Memorandum

City of Lawrence

City Manager’s Office

TO:	David L. Corliss, City Manager
CC:	Diane Stoddard, Assistant City Manager Casey Toomay, Assistant City Manager
FROM:	Britt Crum-Cano, Economic Development Coordinator
DATE:	March 26, 2015
RE:	Dwayne Peaslee Technical Training Center: Request for Industrial Revenue Bond Financing

Project Overview

The Dwayne Peaslee Technical Training Center is a collaborative initiative of the Economic Development Corporation of Lawrence and Douglas County, the City of Lawrence, Douglas County, The Chamber, local industry, and private donors to fill the technical skills training gap that currently exists in the Lawrence and Douglas County community.

The Center is part of a new technical training campus, located at 2920 Haskell Avenue in Lawrence, which includes two buildings:  the Dwayne Peaslee Technical Training Center (under renovation) and the USD 497 College and Career Center (under construction). These two buildings house more than 100,000 square feet of space.

The Peaslee Center will focus on training adults.  However, the synergy between the Peaslee Center and the College and Career Center will support career pathways for both students and adults. Courses are anticipated to start in Fall 2015, with training offered in Construction, Advanced Manufacturing, HVAC (limited to electrical aspects), Technical Math, Computer Literacy, and supportive areas such as employability skills, resolving conflicts, and problem solving.

Incentive Request

On March 24, 2015, Staff received an application from The Chamber of Lawrence, Kansas requesting Industrial Revenue Bond (IRB) financing in order to access a sales tax exemption on project construction materials and labor expenses related to remodeling the Dwayne Peaslee Technical Training Center.  This request is part of a requested assistance package received by the City Commission on 3-24-15 for support of the training center.

IRB Eligibility

According to City policy, the City may from time to time grant IRBs when the project under consideration helps further economic and community development objectives.  Additional eligibility criteria, as stipulated in the Policy, are outlined below, along with notes on related project qualifications:

IRB City Policy Criteria: Peaslee Training Center
Item #	Policy Requirement	Project Delivers	Project Qualifies (Y/N)
1	Only those projects which qualify under Kansas Law will be eligible for IRB financing.(1)	The Peaslee Center is an economic development and workforce development initiative. Douglas County has been void of technical skills training and the Peaslee Center should fill the gap.  The Peaslee Center’s mission is:  We are a catalyst for economic growth providing technical training to a diverse community of learners to meet the current and emerging needs of our communities and employers.	Y
Proposed Project shall achieve one or more of the following public benefits:
2	2a: Meets economic goals of the City as set forth in policy and the Comprehensive Plan of Lawrence and Douglas County:
	Place high priority on retention and expansion of existing businesses.	Training programs are being developed to meet the needs of local businesses allowing them to expand employment locally.	Y
	Encourage existing industry to expand.	Training courses will be customized to meet demands of local manufacturers and commercial businesses, allowing them access to local talent and to expand within community.	Y
	Assist new business start-ups		Y
	Recruit new companies from out-of-state and internationally	Access to training opportunities designed for businesses interested in locating within community will be a substantial recruiting asset.	Y
	Encourage high technology and research based businesses.	Workforce training can be customized for technology- and medical-based businesses	Y
	Encourage training and development of Lawrence area employees	Customized, on-demand training will be available to existing and prospective employers	Y
	Encourage location and retention of businesses which are good "corporate citizens" that will add to the quality of life in Lawrence through their leadership and support of local civic and philanthropic organizations.	Customized, on-demand training will be available to existing and prospective employers	Y
	2b: Promotes infill through the development of vacant lots, the rehabilitation of deteriorated properties or the adaptive reuse of historic properties.	The facility is 40 years old and the parking lot has deteriorated to the point that the property appears blighted. Between the renovations of the Peaslee Center, construction of USD 497's College & Career Center, and the parking lot improvements, this will be an attractive, thriving property again.	Y
	2c: Enhance Downtown		N
	2d: Incorporate environmentally sustainable elements into the design and operation of the facility		N
	2e: Provide other public benefits to the community, particularly as set forth in the Comprehensive Plan of Lawrence and Douglas County.	Benefits of technical training for the community are outlined throughout this application.	Y
3	Prospective tenant shall show the financial capacity to complete the proposed project and successfully market the bonds.	Joint partnership between the EDC, County, and City.	Y

City policy also mentions other project qualities that are favored or preferred when issuing IRBs.  Those aspects are outlined below, along with project notes.

IRB: Other Considerations (Preferred)
Item #	Policy Requirement	Project Delivers	Project Qualifies (Y/N)
1	City looks more favorably upon projects that support the below targeted industries:
	Life Sciences/Research	The College and Career Center offers Intro to Biotechnology through Johnson County Community College and adults at Peaslee can enroll.  The College and Career Center offers Certified Nurse Aide (CNA) and Certified Medication Aid (CMA) courses through Neosho County Community College and adults at Peaslee can enroll.	Y
	Information Technology	The College and Career Center offers Intro to Healthcare Information Systems through JCCC and adults at Peaslee can enroll	Y
	Aviation and Aerospace		N
	Value-Added Agriculture		N
	Light Manufacturing and Distribution	Courses in Industrial Electricity and Industrial Wiring will be offered in Phase I of the Peaslee Center. We will also offer construction courses and two welding courses at Free State High School.	Y
2	The City favors issuing Industrial Revenue Bonds to projects that bring in new revenues from outside the community or enhance the local quality of life over projects that will primarily compete against other local firms.
	Project anticipated to bring in new revenues from outside community:	Indirectly, having a well-trained workforce will support additional success of local businesses that bring in outside revenues.	Y
	Project enhances local quality of life:	Indirectly, better trained workforce enhances job prospects and wages, keeping money local.	Y

As indicated above, the proposed project appears to meet City and State eligibility criteria for support.

Estimated Sales Tax Savings

The costs of incentives are restricted to a sales tax exemption on construction-related materials and labor costs for remodeling the center.  To help illustrate typical sales tax savings that might be expected, the below table provides an estimate of sales tax revenues that each jurisdiction would forego if an IRB was issued for the project.  Of the total 3.2 million in project costs, the applicant estimates construction materials at 40% ($1.28 million) and labor expenses at 60% ($1.92 million).

Peaslee Center IRB Sales Tax Exemption (est.)
Taxing Jurisdiction	Tax Rate (2015)	Est Sales Tax Amount
City	1.55%	$49,600
Countywide (1%)
City Portion	0.57%	$18,374
County Portion	0.36%	$11,532
Other County Municipalities Portion	0.07%	$2,094
State	6.15%	$196,800
Total	8.70%	$278,400
City Total		$67,974
County Total		$11,532

Additional Considerations

· The Peaslee Center is an economic development and workforce development initiative. Douglas County has been void of technical skills training and the new campus should fill the gap. The Peaslee Center will be a catalyst for economic growth, providing technical training to a diverse community of learners to meet the current and emerging needs of the community and local employers.

· Custom training for industry has been, and will continue to be, offered through the Peaslee Center. Leaders from the following companies support this endeavor and are contributing time and equipment to the project:

o Manufacturing: Hallmark, Berry Plastic, Big Heart Pet Brands, Amarr Entrematic, Plastikon Health Care, Grandstand

o Construction: B.A. Green, Highland, Benchmark, Lawrence Home Builders Association, Loyd Builders, KBS, First Construction

o Automotive: Laird Noller, Dale Willey Chevrolet, Crown Toyota, Ellena Honda, Briggs Chrysler, Lawrence KIA

· Community leaders are planning to offer naming rights for the campus. This will give the campus an identity that can be built upon and enhanced, bringing pride to Lawrence for this new dimension of industry support and training.

· The Lawrence Workforce Center is moving to the Peaslee Center in April. This will facilitate additional training, testing, job placement, and other services for Peaslee Center trainees as the Center gives job seekers access to Workforce Investment Act funds so they can access technical training.

About Industrial Revenue Bonds

Industrial Revenue Bonds (IRBs) are an incentive established by the State of Kansas to enhance economic development and improve the quality of life.  Considered a “conduit financing mechanism” whereby the City can assist companies in acquiring facilities, renovating structures, and purchasing machinery and equipment through bond issuance, IRBs can be useful to companies in obtaining favorable rate financing for their project, as well as providing a sales tax exemption on construction-related materials.

IRBs are repayable solely by the company receiving them and place no financial risk on the City.   When IRBs have been issued, the municipality owns the underlying asset and the debt is repaid through revenues earned on the property that has been financed by the bonds.  If the company defaults, the bond owners cannot look to the city for payment.

PIRC Actions

During their meeting on March 26, 2015, the Public Incentives Review Committee (PIRC) reviewed and considered the Chamber of Lawrence’s request for Industrial Revenue Bond financing for the purpose of obtaining a sales tax exemption on project construction materials and labor remodeling expenses related to the Dwayne Peaslee Technical Training Center.  

The Committee voted 5-0 to recommend approving the request for up to $3.2 million in Industrial Revenue Bonds. Draft minutes of the March 26, 2015 PIRC meeting are attached.

Requested Action

Adopt Resolution 7110, authorizing the issuance of up to $3.2 million in industrial revenue bonds for the Dwayne Peaslee Technical Training Center for the purpose of obtaining a sales tax exemption on project construction materials and labor remodeling expenses.