Posts tagged with Incentives

As city debates incentives for grocery store project, a look at how big a tax break several projects will get from City Hall in 2018

I’m the first to admit that I don’t know many details about the grocery store business. I spend 90 percent of my time playing with the self-serve machine that makes fresh peanut butter and the other 10 percent buying wipes. I hardly ever see the rest of the store. But let’s look at what is becoming a controversial grocery store project anyway.

As Journal-World reporter Rochelle Valverde has been telling you in recent days, there is a pretty good debate brewing about whether the city should back a proposed grocery store at the former Borders bookstore site at Seventh and New Hampshire streets. That such a debate is happening is mildly surprising. Political momentum has been building for a downtown grocery store for more than a decade. And the support has been from both developers and residents, which usually is a recipe for success at City Hall.

Pictured is a rendering of the northwest side of a proposed downtown grocery store at 700 New Hampshire St.

Pictured is a rendering of the northwest side of a proposed downtown grocery store at 700 New Hampshire St.

But the incentive request does have a pretty significant twist. The developers are requesting a $2.5 million loan that Price Chopper can use to equip the downtown store. City commissioners and staff members have expressed heartburn over that part of the request. A staff memo to commissioners labeled the loan as having “significant risk” and also stated “it should be noted that the city has not made a loan to a private entity of this magnitude that city staff can recall.”

Notice, however, that the memo didn’t state that the city had never made a loan to a private entity. I can recall at least one such loan in recent years. The city provided a $25,000 forgivable loan to Grandstand Glassware and Apparel in 2011 when the company moved into the East Hills Business Park from another part of Lawrence.

The loan was part of a package of tax incentives for Grandstand, which was expanding and adding employees as its business serving microbreweries across the country was booming. The loan and the broader incentive package sailed through City Hall, and Grandstand has been a big success story, with employee growth even higher than projected.

There obviously are differences between the two situations, with the size of the loan being a big one. But it is worth noting that the grocery store project isn’t the one opening the barn door on the idea of city loans to private businesses. The grocery store project is just hoping for a bigger barn.

It also should be noted that the city has turned down other requests for loans before. The one that stands out is Wicked Broadband in 2014. Wicked sought a $1 million loan guarantee from the city to help expand broadband service in the community. Plus, to be clear, I have no idea whether a loan to a grocery store is a good idea. But the conversation around the idea has been interesting, and got more so at Tuesday night’s City Commission meeting.

At the meeting, several commissioners expressed concern that providing a loan to the grocery store might give it an advantage over other grocery stores in the community. It is a fair question, but does it go far enough? Doesn’t any type of financial incentive give an advantage to a business? In fact, it could be argued that a loan is less advantageous than most incentives because it theoretically will be paid back. A tax rebate — the most common type of incentive — involves no payback provision.

For example, what about hotels that get tax rebates? Do they have an advantage over other local hotels that have to pay their taxes in full? How about a shopping center that gets part of its taxes given back to it? Or an apartment building? There are examples of all of those in Lawrence, and the amount of rebates is often significant. Here’s a look at how much the city is projected to pay each development in tax rebates in 2018, according to the city budget:

• The Oread hotel project near the KU campus: $583,000.

• The TownePlace Marriott project in downtown: $516,000

• The Bauer Farm shopping center project near Sixth and Wakarusa: $261,000

• The HERE apartment building project near the KU campus: $122,000

• The Treanor Architects headquarters project at 1040 Vermont St.: $30,000

• The 901 New Hampshire apartment building project: $29,000.

• The Warehouse Arts District project near Eighth and Pennsylvania streets: $28,000

• Poehler Lofts project near Eighth and Pennsylvania streets: $14,000

Incentives are definitely one of the more hotly debated topics in Lawrence. Proponents note that incentives help entice companies to do projects that add jobs, in some cases. In others, they add affordable housing. Other times, city leaders are told incentives are needed to make difficult projects possible. That was the case with both hotels. The incentives are being used to pay, in part, for the expensive underground parking garages that developers said were needed.

Opponents of incentives often have called them corporate welfare. It will be interesting to listen to what city commissioners start saying. If commissioners start expressing concern that incentives provide an unfair advantage to businesses, then we’ve reached a turning point.

The grocery store project is probably a bellwether. If commissioners kill the project over concerns about incentives, they will anger some vocal residents. There are residents in North Lawrence and East Lawrence who want a downtown grocery store.

But this commission might do so. It has been clear for awhile that a majority of the commission is wary of incentives, but now it may become clearer that commissioners are serious about playing a different game when it comes to tax breaks. If so, the development community will argue Lawrence is being put at a disadvantage to other communities, while other segments of the community will cheer that Lawrence is finally standing up to corporate interests.

It may be a good idea to stock up on wipes. Such Lawrence debates have been known to get messy.

Reply 8 comments from Ophelia_shorn David Holroyd Richard Heckler Louis Kannen Austin Bergstrom Clara Westphal Deborah Snyder

An update on Menards’ plans for local distribution center; Lawrence manufacturer expanding, but in Shawnee

There was some thought that a Trump victory in the presidential election would lead to a positive business development for Lawrence. No, the rumor that Vladimir Putin was going to set up a knock-off Jayhawk Beanie Baby operation in town isn’t true. Instead, there was some hope that the election result would spur Menards to restart its plans to build a 100-job distribution and manufacturing plant at VenturePark.

Thus far, that has not been the case. A Lawrence chamber of commerce official told me he remains in contact with Menards, but the company hasn’t said anything that gives anybody a clue as to whether the company plans to start the Lawrence project or whether it has been scrapped.

“There is nothing at this point to say they are a definite go at any point in the future,” Steve Kelly, vice president of economic development for The Chamber, said.

In case you have forgotten, Menards received City Commission approval in January 2016 to build a plan that would manufacture and distribute trusses, stone blocks and other products on about 90 acres of property at VenturePark. The project would employ 100 to 150 people. The city authorized about $2.3 million in incentives for the project.

But by May, the project had been put on indefinite hold. In October, local economic development officials said they still didn’t know the future of the project, but they speculated that Menards was waiting to see the outcome of the presidential election before deciding whether to invest in new projects. There was an assumption the company was rooting for a Trump victory, given that Menards is owned by a family that is well-documented as being politically conservative. And indeed, a Trump victory generally has spurred activity in several financial and business markets. (Sales of Russian translation books have soared, for example.)

Kelly said there are some signs that the company may be getting closer to restarting projects. He noted that Menards pretty much put on hold all new projects that hadn’t yet started in 2016. He has seen some reports of some new store projects in other markets moving forward in 2017. So, that may be a good sign for the Lawrence project, but chamber officials are hesitant to read too much into anything.

“The conversations we have had have been positive, but I can’t tell you that we have a definite go-ahead,” Kelly said.

We may be entering an interesting time for the project. I thought to ask for an update because the city, as we have reported, is considering a new economic development incentives program to jump start development at VenturePark, which is on the east edge of town where the Farmland fertilizer plant used to be. The Menards project was scheduled to be the first development in the park, which opened in October 2014. More than two years later, the park is still seeking its first tenant.

Menards has selected a 90-acre site at VenturePark for its project, but it has not yet purchased the site. That brings up the question of whether the city is going to include that 90-acre site in the new incentive program, which would offer free land and other incentives to companies wanting to build in VenturePark. In other words, is the city confident enough that Menards is going to happen that it will keep that piece of property in reserve?

Kelly said he thinks the city would have to seriously consider allowing someone else to build on the property.

“Certainly we would like Menards to come through,” Kelly said. “But if this program stimulates interest and there is a developer who wants to move on a quicker timeline, I think that certainly would be considered by the city. The city’s interest is to get things going.”

• I also have some news on that front. As we have detailed, the City Commission tonight will consider a program that essentially would allow the city to offer free land at VenturePark and put tax abatement requests for VenturePark and East Hills Business Park projects on fast-track approval. Both of those ideas are a new level of aggressiveness for City Hall.

But in talking with Kelly, it is clear the city actually may take the aggressiveness level a step further. That’s because the new policy contemplates offering those types of incentives to a company who wants to construct an industrial building “on speculation.” That means the company would be constructing the building without having a tenant in hand. Instead, the hope is the construction of the building would lure a tenant to the property.

That means the city could find itself offering free land and a tax abatement to a company that doesn’t yet know how many or what type of jobs may be located in the building. Such deals happen in other communities, but they aren’t common in Lawrence. Whether that draws objections from some community members remains to be seen.

“I think at a base level that probably is something people will have to get comfortable with,” Kelly said. “When you are talking about spec development, there is no guarantee who the tenant will be.”

But Kelly — who before joining the Lawrence chamber recently was a longtime economic development professional for the state — said Lawrence needs to consider the value of having some spec buildings available in the community.

He said companies are currently less interested in constructing a building from scratch. Often they want a building they can move into and make minor modifications to suit their business needs. Kelly said companies are declining to look at Lawrence because there isn’t currently any sizable space— think 75,000 square feet and up — available.

But Lawrence has tried spec buildings in the past with mixed results. An approximately 65,000 square-foot speculation building was constructed in East Hills Business Park several years ago — it is the one that backs up to Kansas Highway 10 right about where the highway curves. The building sat empty for several years until a KU entity purchased the space for a design studio in 2009. That wasn’t the outcome economic development leaders had in mind when they started the project.

Kelly said building the right type of space is important, but he thinks there are companies experienced in the spec building industry that will give Lawrence a look, especially if the city can offer some incentives. He noted that spec buildings have played a significant role in attracting new companies to the intermodal rail facility in Edgerton.

And, while he’s not ready to wave a red flag, Kelly did say that it is important that VenturePark gets its first tenant. Selling a park that is empty is harder than selling a park that has a tenant.

“I don’t know that there is a magic number that if the park sits empty for ‘x’ period of time that it is cursed,” Kelly said. “I prefer to look at this as being proactive and getting something going. Once there is activity on the site, I think that could take the lid off and we could see more activity. There is just this human quality that makes it hard to believe something is actually happening until people see it happening.”

• On more piece of news on the economic development front. A Lawrence company is expanding and adding 60 jobs to its workforce, but it is doing so in Shawnee.

EntreMatic — the company more commonly thought of as Amarr Garage Doors — has signed a deal to open a production facility in the WestLink Business Center in Shawnee. It is leasing about 70,000 square feet of space in the Johnson County business park.

EntreMatic has about 800 employees at its Lawrence plant in the East Hills Business Park. It makes garage doors that are sold across the globe.

The company began a search for an expansion site last fall. Among its criteria for a site was one that was close to its Lawrence production plant, the company said in a statement.

That would lead you to believe that the company was open to expanding in Lawrence, but simply couldn’t find a facility to meet their needs. The Amarr plant is next door to the vacant VenturePark industrial area.

Kelly said his reading of the situation is that Entrematic decided it needed space it could move into immediately, rather than take the time to build new space.

“We obviously would really like to have those type of expansion opportunities happen here,” Kelly said. “I think that project is another thing that is spurring some additional interest (in the incentives program) and the need to be more proactive.”

Amarr has begun hiring for the new plant, which will produce several types of garage doors and assemble garage door hardware. The facility is expected to open this month.

Reply 10 comments from Rick Masters David Holroyd Richard Heckler Lesblevins Clara Westphal Floyd Craig

Has the city just killed the proposal for a downtown grocery store? And other questions about City Hall’s new policy on incentives

There are many reasons a good number of people want a downtown grocery store. We had a recent article detailing how such a store may make life easier for people who live in nearby food deserts. Other people believe a grocery will help ensure the long-term vitality of downtown. And then there is me: I simply want a grocery store with a bakery case across the street from my office. (The engineers remind me there really is nothing simple about the steel girders that will have to be placed in the floor beneath my office chair.)

The reasons for a grocery store are not what’s on my mind today, though. Instead, I’m wondering whether city commissioners have killed the latest proposal for a downtown grocery store. In case you have forgotten, commissioners last week blessed a policy that essentially would prohibit the city from providing financial incentives to a project that includes any developer that is delinquent on taxes or special assessments.

The current proposal for a downtown grocery store has been put forward by Lawrence businessmen Doug Compton and Mike Treanor for the spot at Seventh and New Hampshire that previously housed the Borders bookstore. Compton has been in the news recently for being part of a development group that has more than $1 million in back taxes and special assessments on a struggling commercial development near 23rd and O’Connell. There is no question that a downtown grocery is going to seek financial incentives from the city.

So, upon watching commissioners last week say no more incentives for people behind on their taxes, I naturally wondered what that meant for the grocery store proposal. Thus far, the development group doesn’t seem too concerned that the policy will derail their plans.

“I think there is still very good support from the City Commission for a grocery store downtown, and the community wants it,” said Bill Fleming, an attorney for the development group. “We still will proceed on it. The talk has been about community benefit, and that is what this project really provides.”

OK, so the incentives policy hasn’t scared off the development group, but how does the project move forward if commissioners are serious about not providing incentives to developers who are behind on their taxes?

Fleming didn’t get into details on that point, but did say: “I don’t think it will have a negative impact on the grocery store project. Doug just wouldn’t get to be involved until he gets these other issues settled.”

I suppose one possibility is that Compton pays the $1 million plus in back taxes and assessments at 23rd and O’Connell, and commissioners pat themselves on the back for a job well done. For some reason, I don’t think that is how this gets settled. Another possibility is the grocery store project just no longer involves Compton. I find that highly unlikely too.

What seems more likely is the city’s new policy on incentives has more stretch to it than my waistband after a bakery sale on day-old pastries. To be clear, I don’t know how Compton will settle his issues of back taxes and assessments.

But what is clear is that there seems to be a lot of ways around the city’s policy. Here are a few that came to mind after I read the city policy, which simply says: It is the policy of the city that no economic development incentive will be granted to any applicant or petitioner who owns any financial interest in any real property, anywhere within the state of Kansas, with delinquent special assessments, delinquent ad valorem taxes, or federal and state tax liens, or who is currently delinquent or in default on any debts, responsibilities, or other obligations owed to the city.

— Ownership interests, or “financial interests” as the policy calls them, aren’t written in stone. If I owned a minority interest in a development group that was behind on taxes, what would prevent me from signing my interests of that failed company over to a son, a daughter, a spouse or a close business associate? At the point that I sign those interests over to someone else, would I no longer be subject to the city’s policy?

— Businesses have their own set of rules that generally are spelled out in a document called an operating agreement. Depending on how that agreement is structured, it may be very easy for me to simply forfeit — or perhaps sell for a $1 — my shares in the company. In that case, the shares go to the other remaining partners in the business. At that point, would I no longer be subject to the city’s policies?

— A property tax — or special assessment — liability isn’t really a long-term liability. If the development group that I’m a part of doesn’t pay its property taxes on a failed piece of commercial property, the tax liability goes away as soon as the property is put up for auction as part of the foreclosure process. Even if the auction doesn’t generate a high enough sales price to cover the tax bill, my tax liability is erased. At that point, would I no longer be subject to the city’s policy?

It sure seems like the policy may be an invitation for gamesmanship. Of course, as questions like these arise, the city may modify the policy to try to eliminate some of these loopholes. Likely, other questions then will emerge. Perhaps the largest question in all of this is: Has the city created a fair policy?

I will grant that it certainly seems like a policy that is grounded in common sense. Why would the city want to provide a financial incentive to someone who is behind on his or her taxes? But the issue became more complicated when the city drafted the policy to apply to any person “who owns any financial interest in real property . . .” I highlighted the word “any” because that is a key point.

What happens when I own a minority interest — say 10 percent — of a commercial development that is behind on its taxes? As the owner of 10 percent of the company, I don’t have any legal authority to order the company to pay its taxes, even if the money existed to do so. I have no legal authority to tell the other partners in the company to dip into their personal checkbooks and pay the property taxes. In theory, I could write a personal check to the Douglas County Treasurer to pay my share of the back taxes, but as the city’s policy is written that seemingly would do me no good. I would still have a financial interest in real property that is behind on its taxes. I suppose I could pay 100 percent of the back taxes even though I own only 10 percent of the company, but that doesn’t seem reasonable.

Of course, the city’s response very easily could be, so what? It is not like I have a constitutional right to receive a financial incentive from the city. What I may have, though, is a good project that could benefit the community for decades to come, but I need some help in bringing it to reality.

How this policy will impact the future of good projects in the city is unclear. It is possible that even if my business interests aren’t behind on any taxes that this policy may still kill future deals. That’s because this policy could become really problematic for bankers.

Say I have a good idea (I know, I’m asking you to stretch your imagination), and I go to a banker to get a loan for that idea. I tell my banker that I think I’m going to get $3 million worth of city incentives as part of this project. My banker factors that $3 million of relatively secure money into the equation when she considers whether she can loan me the money. Then she becomes aware of the city policy. That policy makes it clear that the city incentives could be revoked, if one of my business interests falls behind on taxes.

At that point, my banker needs to see all my business interests. She may trust me to stay current on my taxes, but she may not trust my business partner Joe Blow. Joe is the majority owner of several partnerships that I’m involved in. That creates a situation for my banker where actions of a company controlled by Joe may cause my project to lose my city incentives, which may be the difference in whether I can make my loan payment in full.

It seems like this policy could create a lot of uncertainty. Or maybe I’ve got it all wrong. This part of the policy is very new. Other parts of the policy went through a review process by various groups, such as the Public Incentives Review Committee or the Joint Economic Development Committee. This part of the policy was added after those reviews were completed.

To me, it seems like the city is in a struggle many of us often find ourselves in: a battle between idealism and pragmatism. There is little debate that this city policy is an idea that makes us feel good. No incentives to people behind on their taxes. Whether it is an idea that looks good for the future of development in the city is still an open question.

Reply 14 comments from Carol Bowen Richard Heckler Don Zimmer Thesychophant Bob Smith David Holroyd Brett McCabe Samantha Martin

A law that would make the city’s incentive process more transparent; trying to figure out the City Commission’s new take on incentives

I’ve never been exactly sure what “deck the halls” means, which became abundantly clear with that unfortunate incident in study hall. So, I think I’ll just stick with passing along some notes from City Hall.

• City commissioners on Tuesday approved the city's legislative priorities statement for the upcoming year. The headline item in our recent article was about the city’s support for making the western leg of the South Lawrence Trafficway four lanes. That indeed should be a top item for local officials to lobby for during the next several years.

The statement also included a general topic titled “greater transparency in the legislative process.” While city officials primarily were urging lawmakers to stop the practice of passing tax bills in the wee hours of the morning, I have a more specific proposal I hope city officials will advocate for: The city should seek a change in the law that would allow for greater transparency with the special taxing districts that have become a common part of Lawrence’s development scene.

The Oread hotel incident serves as a perfect conversation starter on this issue. Long before the Oread incident came to light publicly, I received a tip from an anonymous source that a company called Oread Wholesale was operating out of the hotel and was inappropriately taking advantage of the TIF and TDD tax districts that exist at the hotel site.

The Oread Hotel, 1200 Oread Ave.

The Oread Hotel, 1200 Oread Ave. by Mike Yoder

The first thing I tried to do in confirming the tip was to request a list of every business that filed a sales tax return with a business address of 1200 Oread, the site of the hotel and the special taxing districts. I was told by city officials that state law prohibits the release of such information.

I went ahead and told my city contact what my anonymous source was alleging, and a few months later the city did publicly announce that it had found some troubling things at The Oread. City staff followed up on the tip, and for that we should be thankful. I’m not sure it would work that way in every city.

The question seems to be this: What harm would be caused by the public knowing what businesses operate at a particular address? Perhaps you can argue that a business has some right to privacy as well, but does that argument apply to a project where the public is a partner? That is the case in the instance of projects that receive public incentives. The public is forgoing the collection of some future tax revenues in order to help the project succeed. Oftentimes, the amount of tax runs into the millions of dollars. Anyone making that type of investment in a project should be entitled to basic information such as who is operating there.

This may be just one example where we learn that as incentives become more commonplace, the law needs to be tweaked to keep pace.

• On the incentive front, local developers probably are trying to figure out what to make of City Hall policy right now. The last 30 days or so have provided an interesting opportunity to compare and contrast how the city handles incentives request.

On Nov. 1, the City Commission approved a 50 percent tax rebate for an East Lawrence project that would convert an old warehouse building into a microbrewery, a restaurant and 14 apartments. Two of those apartments will be enrolled into an affordable housing program, although it has been noted the projected rent rates for the new one-bedroom apartments will still be greater than median rent rates charged in the city. The project also included the creation of 33 new angled parking spaces in front of the building.

A rendering of the proposed redevelopment of a vacant warehouse at 826 Pennsylvania Street.

A rendering of the proposed redevelopment of a vacant warehouse at 826 Pennsylvania Street.

The project initially asked for an 85 percent tax rebate, but commissioners cut it to 50 percent. When the outside consultants hired by the city reviewed the project, it said the 85 percent abatement request penciled out OK for the city. The project would return $1.36 in benefits to the city for every $1 in public incentives that was granted. The city’s threshold is $1.25 in benefits for every $1 of incentives.

Commissioners approved the 50 percent rebate on a 4-1 vote with Commissioner Matthew Herbert voting against it.

Contrast that with this week’s denial of a tax rebate for a downtown office and condo project that former City Commissioner Bob Schumm had proposed. Schumm was seeking a 75 percent tax rebate for a project that would include office space on the first two floors and 12 condominiums on floors three through five. One of the one-bedroom condos would be enrolled in an affordable housing program, selling for about $95,000. Outside consultants hired by the city gave Schumm’s project a thumbs up. The consultants said the project would deliver $1.78 in benefits for every $1 in incentives.

Importantly, the project included a 22-space, underground parking garage for use by the condo owners and other tenants of the building. That’s important because downtown zoning doesn’t require projects to provide any off-street parking. It is legal for new projects to be built and simply fight for the spaces in the existing public parking lots and garages.

Former City Commissioner Bob Schumm has filed plans to build a five-story building on a pair of vacant lots in the 800 block of Vermont Street.

Former City Commissioner Bob Schumm has filed plans to build a five-story building on a pair of vacant lots in the 800 block of Vermont Street.

The Vermont Street project got rejected on a 3-2 vote, with Herbert, Lisa Larsen and Leslie Soden voting against. The projects in many ways seem pretty similar, so you may be wondering why one got an incentive and the other didn’t. The answer likely is in the percentage. Commissioners reduced the amount of incentive in the East Lawrence project from 85 percent to 50 percent. I’m told by City Hall reporter Rochelle Valverde that Schumm’s attorney early in the meeting said his client wasn’t willing to go below the 75 percent level. Commissioner Lisa Larsen had inquired about whether Schumm was willing to go below the 75 percent level. There also was some concern that one of the condos was set to be Schumm’s personal residence, but that seemed like an easy problem to fix: Just reduce the amount of the rebate by the projected tax value of that one particular condo, if you don't want to give someone a tax break on his personal residence.

The takeaway from the rejection seems to be the price sheet has changed with this commission. It used to be that a residential project in downtown Lawrence that provided its own parking garage was worth about an 85 percent tax rebate. Look at the development at Ninth and New Hampshire for example. That’s how bad the past city commissions wanted additional residential development in downtown, and they placed a high value on projects that provided their own parking. It now looks like 50 percent is closer to the going rate.

Good, bad or indifferent, getting people to live downtown, and getting private developers to help add to the parking inventory in downtown, isn’t worth as much as it once was. Maybe the commission has just seen there is no shortage of apartment construction going on in the city without incentives.

Still, adding living units to downtown has been a major policy goal of past commissions. It will be interesting to see if this change in practice is a sign of other changes in downtown thinking from the commission. At some point, the city may get asked to support a fairly significant incentive request for a downtown grocery store. The downtown grocery store has been an important project, in part, because it would attract more residences downtown. I’ve long thought that a downtown grocery project probably would have the easiest time of any project in the city when it comes to garnering incentives. But, maybe not. There is no denying this City Commission is taking a harder line on the issue.

Reply 2 comments from Charles L. Bloss, Jr. Richard Heckler

Former city commissioner seeking large tax rebate for proposed downtown project

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.

Courtesy: Hernly Associates

Courtesy: Hernly Associates by Chad Lawhorn

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.

Bob Schumm

Bob Schumm by Richard Gwin

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.

Reply 38 comments from Allan Dalton Richard Heckler Larrynative Carol Bowen Patricia Davis Kevin Kelly Armen Kurdian Janis Pool Thesychophant Cindy Wallace and 11 others

See the latest downtown multistory building likely to request financial incentives from the city

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.

Courtesy: Hernly Associates

Courtesy: Hernly Associates by Chad Lawhorn

Courtesy: Hernly Associates

Courtesy: Hernly Associates by Chad Lawhorn

Courtesy: Hernly Associates

Courtesy: Hernly Associates by Chad Lawhorn

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.

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City commissioners to decide whether to order audit of Rock Chalk Park processes

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.

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