photo by: Journal-World File

KU Innovation Park, formerly known as the Bioscience and Business Technology Center, on KU's West Campus is shown on Jan. 20, 2022.

Douglas County commissioners will discuss an agreement Wednesday where KU Innovation Park would make payments in lieu of taxes for long-term tenants using its building space.

Following budget deliberations last year, Douglas County commissioners cut $60,000 of the county’s total contribution to KU Innovation Park – a nonprofit economic development organization and business incubator – in the 2026 budget.

County commissioners’ reasoning was because several businesses have utilized the nonprofit’s space for many years, despite the facility’s purpose to help new companies get their feet on the ground, and those businesses aren’t paying taxes.

On Wednesday, commissioners will discuss whether or not they support a payment in lieu taxes agreement with KU Innovation Park, which would have the organization begin making payments despite the park’s exemption under Kansas law. The proposed agreement was voluntarily put together by KU Innovation Park, and it is intended to create a framework that recognizes both the park’s tax-exempt status and its use of county and city services.

The park, created through a partnership between the University of Kansas, Douglas County, the City of Lawrence and the Chamber of Lawrence, is exempt from property taxes under state law because it operates as a nonprofit technology commercialization incubator.

However, the park is proposing to make payments for its mature, long-term tenants acknowledging services such as police, fire protection, roads and emergency response. The tenants themselves would not provide the payments.

The proposed agreement would run from 2027 through 2037. Annual payments would begin at $2.12 per square foot in the first year and gradually increase to $2.77 per square foot by the 10th year. Douglas County would collect the payments and distribute them to local taxing jurisdictions “in the same manner as property tax revenues are distributed,” a memo in the agenda said.

The agreement calculates the total KU Innovation Park pays each year based on the number of tenants that have advanced beyond the incubation phase and are creating positive cash flow; non-incubation companies with operations in other locations; and for-profit entities.

The tenants that do not apply to that calculation are nonprofit organizations, research-only tenants, vacant space and early-stage companies still in incubation or startup phases. The agreement defines startup companies as technology businesses less than five years old, biotechnology companies less than 10 years old, or companies without positive revenue.

Beginning in 2027, KU Innovation Park would submit an annual list of eligible tenants to the Douglas County Appraiser by May 1, with payments due each December 20 and prorated during the first and final years of a lease.

The agreement also includes a safeguard tied to KU Innovation Park’s debt service coverage ratio – a measure used to determine whether it has enough income to cover its debt payments. If making a payment causes the park’s ratio to fall below a certain amount, the park could temporarily defer that year’s payment. Any deferred payment would be paid back later, but only after the park’s financial condition improves.

It’s estimated that the county will receive roughly $11,231 in 2027, about $23,115 in 2028, about $41,379 by 2032, and could reach approximately $85,040 annually by 2034 and 2035 as other tenants become subject to the agreement. The estimates are based on current lease schedules and are expected to change depending on tenant turnover and lease renewals.

With Wednesday’s proposal, KU Innovation Park is also asking commissioners to restore the county funding that was taken away last year. County funding was reduced from $175,000 to $115,000 for 2026,. The $60,000 in additional funding the organization requests in 2027 will restore funding to its prior levels and support core services.

That specific request will not be discussed during Wednesday’s business meeting, but likely at budget hearings scheduled earlier in the day. KU Innovation Park is scheduled to meet with county commissioners on Wednesday at 10 a.m. during 2027 budget hearings.

The County Commission’s business meeting follows at 5:30 p.m. Wednesday in the Douglas County Commission meeting room at 1100 Massachusetts St. The meeting will also be available via Zoom.