don’t require developers to add parking as part of their projects. The city provides thousands of public parking spaces downtown. Regardless, several downtown projects have built parking as part of their projects. This development group has built underground parking garages for the Marriott at Ninth and New Hampshire and also is building a garage as part of the multistory office/apartment building under construction at the northeast corner of Ninth and New Hampshire. It also is worth noting, however, that both projects asked for and received much larger public incentive packages to help cover the cost of constructing underground parking.

You may be asking yourself, where is everybody going to park as part of this new project? A City Hall report is indicating it shouldn’t be that big of a problem because it points out a fact that often gets overlooked: Finding a parking spot in downtown Lawrence isn’t hard, if you are willing to walk just a little bit.

And the report found the area near the proposed Pachamamas site has a particular abundance of empty public parking spaces. The report broke downtown into quadrants. The northeast quadrant — everything north and east of Ninth and Massachusetts — has an average of 157 vacant, long-term parking spaces each weekday. During the evening hours, it is even higher.

The report serves as a reminder that the city is paying for some public parking lots that barely get used. Lot No. 16, which is the parking lot right at the entrance to the Riverfront Parking garage, has an average vacancy rate of 98 percent at any time of day, the report found. The Riverfront garage itself has a lot of 10-hour parking spots that aren’t being regularly used. It has about a 45 percent vacancy rate during the daytime hours and about 87 percent vacancy rate during the evenings. That’s a multimillion dollar structure the city built. It is even emptier on the weekends with about a 90 percent vacancy rate on the 10-hour spaces. Figuring out how to get people to pay to park in those spaces — you can buy an annual parking pass from the city for all 10-hour lots — would seem to be in the interest of the city. The city is spending money every year to maintain the parking lots.

Those two parking lots provide more than enough space to handle the approximately 55 new apartments that are proposed as part of the Pachamamas remodel. But both those lots will require a little bit of walking for tenants. I’ve timed the walk. It is five to six minutes, depending on which lot you park in. It is basically a walk of about two blocks.

Don’t get me wrong. I don’t know whether this project deserves a tax incentive or not. But I find the parking issue pretty interesting. Lawrence is spending lots of money on trails, bike lanes and other infrastructure to get people to walk more and rely on vehicles less. This proposed apartment project is making a pretty big bet that there are people in Lawrence who really want that lifestyle. They’re proposing to rent apartments that don’t guarantee you a parking space, and may require you to walk five minutes to get to your vehicle.

It will be interesting to see if that is successful in the Lawrence marketplace. But first, it will be interesting to see if city leaders embrace the idea, or whether the idea of a two-block walk is too onerous.