Memorandum

City of Lawrence

City Manager’s Office

TO:	David L. Corliss, City Manager
CC:	Diane Stoddard, Assistant City Manger Casey Toomay, Assistant City Manger Brandon McGuire, Assistant to the City Manager
FROM:	Britt Crum-Cano, Economic Development Coordinator
DATE:	February 10, 2015
RE:	City Commission Public Hearing: NRA and IRB request for 705 Massachusetts Street (Eldridge Hotel expansion project)

The City has received a request letter and application from the Eldridge Hotel, LLC, to establish a 15-year, ninety-five percent (95%) Neighborhood Revitalization Area (NRA) for the property at 705 Massachusetts Street and for a stand-alone IRB to obtain a sales tax exemption on construction materials. This request was received by the City Commission at its January 20, 2015 meeting and has been referred to PIRC for review and recommendation.

Eldridge Hotel, LLC, is proposing the expansion of the existing Eldridge Hotel located at 701 Massachusetts Street by developing the vacant parcel located next to the hotel at 705 Massachusetts Street. The expansion project would add approximately 54 new guest rooms and provide approximate 7,000 feet for additional meeting/banquet room space, hotel kitchen expansion, and restaurant and bar concept.

Background:

Kansas Law enables cities to establish neighborhood revitalization areas in order to encourage redevelopment under the Neighborhood Revitalization Act. The establishment of a revitalization area enables a property owner to receive a rebate on a portion of the incremental increase of property taxes associated with an improvement project within the area.

Eldridge Hotel, LLC is requesting that the City, Douglas County and USD 497 all participate in the revitalization program. Douglas County and USD 497 will need to determine its level of participation and information has been forwarded to the County Administrator and Superintendent of Schools regarding the request.

Staff Analysis

City Staff has completed a cost-benefit and “but for” analysis of the proposal, in accordance with the City’s NRA policy. Analytical results are presented in staff’s Technical Report. Note that under all the analytical scenarios, the estimated tax paid with an NRA more than doubles the current property tax collections. (For example, currently property taxes (or base taxes) collected are approximately $4,942 per year. During the first full year of project operations, property tax collections are estimated at $11,012 given a NRA at 95% (base tax of $4,942 plus 5% incremental tax of $6,070).

Staff also provided additional information, which summarizes the data presented in the technical report by year and over time.

NRA Policy

The City of Lawrence adopted an updated NRA policy in the fall of 2011. Staff’s technical memo summarizes the policy issues as it relates to this particular NRA request. It appears the request would meet the parameters of the policy.

Draft Neighborhood Revitalization Plan

Staff has prepared a draft Neighborhood Revitalization Plan, which is required by State statute, for the Eldridge Hotel, LLC request. This plan should be reviewed by the City Commission, the Public Incentive Review Committee, and the taxing jurisdictions. The plan includes a rebate schedule and also includes provisions for Douglas County to retain $100 annually as an administrative fee for the duration of the rebate program.

Next Steps/Calendar

A draft calendar has been prepared to consider items related to this request. The City Commission will conduct a public hearing to consider the request at its February 10, 2015 meeting. After the public hearing, the School Board and County Commission will also consider their participation regarding the project. The meeting with the School Board is scheduled for February 23 and the meeting with the County is scheduled for February 25. The City Commission would take final action on the NRA ordinance and plan once School District and County participation is known. Second reading of the NRA ordinance and plan is tentatively scheduled for the March 3, City Commission meeting.

Staff Conclusions & Recommendations

The 1.25 ratio threshold is exceeded for the City for a 10-year and 15-year, ninety-five percent (95%) NRA with IRB sales tax exemption on construction materials under all cost-benefit scenarios (15 or 20 year evaluation period, with and without sales tax revenues included). The ratio threshold is met for the County for the same incentive package under all scenarios, with the exception of the 15 year evaluation period when sales tax revenues are excluded.

The current zoning district does not require projects redeveloped in downtown to provide off-street parking as would be the case in other zoning areas. However, since the project will not provide off-street parking, there likely will be some increased demand on existing parking space. The impact on existing businesses in the downtown corridor should be discussed when considering the NRA duration. In cases where off-street parking is provided, it may be appropriate to provide a longer NRA duration.

The duration period for the NRA should be a topic of discussion for PIRC and the governing bodies.

Should an incentive package be approved, staff would recommend including the following provisions in a performance agreement:

· Condition any incentives authorized for the project on the complete compliance with all land use requirements for the property, including the City’s historic and downtown design guidelines. Failure to comply with these requirements would nullify any incentives approved.

· Project construction to commence within one year and end within two years of incentives approval.

PIRC Recommendation

During the PIRC meeting, conducted on February 3, 2015 to consider the request:

A motion was made to recommend authorizing Industrial Revenue Bond Financing (IRB) for the project to access a sales tax exemption on construction materials. Motion passed 5-0.
A motion was made to recommend a 15-year, ninety-five percent (95%) NRA with conditions outlined by staff. Motion passed 4-1.

Draft minutes of the February 3, 2015 PIRC meeting are attached.

Requested Action

Receive recommendation from the Public Incentives Review Committee and receive request from Eldridge Hotel, LLC for a Neighborhood Revitalization Area (NRA) and Industrial Revenue Bond financing for hotel expansion at 705 Massachusetts Street.

Conduct a public hearing on the establishment of a Neighborhood Revitalization Area (NRA) at 705 Massachusetts Street. After the public hearing, consider adopting on first reading, Ordinance No. 9086, establishing the revitalization area and approving the NRA plan, and consider adopting Resolution No. 7104, authorizing Industrial Revenue Bond (IRB) financing in order to receive a sales tax exemption on project construction materials.