Memorandum

City of Lawrence

City Manager’s Office

TO:              David L. Corliss, City Manager

CC:               Diane Stoddard, Assistant City Manager

FROM:          Britt Crum-Cano, Economic Development Coordinator

DATE:           May 1, 2012

RE:               2011 Report on tax abatements and economic development incentives

Overview

On April 24, 2012, City staff delivered the 2011 Report: Tax Abatements and Economic Development Incentives to the Public Incentives Review Committee (PIRC).  This is an annual report that reviews the progress of companies receiving tax abatements from the City of Lawrence.  For 2011, the report was expanded to also include information on other active incentive programs currently sponsored by the City, including NRAs, TIFs, TDDs, and other economic development support programs. 

Executive Summary

Tax Abatements:

There were five companies receiving tax abatements in 2011.  In summary, the five companies subject to this report have invested over $20 million in real and personal property as a result of the tax abatements received.  There have been 264 full-time employee additions from abatements, meeting 80% of projections.  This does not include 225 part-time employees hired during this time.  Full-time employment has likely lagged projections due to the economic downturn.  The companies’ average full-time wage is just under $41,000, which is above the community’s average full-time wage (approximately $29,000).

Industrial Revenue Bonds (IRBs):

Four companies had Industrial Revenue Bonds, totaling $44.5M, that remained outstanding at the end of the year. As a reminder, IRBs are conduit financing with the companies being entirely responsible for principal and interest payments on the bonds. 

Neighborhood Revitalization Areas:

As of the end of 2011, the City had three approved NRAs:  8^th & Pennsylvania Street district NRA, 1040 Vermont Street NRA, and 1001 Massachusetts Street NRA.  Currently, only one property has initiated rebate incentives (720 E 9^th Street, within the 8^th & Pennsylvania district). 

Tax Increment Financing Districts (TIF):

The City currently has two TIF districts.  The Downtown 2000 Redevelopment TIF District was created to support the development of the parking garage at 10^th and New Hampshire and other cultural, commercial, office, and apartment developments.  At the end of 2011, approximately $5.4M remained outstanding on the bond debt out of the original $8.6M total.

The Oread TIF district was created to help fund public improvements supporting the multi-level lodging, hospitality, and business venue at 12^th and Oread.  At the end of 2011, the district had generated TIF revenues from sales tax and incremental property tax of approximately $783,000 to date.

Transportation Improvement Districts (TDD):

Currently, the City has two active TDD districts.  The Oread TDD district (located at W 12^th Street & Oread Avenue)—At the end of 2011, the district generated approximate $184,500 to date in TDD revenue.  The Free-State (Bauer Farm) TDD district (located at West 6^th Street and Wakarusa Drive)—At the end of 2011, slightly more than 24% of the buildable area within the district was occupied, generating a total of approximately $81,500 to date in TDD revenue.

Other Economic Development Programs: The city also participates in non-traditional support programs to help initiate and support economic development within the community.  Three of the programs supported in 2011 include:

· Employee Incentive Training Program—Plastikon

The City of Lawrence and Douglas County, Kansas share equally in providing an annual training incentive for Plastikon’s Lawrence facility employees.  Plastikon is a plastic manufacturing company specializing in the production of high tolerance parts and accessories for the diagnostic healthcare and pharmaceutical industries. 

In 2011, the Company commenced operations at their new Lawrence facility, hiring 19 new, full-time employees.  Based on their compliance percentage, the employee training incentive for 2011 totaled $10,710 ($5,355 paid by both the City and County).

· Historic Neighborhood Revitalization—The City is supporting the preservation and revitalization of the East Lawrence Historic District (8^th & Pennsylvania area) by funding several neighborhood improvements, some of which include:

o Addressing existing drainage problems by providing adequate storm water services and improvements to enhance the watersheds ability to manage storm water runoff more effectively and efficiently. 

o Replacing a 100-year old, inadequately sized waterline with the correct capacity line, completing the loop and upgrading to current design standards.

o Providing complete street aspects such as pedestrian lighting, landscaping, sidewalks, and on-street parking

· Expansion & Relocation Grant/Loan—The City of Lawrence provided a $25,000 grant (forgivable loan) to Grandstand Sportswear and Glassware to help facilitate the company’s expansion into the vacant 155,000 square foot building at 3840 Greenway Circle in East Hills Business Park.  A Lawrence-based company, Grandstand started operations in 1988 and has since experienced rapid growth, necessitating the move to a larger facility.

Compliance

Compliance rules vary by project as each is subject to a different ordinance or performance agreement.  All of the firms receiving abatements in 2011 met compliance standards as per their regulating documents.

Actions by PIRC

PIRC voted unanimously to approve the report and pass it on to the City Commission.

There was a brief discussion on the report, and this was recorded in the draft PIRC minutes.  It was decided to include, via a website link to the report, ordinances and performance agreements pertaining to the various incentives included within the report.

Recommendation

Staff recommends the City Commission accept the 2011 Report: Tax Abatements and Economic Development Incentives.