A familiar face at Lawrence City Hall may end up being the test case for new thinking about tax breaks for downtown residential projects. Former City Commissioner Bob Schumm has confirmed to me that he’s filed a request for tax breaks for a multi-story office/condo project he hopes to build on Vermont Street.
We’ve reported multiple times that Schumm has filed plans to build a five-story building on a pair of vacant lots in the 800 block of Vermont Street, just south of the old Headmasters salon building. Plans call for a ground floor of office space, and Schumm says he has a tentative deal for a bank to be the anchor tenant of that space. The second floor would house about 30 small, high-tech office spaces. The remaining floors would consist of 11 condos that Schumm would sell, and one top floor living space he plans to keep for himself.
Plans also call for 22 underground parking spaces. Schumm has said the underground parking garage likely would require him to seek some financial incentives from City Hall. Well, that incentive request has now been filed.
Schumm is seeking 10 years' worth of tax rebates under the Neighborhood Revitalization Act. The first five years would include an 85 percent tax rebate on the new tax value added to the property as a result of the project. In the final five years, the tax rebate would shrink to 50 percent. Schumm also is requesting industrial revenue bonds, which would allow him to receive an exemption from paying sales tax on about $2.8 million worth of construction materials for the project.
The request comes at an interesting time. City commissioners are considering a host of changes to the policies that govern financial incentives, especially those offered to residential projects. The city is seeking to draw a brighter line that it won’t offer tax breaks greater than 50 percent for residential projects. The commission is also considering a provision that would require such projects to have at least 10 percent of its units be rent-controlled to serve as affordable housing units.
That new policy isn’t in place currently, so technically Schumm’s project doesn’t have to meet the provisions. But that’s really just a technicality. Approving or rejecting a tax incentive is entirely discretionary on the part of the commission. Commissioners can set the amount of the tax incentive and the terms however a majority of them choose.
So, it will be interesting to see what type of incentive package this commission thinks a major downtown development should receive. Most of the other downtown development projects that have received incentives were approved by the previous city commission.
Schumm says his project has a strong argument for public incentives. It can be summed up in one word: Parking. Schumm says he has received bids for the underground parking garage. They have come in at about $1.1 million for the 22 spaces of parking. Schumm says it is clear to him that he can’t pass along the cost of the parking spaces — about $52,000 a stall — to the owners of the condos. In the Lawrence real estate market, people simply don’t pay that much for parking, he said.
“The thing is, nobody wants to pay for parking,” Schumm said. “And in downtown, there is no requirement to provide parking, but the city wants you to provide parking.”
That is where things get really interesting. Schumm is correct that downtown zoning does not require projects to provide any off-street parking. The city decades ago — like many cities — decided public parking spaces would serve downtown.
But downtown has changed over the years, and the city is urging more residential projects in downtown. As more people live in downtown, more of a strain gets put on the public parking supply. Developers have said they they’re willing to put in in their own private, below-ground parking garages to accommodate some of the new parking demand they are creating. But they often say they can’t put in the parking and still have a financially-viable project without some assistance from the city.
That’s where this project stands. Schumm knows the drill well. He’s been a downtown businessman since the 1970s, and until he lost his re-election bid last year, he was one of the longer serving city commissioners in the community.
Schumm says he thinks he has a strong case to get the incentives, but if he doesn’t, the project could still proceed under a different path. He could change the development from one that has condos to one that has apartments. By doing that, he thinks he could eliminate the below-ground parking garage. In other words, he’s confident that renters will be willing to hunt and peck for a parking spot in nearby public parking lots, but condo owners likely will expect a dedicated spot. Lawrence developer Doug Compton is already making that bet. He’s adding apartment units to the former Pachamamas building at Eighth and New Hampshire, and he’s not adding any private parking spaces.
“I’m confident he’s not going to have a problem renting those units,” Schumm said.
Schumm said he’s confident he could rent apartment units too. His proposed project is right across the street from a large, public parking lot, and it is only a short block away from the new public parking garage at the library. Schumm notes that as a downtown property owner, he’s already paying a special assessment on his property tax bill to pay for a portion of that new parking garage.
“I wouldn’t feel bad about using the garage,” Schumm said.
And perhaps he shouldn’t feel bad about it. Did commissioners build the garage only for certain types of parkers to use, such as library patrons or people using the nearby municipal swimming pool? I’m not sure that they did. But parking is in high demand at times in downtown. If residents of downtown are taking larger amounts of public parking, that will make it more difficult for visitors to find parking, and that could have ramifications.
That’s the type of tradeoff that commissioners have to weigh.
As for the affordable housing component, Schumm said his project doesn’t have any plans to set aside units for affordable housing stock. He noted most of the City Hall talk with affordable housing has been focused on rental units, and his project doesn’t call for any rentals. He said if such a requirement is put on his project, he’ll try to meet it. But he said it probably would require a greater incentive in order for the project to pencil out. As it is currently planned, Schumm said the condo units are projected to be marketed at $275 per square foot, or about $275,000 for a 1,000 square foot condo.
Schumm has been following this closely. He has even went up to Iowa City, where new City Manager Tom Markus came from. He’s talked to developers up there, and quickly learned that developers in Iowa City had figured out how to make a similar affordable housing requirement work because they received large incentive packages, often times significantly larger than what has been offered in Lawrence.
I think that is a point that hasn’t quite got full discussion yet in Lawrence: If Lawrence wants to require affordable housing in projects, does it need to increase the amount of incentives it has historically offered?
For those of you who have been following along with City Hall reporter Nikki Wentling’s series on affordable housing, there have been signs that Markus thinks that discussion needs to be had too.
“Our incentives packages tend to be pretty conservative [in Lawrence],” Markus said in an article earlier this month. So, that too will be interesting to watch.
Schumm said he is hoping that through all of this, city commissioners remember the importance of having people living in downtown. Schumm said he’s become convinced new living units in downtown are the primary factor that will protect downtown from increased competition of new development on the edge of the city.
“The pressure from development on the periphery will never end,” Schumm said. “The way to take care of downtown for the longterm is to ensure people are living here. Then you have people here 24 hours a day, and that will bring in the different mix of retailers to downtown.”
We’ll keep you updated on Schumm’s incentive request. City commissioners will receive it soon, but won’t act on it right away. It will go to city staff and also to the city’s Public Incentives Review Committee for a recommendation before it is voted on by city commissioners.
City Hall on a Tuesday night is sometimes a good place to see an odd sight.
That may be the case tonight. When Lawrence city commissioners meet for their regular weekly meeting, Mayor Bob Schumm is scheduled to be wearing odd attire.
Schumm will be decked out in team gear from West Virginia University. The folks at city hall in Morgantown, W.Va. — home of West Virginia University — proposed a wager with Schumm. If KU won last Saturday’s football game between the two universities, Morgantown mayor would wear KU gear to his council meeting. If West Virginia won the game, Schumm would wear Mountaineer gear.
The folks at Morgantown offered a similar wager to all the other Big 12 communities. I suspect it was just their way of saying hello to their new conference neighbors and perhaps generating a little interest among conference residents about Morgantown. On that note, I wonder how many KU fans made the trip to Morgantown last weekend, and what they thought of the place. If you went, let me know your thoughts below.
In case you missed it, KU fell just a bit short on Saturday, losing 59-10. Schumm told me he has a yellow West Virginia shirt that he’ll be sporting at the meeting.
“I told them I would wear it, but I never said for how long,” Schumm said.
Schumm ought to just take his lumps and feel lucky. I’m surprised that blowout loss didn’t trigger some clause in the wager that required Schumm to wear the entire Mountaineer mascot uniform.
Though that may not have been all bad. I think the Mountaineer mascot comes with a musket and moonshine. (West Virginia officials may dispute the moonshine part of this, but anybody who has seen their atmosphere at a football game would confirm moonshine has to be involved.) I don’t know how much the musket would add, but I’m pretty sure the moonshine would improve most City Commission meetings.