Memorandum

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:           April 27, 2010

RE:               New Language for Economic Development Policy: High Wage Jobs

Over the last year, staff has had the chance to assist on several relocation and retention projects and evaluate economic conditions in Lawrence and Douglas County.  This has helped us evaluate how the firms we have been assisting relate to our economic development strategy in Horizon 2020, and how our new economic development policy (passed in March of 2009) helps us attract and retain firms that fit our strategy. 

One thing that has become apparent is that high-paying jobs play a critical role in our local economy.  They are a crucial component of our economic development strategy, and there is a demonstrated need for more of them.

First, several target industries in the economic development strategy tend to pay above-average.  These include life sciences, information technology, and aviation.  The City and County have made significant efforts to promote these industries.  For example, Lawrence and Douglas County have committed to a 10 year, $1.5 million contribution toward the new incubator facility for bioscience start-ups at the University of Kansas.  The City and County also partnered to purchase the West Lawrence Labs building at 15^th and Wakarusa for graduate firms of the incubator, as well as firms that may need more specialized space than is available at the incubator.

However, Lawrence has had difficulty retaining businesses as they have outgrown incubator-like facilities.  The Chamber of Commerce noted that only 4 of 17 businesses that have been generated from the University of Kansas remain in Lawrence today.  In addition, it is these types of firms that have been identified as a key opportunity for additional economic growth.  At the Jobs Forum held in October of 2009, participants identified “commercialization of KU research” as one of the top economic development opportunities for Lawrence.

Second, there is a demonstrated need for more high-paying jobs in the community.  The Barometer Report, which uses publicly-available data from the BLS, Census, Douglas County and elsewhere to track economic trends, shows that private sector wages in Lawrence have been stagnant for the better part of this decade.  Additionally, a larger-than-average number of jobs in the community appear to be in low-paying industries that cannot fully take advantage of the intellectual resources of the University of Kansas, Haskell University, and Baker University.  Furthermore, high paying jobs likely have a disproportionately positive impact on the local economy.  In the benefit-cost model, a salary that is twice as high as the local private sector average wage often provides more than twice the benefits to the community.

Given the need for higher paying jobs, the targeted industries identified in the comprehensive plan, the efforts that have begun to promote bioscience and pharmaceutical research, and the benefits of and desire for high paying jobs locally, it makes sense to ensure that the economic development policy enables the City to respond more favorably to firms that pay high wages.

The policy is most explicit in identifying “bonuses” for tax abatements for local firms (Section 1-2114).  These “bonus” provisions enable a firm to seek abatements in excess of fifty percent (50%), and include a number of items related to the size, location, and environmental sustainability of the building being constructed.  None of the bonus provisions address high-wage jobs. 

Staff brought language to the PIRC committee for their review and comment.  After receiving PIRC’s comments, staff proposes that the following item be added to Section 1-2114:

g) a project that is seen as providing exceptional wages given current market conditions, industry norms in Douglas County and other relevant business factors, may receive up to an additional ten percent (10%) abatement

This language incorporates suggestions from PIRC that guidelines be provided to help determine what is “significant” or “exceptional” wages.  It does so by directing applicants and public reviewing bodies to consider economic conditions, wages among comparable firms, and other relevant business factors (for example, if the firm is providing jobs that help keep graduates of KU or Haskell in Lawrence).  It also helps match the policy to the economic development strategy.  Finally, this language should help strengthen recruitment and retention efforts to match the other initiatives that the City and County have begun with regard to incubator facilities for research and development.

Action Requested:

Staff recommends adoption of Ordinance 8522 by the City Commission, if appropriate.