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.
It is becoming a familiar issue for city commissioners to consider: Should a new multistory building in downtown Lawrence be offered some sort of financial incentive from the city?
It looks like the next project commissioners will be asked to consider is a proposed five-story commercial/residential building along Vermont Street that former City Commissioner Bob Schumm hopes to build.
Back in June, we reported that Schumm had plans for a major building on the vacant lot that is just south of the old Headmasters salon building in the 800 block of Vermont Street. Well, the proposal has changed a bit since then — we reported on some changes in August — and Schumm said he is getting closer to moving ahead with the project.
But Schumm told me he has decided he’s going to need a city incentive to make the project work as planned. Schumm said he plans to file this month an application for a property tax rebate through the Neighborhood Revitalization Act. No word yet on exactly how large of a rebate the project may seek. The city has given out rebates in the 50 percent range to 85 percent.
Schumm said there is one particular part of the project that makes the incentive needed.
“The project is going to have 22 underground parking spaces that are very expensive,” Schumm said.
That is becoming a theme with projects in the downtown area: Developers need help paying for parking.
Downtown is an interesting area when it comes to parking. For decades, the city’s code for parking in downtown has been different than it is in other areas of town. (My wife’s code for parking in downtown is different too, which is why you sometimes have to walk around a Ford Taurus on a sidewalk.) Along the key stretches of Massachusetts, New Hampshire and Vermont, buildings can be constructed without having to provide any off-street parking for customers or tenants. The city long ago decided the downtown area would be served by public parking.
One thing that has changed in recent years, though, is the city is urging more development of a residential nature in downtown. As more people live in downtown, more of a strain gets put on the public parking supply. Developers — I’m specifically thinking of the development at Ninth and New Hampshire — have said they’re willing to put 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.
The previous City Commission was pretty amenable to providing that assistance. Schumm’s project, though, is really the first such test for the new commission, so it should be interesting to watch.
I’ve heard some people say the city needs to just start requiring new construction in downtown to provide its own parking. I’ve heard others say that would be a momentum-killing strategy for downtown. It would create a two-tiered system in downtown: Hundreds of businesses get to take advantage of a code that doesn’t require them to provide for parking, while businesses that have come to the scene more lately have to take on the private expense of providing parking. And I have heard others, yet, say that instead of subsidizing developers to build private parking in downtown, the city simply needs to build more public parking. That, though, will take some new city resources, and perhaps some adjustments of parking rates. So, a lot to keep an ear open for on parking issues.
As for Schumm’s project, see below for some renderings from Lawrence-based architects Hernly Associates. The project is proposed to have a bank — the specific bank hasn’t been identified yet — on the ground floor, and 32 single offices of about 200 square feet each on the second floor, and 11 condos that will be for sale on the third and fourth floors. The fifth floor also will have a large condo, but don’t expect it to be for sale anytime soon. Schumm — who spent most of his career downtown as a restaurant owner — said he and his wife plan to sell their west Lawrence home and move into the top floor condo.
“When they take my keys away, I can walk to the senior center and everything else that is in downtown,” he said.
Any incentive request for the downtown project — which is being called Vermont Place — would first go to the city’s Public Incentives Review Commission for a recommendation and then to the City Commission for a final vote. The building's design already has won approval from the city's Historic Resources Commission, Schumm said.
City commissioners will find themselves in an odd position tonight: They’ll get to decide whether they want one of their more controversial projects of the last several years to be audited.
More specifically, they’ll be asked to decide whether they want their city-hired auditor to more closely look into the Rock Chalk Park recreation center project.
Each year, City Auditor Michael Eglinski brings forward a list of topics for city commissioners to consider for performance audits. This year, at least three of the topics on his list for consideration are related to the controversial Rock Chalk Park recreation center.
Eglinski has proposed an audit of the processes the city will use to ensure fair prices are being charged for the estimated $12 million worth of infrastructure work taking place at the Rock Chalk Park site in the northwest corner of the city. If you remember, the city deviated from its bid policy and is allowing the infrastructure work to be built through a no-bid contract with a company led by Lawrence developer Thomas Fritzel.
The city has said it will review all the invoices for the work related to the infrastructure, and compare them with market prices to ensure that the costs aren’t inflated. But exactly how the city will do that isn’t entirely clear. This audit would examine some of those processes.
Eglinski has put this topic on his list of seven that he is suggesting commissioners give serious consideration. Eglinski has a larger list of topics that he said are probably lower priority items, but deserve consideration as well. Two of those topics have tie-ins to the recreation center. They are:
• A review of public-private partnership practices. The recreation center is one of the larger public-private partnerships in the city’s history. But this topic also could review some other high-profile projects, such as the proposed hotel development at Ninth and New Hampshire streets and The Oread hotel in the Oread neighborhood. Both of those private projects received significant assistance from City Hall.
• A review of the process for reviewing and approving incentives such as tax increment financing, transportation development districts, tax abatements, and industrial revenue bonds. The Rock Chalk Park project is expected to receive about $40 million in industrial revenue bonds. But perhaps the biggest incentive the project is receiving is the city is set to pay for essentially all of the roads, streets, sewers and other similar infrastructure to serve the track and field, soccer and softball complex that is part of the Rock Chalk project. Those facilities will be privately-owned by a group led by Fritzel. Kansas University will lease the facilities.
Eglinski — who reports directly to the City Commission, rather than to the city manager — is asking commissioners to choose four to five audit topics for him to work on this year. Here’s the complete list of seven higher priority topics that he’s presenting to commissioners:
• Recreation center construction invoice controls;
• Barriers to the city adopting additional performance measurements systems for services provided by City Hall;
• How the city can or should control the amount of fats, oils, and grease dumped into the city’s sewer system;
• A financial indicators report for the city. Eglinski annually completes this report that compares Lawrence’s finances to those of other cities.
• An examination of the police department’s workload, examining the claims that the department needs about 30 additional employees.
• A review of the condition of the city’s sidewalks and the community’s efforts to maintain sidewalks.
Eglinski also compiled a list of 28 other audit topics that he has considered. They include audits of: cable television franchises; capital planning and budgeting; cash control testing; condition of public buildings; downtown parking; vehicle and equipment conditions; financial policies; flow of traffic; finances of the Eagle Bend Golf Course; cost accounting methods for the solid waste division; municipal court workload; funding of outside agencies; the parks and recreation department’s fee waiver policy and scholarship program; the performance of the city’s parking fund; the condition of pavement markings in the city; payment card industry data security standards; process for reviewing and approving economic development incentives; public private partnership practices; purchase card transaction reviews; record retention policies; reliability of the city’s population forecasts and estimates; risk assessment survey of department and program managers; safety and workers compensation; solid waste rate structure; span of control analysis; vehicle and equipment replacement; water conservation.
Commissioners will discuss possible audit topics at their 6:35 p.m. meeting tonight at City Hall.