Memorandum

City of Lawrence

Legal Services Department

TO:	David L. Corliss, City Manager
FROM:	Toni Wheeler, Director of Legal Services
Date:	January 28, 2010
RE:	Revised Land Lease Agreement and Revised Job Creation Credit Agreement with LWC Partners, L.L.C.

Following direction received from the City Commission on January 12, 2010, City staff and representatives from LWC Partners, L.L.C. (“the Company”) reviewed the terms of the Land Lease Agreement and Job Creation Credit Agreement related to property taxes, and future applications for exemptions by the Company.  The Land Lease Agreement has been revised as follows:

1.       The “Lessee” includes LWC Partners, LLC and its successors and assigns.  This clarification is made in recognition that Hawkeye Helicopter, Inc. will occupy the hangar and will create the jobs while the Land Lease Agreement will be with LWC Partners, LLC.  One of LWC Partners’ co-managers is the owner and operator of Hawkeye Helicopter, Inc.

2.       Paragraph 8 concerning property taxes is modified.  As previously communicated to the Commission, the agreement provides that the Lessee will pay all property taxes on the leased premises and on its hangar which are not otherwise exempt by law.  The agreement provides that at its sole cost and expense, the Lessee may contest the amount or validity of any taxes, seek a reduction in the valuation of the leased premises, or seek an exemption of any taxes.  The revisions to the agreement provide that if the Lessee applies for and receives an ad valorem property tax exemption on the leased premises or its Hangar, then the Lessee shall within 30 days of approval of the exemption elect in writing to either (i) make comparable payments in lieu of property taxes (“pilot payments”) to the applicable taxing jurisdictions in which case the City will continue to honor the terms of the Job Creation Credit Agreement or (ii) not make pilot payments in which case the City shall be excused from any further performance under the Job Creation Credit Agreement.  If pilot payments are made, they will be apportioned and distributed in the same manner as general property taxes for any or all years of the lease term.   

The language that appeared in the version of the Land Lease Agreement that was before the City Commission on January 12, 2010 that read, “Lessor and Lessee hereby acknowledge and agree that the Leased Premises and Hangar to be constructed on the Leased Premises are to be used exclusively for Airport and aviation related purposes, and are deemed essential to the operation of the Airport” has been stricken from the revised agreement. 

The Job Creation Credit Agreement has been revised as follows:

1.       The reference to “Company” is clarified to include LWC Partners and its successors, affiliates and assigns to reflect LWC Partners’ relationship with Hawkeye Helicopters, Inc.

2.       A paragraph is added stating that the Job Creation Credit will cease and the City will have no further obligation under the Agreement if the Company is granted an exemption from ad valorem property taxes in years one through ten, unless the Company elects to make comparable payments in lieu of property taxes.  If the pilot payments are made, the Job Creation Credit will not cease. 

Staff believes the above changes are consistent with the direction received from the City Commission on January 12, 2010. 

Action Requested:  Authorize the City Manager to execute the revised Land Lease Agreement and the revised Job Creation Credit Agreement with LWC Partners, LLC, if appropriate.