PERFORMANCE AGREEMENT
BETWEEN THE CITY OF LAWRENCE, KANSAS AND
PACKERWARE CORPORATION
Whereas, on December 22, 2005, PackerWare Corporation, (“PackerWare”) a wholly owned subsidiary of Berry Plastics Corporation, 2330 Packer Road, Lawrence, Kansas, submitted an application (“Application”) for property tax abatement to the City of Lawrence, Kansas (“City”), which is attached hereto and incorporated by reference; and
Whereas, on January 24, 2006, the governing body of the City conducted a public hearing and authorized the issuance of industrial revenue bonds and a tax abatement on the original request of PackerWare; and
Whereas, by letter dated January 24, 2006, PackerWare amended its December 22, 2005, Application for property tax abatement. Said letter is attached hereto and incorporated herein by reference; and
Whereas, on February 7, 2006, the governing body of the City conducted a public hearing on the request for a tax abatement pursuant to the Kansas Constitution for certain real property and improvements by Packerware, and in reliance upon the Application, the governing body of the City did approve a 90% property tax abatement conditioned upon certain conditions precedent including but not limited to: 1) the execution of a performance agreement between the City and PackerWare pursuant to the City’s Ordinance on Tax Abatements and Incentives for Economic Development (Ordinance No. 7706); and 2) other lawfully required conditions and approvals, including approval of tax exemption by the State Board of Tax Appeals; and
Whereas, the Kansas Legislature passed, and the Governor approved on May 22, 2006, HB 2583 which eliminated property taxes on new business machinery and equipment purchased after July 1, 2006, and;
Whereas, Packerware’s purchase of the new business machinery and equipment set forth in the Application, and upon which the governing body of the City approved a 90% property tax abatement, shall occur after July 1, 2006, and therefore, will not be subject to the property tax pursuant to HB 2583; and
Whereas, Ordinance No. 7706 provides, in part, “Any tax abatement granted pursuant to this ordinance shall be accompanied by a Performance Agreement between the applicant and the City. The Performance Agreement shall include provisions to ensure compliance with the requirements of this ordinance, and appropriate consequences in the event of non-compliance.” (Section 24 of Ordinance No. 7706)
Whereas, the City and PackerWare desire to enter into this Performance Agreement (“Performance Agreement”) prior to the adoption of the ordinance authorizing the tax abatement pursuant to Kansas law;
NOW THEREFORE IN CONSIDERATION OF THE MUTUAL COVENANTS HEREIN, THE CITY AND PACKERWARE HEREBY ENTER INTO THIS PERFORMANCE AGREEMENT:
1. The above recitals are incorporated by reference as if fully set forth herein.
2. The approval of the tax abatement by the governing body of the City was in reliance upon the Application, as modified by correspondence dated January 24, 2006 (the “Modified Application”), submitted by PackerWare. Specifically, the Application and the approved tax abatement provided that PackerWare would: 1) In Phase 1, create 43 jobs, and make capital investments of $23.5 million in production equipment and $6.5 million in systems and support equipment (which could potentially include some building improvements depending on how the improvements are classified). PackerWare proposed in Phase 2, so long as its existing and potential customers continued to justify further expansion with their demand for PackerWare’s thermoformed products, to add 35 new employees and make capital investments of $22.0 million in production equipment and $4.5 million in systems and support equipment (which could potentially include some building improvements depending on how the improvements are classified). PackerWare further proposed in Phase 3, so long as its existing and potential customers continued to justify further expansion with their demand for PackerWare’s thermoformed products, to add up to 76 new employees and make capital investments of up to $48 million in production equipment, $4.5 million in systems and support equipment (which could potentially include some building improvements depending on how the improvements are classified), and $9 million in a new building; and 2) Direct payments to the Lawrence School District (USD 497) equal to $120,000.00, with such payments to USD 497 being paid in equal, annual installments of $12,000 over ten (10) years beginning ______________________.
3. PackerWare agrees to make payments to the Lawrence School District (USD 497) equal to $120,000.00. Said payments shall be paid in equal, annual installments of $12,000.00 over ten (10) years with the first such installment to be paid on _______________________..
4. The wages and classifications of the employees are set forth in the Application. Additionally, the Kansas Department of Human Resources (KDHR) classifications for the employees are set forth in the City Report prepared by the City’s Director of Finance, dated January 13, 2006. The City report is attached to this Agreement.
5. Wage Floor and Health Insurance Requirements:
If PackerWare does not comply with the wage floor and health insurance requirements of Ordinance No. 7706, then PackerWare shall be required to pay, on an annual basis, to the City, a certain amount as established below:
PackerWare shall pay to the City for the applicable year of non-compliance, by May 20 of the following year, an amount of money equal to two hundred percent (200%) of the difference between the actual wages paid to employees and the amount of wages that should have been paid to the same employees to comply with the wage floor and health insurance requirements of Ordinance No. 7706. For purposes of this Agreement, employees shall mean forty three (43) employees in Phase 1, and if PackerWare’s existing and potential customers continue to justify PackerWare’s further expansion in phases 2 and 3 with demand for Packerware’s thermoformed products, the 35 new employees proposed in Phase 2, and the 76 new employees proposed in Phase 3. This payment to the City may not exceed the annual value of the abated property taxes to the business.
The Public Incentives Review Committee shall monitor PackerWare’s compliance with the wage floor and health insurance requirements. If PackerWare fails to comply with the wage floor and/or health insurance requirements, PackerWare shall provide a written explanation and a plan for correcting the non-compliance. This information shall be contained in the report submitted by the Public Incentives Review Committee to the City Commission. If PackerWare is in non-compliance with the wage floor and/or health insurance requirements for two (2) consecutive years, the City Commission shall take appropriate actions to completely remove the tax abatement for the business, unless the City Commission, by super-majority vote (currently four (4) votes), determines that extraordinary circumstances exist and the tax abatement should be allowed to continue.
6. Additional Compliance Requirements:
The City shall also require the monitoring of the average wage criteria of the Kansas Department of Human Resources, the number of jobs provided by Packerware, and the capital investment projections set forth in the Modified Application. Any non-compliance shall be reviewed by the City’s Public Incentive Review Committee, and as appropriate, the City Commission. The tax abatement shall be annually reviewed by the Public Incentives Review Committee which shall forward a copy of the annual review and appropriate recommendations to the City Commission. The City Commission shall review the annual review report, and if the City Commission determines that PackerWare is not in compliance with the provisions of this Agreement, then the tax abatement may be modified as the City Commission deems appropriate. The County Appraiser and the State Board of Tax Appeals shall be notified of appropriate actions.
The tax abatement granted pursuant to this Agreement shall be subject to an annual review by the City’s Public Incentives Review Committee to ensure that the ownership, use of property, and the economic performance of the business, including the capital investment, employment, and wages, are pursuant to the requirements and criteria of Ordinance No. 7706, the Modified Application, and the conditions of the granting of the tax abatement. The review shall also include a comprehensive review of the entire abatement review period for PackerWare, including milestones and project phases for PackerWare. The annual review shall provide an opportunity for PackerWare to describe their achievements, especially in the areas of environmentally sound practice, community engagement and services, and job training. If PackerWare:
a) no longer qualifies for a tax abatement pursuant to law or Ordinance No. 7706;
b) substantially fails to meet the expectations set forth in the Modified Application for a tax abatement, including failure to meet employment, wage, or capital investment plans in the Modified Application; or
c) substantially fails to meet the criteria or objectives of Ordinance No. 7706;
the City Commission, after notice and a public hearing, may modify the abatement by ordinance.
7. Access to PackerWare information and City Review:
PackerWare shall be required to complete an annual report by March 1. The information in the report will cover the time period of January 1 through December 31 of the previous year. The annual report will be reviewed by the Public Incentives Review Committee and presented to the City Commission by May 1. The failure of PackerWare to provide accurate and timely information to the City in the preparation of the annual report shall be grounds for the modification or repeal of the tax abatement. The City shall retain a qualified third party consultant to assist the preparation of any report and to maintain the confidentiality of the personnel and wage records of a business.
PackerWare shall maintain payroll records for employees and shall preserve them for a period of two (2) years. The records shall contain:
a) the name and address of each employee;
b) the job title and classification;
c) the number of hours worked each day;
d) the gross wages earned and deductions made;
e) a record of health insurance payments made by the employee and PackerWare; and
f) additional information necessary to establish that an employee is exempt from the wage floor and health insurance requirements established in Section 5 of Ordinance No. 7706.
For purposes of determining compliance with the requirements of Ordinance No. 7706 and the terms of this Agreement which require that PackerWare provide a minimum of seventy percent (70%) of the cost of an employer-sponsored health insurance policy for covered employees (or provide covered employees a wage which is $1.50 per hour above the wage floor of Ordinance No. 7706), the City and the third-party auditor retained by the City shall include all of PackerWare’s total out of pocket benefit costs (including but not limited to all direct and indirect self-insured health benefit costs) paid by PackerWare for such covered employees. Deductibles, co-payments and co-insurance amounts shall not be included in determining the amount of costs attributed to the employee.
A copy of these records shall be provided to the third-party auditor to review and determine compliance with the requirements of this Agreement and Ordinance No. 7706. Members of the Public Incentive Review Committee, City staff selected by the City Manager, or the City Commission may review these records in the custody of the third-party auditor but may not do anything to remove or destroy their confidential nature.
8. This Agreement shall be governed by the laws of Kansas. This Agreement may not be assigned or transferred without the written permission of the parties.
This Agreement shall expire one (1) year after the expiration of the tax abatement granted pursuant to this Agreement. In the event that a tax abatement pursuant to this Agreement is: not granted by the State Board of Tax Appeals, or is completely removed by the City pursuant to this Agreement, this Agreement shall be null and void.
AGREED TO THIS DAY OF , 2006.
FOR PACKERWARE CORPORATION:
PackerWare Corporation, a wholly owned
Subsidiary of Berry Plastics Corporation
STATE OF _________________________ )
COUNTY OF _______________________ )
BE IT REMEMBERED, that on this day of , 2006, before me, the undersigned, a Notary Public in and for the County and State aforesaid, came , who is personally known to me to be the same person who executed the above Agreement, and such person duly acknowledged the execution of the same to be his free and voluntary act and deed.
Notary Public
Seal:
FOR CITY OF LAWRENCE, KANSAS:
Mike Amyx, Mayor
ATTEST:
Frank S. Reeb, City Clerk