Memorandum
City of Lawrence
City Manager’s Office
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TO: |
David L. Corliss, City Manager |
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CC: |
Diane Stoddard, Assistant City Manager Casey Toomay, Assistant City Manager |
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FROM: |
Britt Crum-Cano, Economic Development Coordinator |
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DATE: |
April 30, 2015 |
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RE: |
Request for Assistance: Integrated Animal Health (IAH) |
Background
Public assistance is being requested for Integrated Animal Health (IAH) to aid in locating and establishing their global headquarters at the Bioscience & Technology Business Center, located on the West Campus of the University of Kansas. Based out of Queensland, Australia, IAH is a privately owned and funded company that uses patented technology to help increase the absorption of medicine in animals, either given orally or through the skin.
“IAH was formed after three companies – Mastitis Management Australia, Equine Ergogenics Australia and Veterinary Research Australia – amalgamated to become Integrated Animal Health in December 2013 and incorporated during February 2014. The Business currently has 16 employees and has sales in excess of $3 million.
IAH has commercialized over 70 products including natural oral tick and fly repellents for use in the cattle feedlot industry. IAH's portfolio also consists of mastitis management technology, weight gain products, drug delivery tools and a pipeline including oral vaccine technology for companion animals.
The firm's core strategy has been to identify difficult-to-deliver compounds that have already demonstrated safety and efficacy in human health and to develop non-therapeutics for feed chain animals and companion animals.”[1]
Based upon an original inquiry sent out to a number of communities by the Kansas City Area Development Council (KCADC), Community Economic Development Partners (Bioscience and Technology Business Center, Lawrence Economic Development Corporation, City of Lawrence, Douglas County, Kansas) submitted a proposal to recruit Integrated Animal Health to Lawrence. The proposal included an assistance package, as outlined below and to be split equally between the City of Lawrence and Douglas County, Kansas, subject to a public approval process through the City Commission and the County Commission.
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Incentive Package |
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Assistance Program |
Amount |
Description |
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Forgivable Loan |
$100,000 |
Full amount paid upon signing a 3-year BTBC lease. Monies may be used toward any expense necessary to establish the company's presence in the Lawrence BTBC, including machinery and equipment. Forgivable over 3-year lease period. |
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3-Year, 100% Lease Subsidy |
$115,000 |
Zero lease expense, up to 3-years for 700 square feet at the BTBC Lawrence Facility. |
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Total Value |
$215,000 |
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The Douglas County Commission considered the request and authorized County participation in the incentive package at their April 22, 2015 meeting.
Requested Assistance
The City received an application for economic development assistance from Integrated Animal Health (IAH) on April 13, 2015. The application specifies a requested three-year, forgivable loan of $100,000 and a three-year lease subsidy of $115,000 for 700 square feet of space in the Lawrence BTBC facility at 2029 Becker Drive.
Staff Analysis
Staff performed a cost-benefit analysis based on information provided in the application submitted by IAH.
Assumptions
Staff utilized the company provided job creation schedule from the submitted incentives application. Given this data, average salary for the estimated nine jobs created within the first three years would be $113,167.[2]
As the company will be renting space from an existing facility, there is little capital investment outlay.
Model Results
A summary of cost-benefit results for a $215,000 assistance package, split equally between the City and County, are shown below. Detailed model results are attached.
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CBA: IAH Relocation Package |
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Incentive Package |
City |
County |
USD 497 |
State |
Total Incentive Value |
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$100K Forgivable Loan provided initially (Split Equally between City & County) + $115K Rent Subsidy provided over 3 years (Split Equally between City & County) |
1.39 |
1.51 |
4.53 |
N/A |
$215,000 |
Staff Recommendation
As the recruitment of an international, bioscience company projecting a significant amount of high-skilled, high-wage jobs is a major community goal (e.g. IAH projected jobs would pay over twice the community average wage of $38,160[3] and meets major economic goals outlined in City code[4] and Horizon 2020[5]), Staff recommends support of the incentive package to help establish the company’s global headquarters in Lawrence. Staff also recommends a performance agreement be executed between the City, County and Integrated Animal Health with support as outlined at the end of this memo.
In addition, Staff recommends continuing to work with IAH throughout their 10-year growth period to identify ways to support the success of the company within the Lawrence community.
PIRC Recommendation
During the PIRC meeting, conducted on April 29, 2015 to consider the request:
- A motion was made to recommend providing the incentive package as requested, along with setting up a performance agreement with the company. Motion passed 6-0, with one PIRC member recusing himself due to a conflict of interest.
Draft minutes of the April 29, 2015 PIRC meeting are attached.
Requested Action
Receive recommendation from the Public Incentive Advisory Committee and consider City participation in a City-County assistance package for Integrated Animal Health (IAH), including a three-year, $100,000 forgivable loan and a three-year, $115,000 lease subsidy for 700 square feet of space at the Lawrence BTBC main facility.
DRAFT Outline of
Incentives and Performance Provisions:
Integrated Animal Health
Incentives Provided:
Forgivable Loan
To aid in establishing Integrated Animal Health’s (IAH) global headquarters in Lawrence, Kansas, the City of Lawrence, Kansas and Douglas County, Kansas agree to provide a $100,000 forgivable loan, to be split equally between the City and County, to IAH upon its signing of a three-year lease at the Lawrence BTBC.
Lease Subsidy
Upon IAH signing a three-year lease at the Lawrence BTBC, the City and County agree to provide a three-year lease subsidy for 700 square feet of space at the Lawrence BTBC. The lease subsidy will be split equally between the City and County and paid directly to the BTBC on a monthly basis for IAH rent expenses at the Lawrence BTBC.
Performance Targets and Annual Compliance:
In connection with the forgivable loan, IAH will need to meet annual job creation and wage targets at the Lawrence BTBC facility as shown on the below table.
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Job Performance Targets |
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Year |
Cumulative, Net New Full-Time Jobs |
Average Annual Salary |
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1 |
2 |
$113,167 |
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2 |
5 |
$113,167 |
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3 |
9 |
$113,167 |
Performance targets for job creation and annual wages will be subject to the below compliance schedule to determine that year’s portion of the loan forgiven:
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