photo by: Chad Lawhorn/Journal-World photo

This June 2019 file photo shows the old Zimmerman Steel building just west of East 19th Street and Haskell Avenue. A group affiliated with Lawrence-based Mar Lan Construction recently purchased the building and plans to move the company's headquarters to the site.

City leaders will soon consider a sales tax break for a renovation and construction project for the headquarters of a locally based construction company.

As part of its meeting Tuesday, the Lawrence City Commission will consider a request from Banks Street LLC for an industrial revenue bond sales tax exemption for a two-phase renovation and construction project for buildings that will house the headquarters of Lawrence-based Mar Lan Construction, according to a city staff memo to the commission.

If the request is approved, the city would issue up to $2 million in industrial revenue bonds for the project, which would exempt Banks Street LLC from paying city sales taxes on project construction materials and renovation labor. The size of the sales tax exemption for both phases of the project is estimated at $24,470.

As the Journal-World reported in September, an entity affiliated with Mar Lan Construction purchased the old Zimmerman Steel building along East 19th Street, just west of Haskell Avenue. The plan is to relocate Mar Lan’s corporate headquarters from a leased space in downtown Lawrence to the building following the renovation.

Banks Street LLC is requesting the sales tax exemption for the two-phase development project at the site, 701 E. 19th St., according to the memo. The project will include the renovation of the existing office building to become the Mar Lan Construction headquarters and the construction of a new building to house office, warehouse and retail space. The original request included participation in the Neighborhood Revitalization Act, which would give the project a rebate on property taxes as well, but that request has since been withdrawn.

The first phase of the project will include a $1.4 million renovation of the existing 7,745-square-foot building. The second phase will be the construction of a 10,000-square-foot new commercial building that will house the office, warehouse and retail space. The new building calls for an estimated capital investment of $1.7 million and will be located on the eastern portion of the same lot. The renovation is estimated to start in January 2021, and the construction of the new building is slated for 2023 and 2024.

The city received the economic incentives request in September, which was then referred to city staff and the Public Incentives Review Committee for review. City staff state in their analysis report that the project is eligible for the sales tax exemption. The report notes that while a cost-benefit analysis is required for a property tax abatement request, one is not required for a sales tax exemption. In addition to the city sales tax exemption estimated at $24,470, the project is also seeking exemptions from county and state taxes, which would have to be approved by those governments. If those taxes were also waived, the total exemption would be about $101,465.

Industrial revenue bonds require an origination fee, and the city can waive all or a portion of it in certain circumstances. Projects might qualify for a waiver if the applicant is a nonprofit or if the project will create affordable housing or new primary jobs, according to the city staff memo to the commission. City staff is recommending that the company pay at least part of the fee for the Mar Lan project, because Mar Lan estimates that 30% to 35% of its annual revenue comes from sources outside Lawrence. The total fee is estimated at $8,000; staff recommended that 35% of the fee be waived, which would leave the company to pay $5,200.

The Public Incentives Review Committee was not able to provide a recommendation on the tax incentives request. The vote was split 3-3, with one abstention, regarding a potential recommendation to approve the request. Those opposed to the request spoke about the strains on revenue for local governments and questioned whether the project deserved the dollars of local taxpayers. Those in favor cited that the project does provide infill development, a stated goal of local governments.

The City Commission will convene virtually at 5:45 p.m. Tuesday with limited staff in place at City Hall, 6 E. Sixth St. The city has asked that residents participate in the meeting virtually if they are able to do so. A link to register for the Zoom meeting and directions to submit written public comment are included in the agenda that is available on the city’s website, lawrenceks.org.