City of Lawrence
City Manager’s Office
TO: David Corliss, City Manager
CC: Diane Stoddard, Assistant City Manager
Cynthia Boecker, Assistant City Manager
FROM: Roger Zalneraitis, Economic Development Planner/Coordinator
DATE: May 18, 2009
RE: Recent Economic Development Activity and Funding Sources
Despite the recession, several regional governments have announced significant economic activities this year. In March of 2009, the City of Overland Park announced an expansion of the Black & Veatch headquarters. In April of 2009, Hutchison, Kansas was chosen as the site of a new wind turbine manufacturing center from Siemens energy. This month, Sedgwick County announced that they would seek the acquisition of 808 acres of land for the development of a new industrial park. The details of each of these announcements are available in the attachment provided.
All three of these announcements involved the use of both local and state funds to complete. In Overland Park, a 75% tax abatement coupled with $25 million of assistance from the state was used for the Black & Veatch deal. Hutchison and other local governments provided cash incentives, free land, an option on additional land, as well as $5 million from the Kansas Department of Commerce. Finally, Sedgwick County will purchase the 808 acres using local money, and work with the City of Bel Aire to split the costs of extending infrastructure. It should also be noted that both the Hutchison and Sedgwick County activities involve multiple local jurisdictions to finance the economic development projects.
Local governments in Kansas use a variety of sources to fund economic development activities. A survey of 12 cities (see attachment) and 2 counties shows that half of them use money from their General Funds. Four cities and one county use sales taxes, and two cities use guest taxes to fund local economic development activity. One of these 12 cities- Hutchison- uses General Funds but can also supplement this with sales tax proceedings, if sales taxes exceed a certain amount. Finally, many cities that use general funds for economic development also have other sources of funding, such as private contributions. In these cases, it is often a Chamber of Commerce that receives the funding and thus raises dues from members as well.
Recent Kansas Economic Development Activities:
Overland Park (March 2009)
Expansion of Black & Veatch Headquarters. Black & Veatch will purchase and enhance their existing 600,00 square foot building, eventually create a 250,000 square foot expansion, and add environmentally sustainable features. The office will accommodate up to 1,100 new employees (for a total of 3,400 at their headquarters) with an average salary and benefits package of $85,000 per year. The purchase price of the building was about $60 million.
Overland Park assisted with an IRB and a 10 year, 75% tax abatement. This was the largest abatement ever offered in Overland Park. In addition, the State provided $25 million in assistance for training and capital investment.
Sources:
http://www.opedc.org/B_V_Overland_Park.aspx
http://www.bv.com/wcm/press_release/03232009_7902.aspx
http://www.bizjournals.com/kansascity/stories/2009/03/23/daily3.html
http://www.opkansas.org/_Res/News/black_veatch.cfm
Hutchison (April 2009)
Siemens Wind Turbine Manufacturing Center. Siemens announced the Hutchison, Kansas would be the site of their new wind turbine manufacturing facility. The plant will be a $50 million investment with $1.5 to $2 billion in purchasing volume each year. Up to 400 new jobs will be created.
Hutchison, South Hutchison, and Reno County provided $2 million of cash to Siemens. In addition, they received 109 acres of land for free in an industrial park as well as an option to take an additional 90 acres of land for free either for an expansion or for suppliers to locate near them. The local governments also agreed to build a rail spur estimated to cost $2.5 million. Finally, the state will contribute up to $5 million for new jobs created.
Sources:
http://www.energycurrent.com/index.php?id=3&storyid=17870
http://www.kansascw.com/Global/story.asp?S=10349920
Sedgwick County (May 2009)
Development of a new industrial site. Sedgwick County announced that they may purchase an 808 acre site from the city of Bel Aire for the development of a future industrial park. The County would be $6.5 million to purchase the land from Bel Aire, and spend $6.9 million to improve road access to the site as well as $900,000 for extending a rail spur. Bel Aire, in turn, would spend $4.9 million to extend sewer and water to the site. The total announced investment by local governments is $19.2 million, or roughly $23,762 per acre.
Sources:
http://www.kansas.com/news/story/808945.html
http://wichita.bizjournals.com/wichita/stories/2009/05/11/daily22.html?ed=2009-05-13&ana=e_du_pap
Local Governments that use General Fund:
· Overland Park contributes about $517,000 per year, in addition to private and miscellaneous sources (Survey conducted by Shawnee, Kansas)
· Shawnee contributes about $240,000 per year, in addition to private and miscellaneous sources (Survey conducted by Shawnee, Kansas)
· Gardner and Edgerton contribute about $53,000 per year, in addition to private and airport sources (Survey conducted by Shawnee, Kansas)
· Hutchison uses general funds, and may also use sales taxes if their total sales tax collection from the 1.5% City and County taxes exceeds $4.75 million) (Hutchison Website)
· Wichita provides $1 million each year for forgivable loans. Sedgwick County also contributes $1 million for forgivable loans from their General Fund. (Lawrence 2007 ED Survey)
· Unified Government of Kansas City and Wyandotte County contributes about $500,000 annually. (Lawrence 2007 ED Survey)
Sales Taxes:
· Topeka instituted a ½ cent sales tax for 10 years, and anticipates collecting about $8 million per year. (http://www.topekachamber.org/doing_business_topeka/incentives_taxes_permits/local/go_topeka_incentives.php )
· Manhattan has a ½ cent sales tax and raises roughly $2 million per year. (Lawrence 2007 ED Survey)
· Johnson County passed a 1/8 cent sales in 2008 for the “Research Triangle,” an expansion of local bioscience university research centers, that is expected to raise about $15 million per year. (http://www2.ljworld.com/news/2008/nov/05/johnson_county_voters_ok_sales_tax_research_triang/ )
· Salina has ¼ cent sales tax that began in 1999. Since then it has collected a total of $1.8 million for economic development. (http://www.saljournal.com/election/story/area-election-story-runs-saturday-42-inches )
Guest Taxes:
· Olathe has a 6% guest and uses a portion of it, roughly $900,000 per year, for economic development. (Lawrence 2007 ED Survey)
· Lenexa has a 3.4% transient guest tax and uses about $360,000 of it each year for economic development. (Lawrence 2007 ED Survey)