City of Lawrence

City Manager’s Office

TO:              David L. Corliss, City Manager

CC:               Diane Stoddard, Assistant City Manager

FROM:          Roger Zalneraitis, Economic Development Coordinator/Planner

DATE:           March 8, 2010

RE:               Amarr Abatement, Updated

In October of 2009, the City Commission granted a 10 year, fifty-five percent (55%) constitutional abatement for Amarr Garage Doors (Ordinance 8470).  The abatement was originally approved in November of 2003, but due to timing Amarr did not ask for the abatement to begin until last year.  The tax abatement included both machinery and equipment purchased for an expansion (prior to July 1, 2006) as well as an expansion to their existing real property.  The abatement was to begin on January 1, 2010.

During the process to assist Amarr with submitting the abatement to the Kansas Court of Tax Appeals, it came to the City's attention that Amarr/RAM sold the building (real property only) to an unaffiliated real estate company.   

Traditionally, Amarr has used Industrial Revenue Bonds (IRBs) for building construction and expansion.  IRBs permit one firm to own a building and an unrelated firm to lease the space, so ownership had not previously been a concern for Amarr.  However state law prohibits a constitutional tax abatement being granted on real property unless the recipient owns the property, or there is a substantial ownership interest between the property owner and the party leasing the property.  Neither of these conditions was satisfied, and thus Amarr cannot receive a fifty-five percent (55%) property tax abatement on the real property expansion. 

Amarr still owns the machinery and equipment.  Staff worked with KU’s Institute for Policy and Social Research to re-run the original cost-benefit model and investigate the impact of a fifty-five percent (55%) machinery and equipment abatement.  The analysis confirmed that taxing jurisdictions were better off than if a fifty-five percent (55%) tax abatement was issued for real property as well.  Staff also determined that the abatement application process did not have to start over if Amarr wanted to receive a fifty-five percent (55%) abatement on only their machinery and equipment.

The ordinance presented tonight rescinds Ordinance 8470, which granted Amarr a fifty-five percent (55%) abatement on both property as well as machinery and equipment, and instead permits a 10 year, fifty-five percent (55%) abatement solely on machinery and equipment purchased prior to July 1, 2006.  The abatement still begins on January 1, 2010.

Action Requested:

Adopt on first reading, Ordinance No. 8497, granting Amarr Garage Doors a 10 year, fifty-five percent (55%) tax abatement on machinery and equipment starting January 1, 2010, and repealing Ordinance 8470.