Memorandum

City of Lawrence

City Manager’s Office

TO:              David L. Corliss, City Manager

CC:              Cynthia Boecker, Assistant City Manager

Charles Soules, Director of Public Works

                   Ed Mullins, Director of Finance

                   Craig Weinaug, Douglas County Administrator

                   Beth Johnson, Lawrence Chamber of Commerce

FROM:                   Diane Stoddard, Assistant City Manager

DATE:                   January 10, 2008

RE:              Request from Douglas County Regarding Special Assessments for the East Hills Business Park

The City is in receipt of a letter from Douglas County requesting that the City release the County and Douglas County Development, Inc. (DCDI) from its obligations under an interlocal agreement which determined how certain infrastructure costs associated with East Hills Business Park would be handled.  The applicable agreement dates back to June 1989 and was subsequently amended in November 1991. 

The interlocal agreement provides for the following:

• The City would fund and finance 100% of the water improvements;
• The City would finance the street and sewer projects;
• The City would fund the costs associated with street improvements in excess of 27 feet in width;
• A benefit district would be established to fund the total remaining cost of the street and sewer infrastructure
• 95% of the benefit district costs were agreed to be deferred until such time the lots were sold or for a period of 20 years from the date of the consent to the levying of assessments (May 15, 2009).  Upon reaching the 20 year mark, the agreement requires the assessments to be paid.  As properties have sold within the Business Park, these costs have been captured by the City. 
• 5% of the un-deferred costs have been paid by the County and DCDI annually. 

City records show nine tracts within the East Hills Business Park Benefit district that are still owned by the County.  While the bonds that originally financed the street and sewer projects have been paid in full, the assessments on these lots were deferred and have not been paid.  The estimated value of the outstanding deferred assessments associated with these properties is approximately $460,000.  This amount includes accrued interest during the time that the bonds were outstanding.  Based upon an average rate of interest of 6.61%, interest expenses represent about 26.7% of the total assessed costs, or $122,820. The attached map and spreadsheet delineates these properties. 

It is important to note some background regarding the County’s role in the East Hills Business Park. The County originally purchased all of the land that is now the Park.  The County still owns a number of lots, which has been mentioned previously.  As the owner of these lots, the County advises us that they have paid property taxes on the lots, at an average cost of $14,000 annually for the life of the Park.  The County is reimbursed at $3,000/acre for the original cost of the property when a sale occurs.  However, the County has not increased this original cost of the property with inflation. 

Additionally, it may be appropriate to provide some background information regarding DCDI.  DCDI, formed in 1986, is a not-for-profit 501(c)(6) organization pursuant to the federal income tax code.  The organization was formed in order to foster industrial and commercial growth in Douglas County and to purchase, develop, manage, and lease real estate, buildings and other property for economic development purposes.  DCDI has been instrumental in the development of the East Hills Business Park, including marketing and selling the property for industrial purposes. Attached is a history of DCDI provided by the Chamber, DCDI’s articles of incorporation and bylaws and a list of board members effective December 2007. 

One of the policy issues associated with this request might be defraying the assessments on some properties while other properties which were previously sold paid the assessments.  However, Beth Johnson with the Lawrence Area Chamber of Commerce clarifies that the future property owners of the nine lots with remaining assessments wouldn’t benefit unfairly due to the way the property is marketed and priced.  Land in the park is marketed at $1/square foot.  Once the property is sold, the proceeds are used to defray the original purchase costs of the land and to pay any outstanding special assessments.  Should the deferred special assessments be forgiven, the amount that would have been forwarded to the City would go to DCDI as part of the sales price. 

Action Requested:  It appears that the City Commission may have several options:

· The Commission could approve the request and forgive the outstanding special assessments on the remaining property.

· The Commission could suggest amending the agreement to allow it to continue beyond May 2009, thereby continuing the arrangement that the specials be paid back to the City as lots are sold.  Under this arrangement, the possibility would remain to negotiate defraying these special assessments on a case-by-case basis.

· The Commission could develop other options.

· The Commission could deny the request.

Attachments:

1. Letter from Douglas County

2. June 1989 Interlocal Agreement

3. November 1991 Interlocal Agreement

4. Property Map

5. Assessment Spreadsheet

6. DCDI History

7. DCDI Articles of Incorporation

8. DCDI Bylaws

9. DCDI Board Members as of December 2007