Company seeking tax break likely to produce jobs near $70K; questions emerge why commissioners got information that public didn’t
photo by: Nick Krug
The Journal-World has learned a company seeking tax breaks and free land to locate in a Lawrence industrial park will provide jobs near $70,000 a year at its high-skilled manufacturing plant.
While that news is likely to be cheered by community members seeking better-paying jobs, the information also is creating questions about whether the city’s program to provide tax breaks and other incentives to companies is lacking transparency.
City commissioners on Tuesday are scheduled to vote on an incentives package for Kansas City, Mo.-based U.S. Engineering Metalworks to locate a new manufacturing facility in Lawrence VenturePark on the eastern edge of the city.
When the project was announced earlier this month, the public was told that it was expected to create about 80 jobs but was given no details about wage or salary information. At the time, city officials noted that the company was not required to provide such information on its application for a property tax break.
But upon further investigation, the Journal-World learned the city does require such wage and salary information as part of a separate state-mandated process. The Journal-World further learned that city commissioners, via an email from a staff member, learned of the $70,000 wage estimate about two weeks ago, or one day before the project was publicly announced.
That created a situation where the public was being told salary information wasn’t available to the public but city commissioners and multiple staff members actually were being told of the information.
“It flies in the face of transparency, frankly,” said Ken Easthouse, a Lawrence City Commission candidate who has been raising concerns on the campaign trail about the city’s fast-track tax abatement and incentives policy. “That is information the public deserves to know ahead of time so it can support or oppose the project.”
Commissioner Stuart Boley has touted the fast-track incentive program, known as the Catalyst Program, as he campaigns for a second term on the commission. But on Monday, he said this project had raised questions about whether the program should require more information to be gathered and publicly released when companies apply for a tax break or other incentives. Generally, wage and salary information is deemed to be a key factor in commissioners and the public determining whether a company is providing enough benefits to the community to justify the value of the tax breaks and incentives it will receive.
“I have been very interested in transparency,” Boley said. “I think the public should be informed of the aspects of these projects they want information on.”
It long was standard practice at City Hall to publicly release information about the number of jobs and their wages whenever a company applied for a property tax break. But that was before the city created the Catalyst Program in 2017. Under that program, when companies are asking for a public tax break, they no longer are required to provide an estimate on the number of jobs the project will create or how much those jobs will pay.
Such a system makes it easier for buildings constructed on speculation — meaning they don’t have a tenant at the time of construction — to qualify for tax breaks and incentives. The developers constructing those buildings have no good way to estimate how many jobs or how much wages a building may produce without knowing the tenant. Part of the goal of the Catalyst Program was to better accommodate those “spec” buildings, which are becoming a larger part of the economic development landscape.
But the program also creates an opportunity for companies that do have good estimates of wage and job totals to simply refuse to share them with the city. When wage information didn’t show up in the information released by City Hall for the U.S. Engineering Metalworks project, the Journal-World began asking about the wage information. The company did not return a phone call seeking information on the wages. An economic development official with The Chamber said he knew of wage estimates for the company but wasn’t authorized by the company to release them. Several officials said they were hopeful the company would voluntarily bring up the wage information as it presented its case to the City Commission.
The Journal-World then began inquiring whether city commissioners actually were going to vote on the project — the company is seeking up to a 70%, 10-year tax abatement plus 25 acres of land valued at nearly $670,000 — without knowing anything about the wages of the resulting jobs.
Upon questioning, Boley said that wage information had been made public. When told that it had not, he realized he was thinking of information he had received as part of a Sept. 4 email from Assistant City Manager Diane Stoddard. That email went to all the city commissioners and several staff members, Boley said. He said that email stated jobs were expected to be in the $70,000 range, plus provided some other basic information about the company.
A less visible process
The fact that the city’s application form for a property tax abatement doesn’t ask companies to provide job and wage information doesn’t mean the city isn’t getting such information, the Journal-World discovered.
That’s because there is a second — less visible — process at work when a company asks for a tax abatement. A tax abatement cannot become official until the Kansas Board of Tax Appeals approves the abatement. As part of that process, state policy requires the city to conduct a cost-benefit analysis of any tax abatement request.
Stoddard confirmed to the Journal-World that such a cost-benefit analysis does include information about the number of jobs the company expects to produce and how much those jobs are expected to pay.
Unlike past years, that cost-benefit analysis is not presented to the City Commission as part of its public deliberations. Stoddard, though, confirmed the report is expected to be done by Tuesday night’s meeting, and staff would be prepared to talk about it if questioned on it. She also said the report would be considered a public document once it is completed and would be available to members of the public who request it.
The fact that City Hall officials already are gathering the job and wage information raises a question about why they simply wouldn’t make such information available to the public from the very beginning. How many jobs are being created and what they pay are often the two most frequent questions members of the public have about a company seeking a tax break.
Boley said he wasn’t sure why that information wasn’t being made more readily available to the public.
“That is something we possibly ought to talk about,” Boley said.
Easthouse said it was clear the information should be released as soon as a company publicly asked for a tax break or financial incentive.
“This project is an interesting kind of test case to see how transparent the Catalyst Program will be,” Easthouse said. “If the commission gets information and the general public doesn’t, I’m not too impressed.”
The Catalyst Program also has other elements to it that have garnered support from various leaders. Those include the ability of the city to offer free land to projects, an expedited approval process that allows projects to skip a review by the city’s Public Incentives Review Committee, and fewer annual reporting requirements that companies must make to the city upon approval of a tax abatement. Leaders previously have said the program was an important step in making the community more competitive in landing job-producing companies.