Memorandum

City of Lawrence

City Manager’s Office

 

TO:

Thomas M. Markus, City Manager

CC:

Diane Stoddard, Assistant City Manager

Casey Toomay, Assistant City Manager

FROM:

Britt Crum-Cano, Economic Development Coordinator

DATE:

April 11, 2016

RE:

2015 Annual Report: Economic Development Support & Compliance

 

 

The City has released its 2015 Annual Report: Economic Support & Compliance.  The report covers public assistance to aid economic and community development efforts, providing details on the project, public assistance provided, and applicable compliance performance measures. 

 

For 2015, the City, along with its economic development partners, supported a variety of assistance programs for both large and small businesses, ranging from pay-as-you-go programs such as property tax abatements, tax increment financing, neighborhood revitalization, and transportation development districts to providing direct support for relocation, infrastructure, historic rehab., business expansion, affordable housing, workforce development, and small business assistance services.

 

This year’s report includes an expanded section on reimbursements and investment data, as well as information on County participation and recently expired programs.

 

Highlights from the 2015 report include:

 

Property Tax Abatements

Four companies had active property tax abatements in 2015, with all meeting substantial compliance measures: Amarr Garage Doors, Grandstand Sportswear and Glassware (Screen-It Graphics), Sunlite Science & Technology, and Rock Chalk Park[1].    

 

Overall, the properties receiving a tax abatement substantially outperformed projections for the year.

 

 

 

 

 

 

 

 

 


Based on the portion of property receiving an abatement, the three companies receiving a tax abatement paid a combined $205,570 in property taxes out of a total $354,879 due in 2015 (approximately $149,197 abated). 

 

One tax abatement, Prosoco, had expired and was placed fully back on the tax rolls in 2015.  At the end of its 10 year abatement period, Prosoco had achieved substantial success, generating 2% more than projected in real property investment and 155% more than projected in personal property investment.  The company created 38% more full-time jobs than projected with wages that were 68% higher than projected. At the end of the 10-year incentive period, for every $1 in public sector assistance, $8.47 in Prosoco's private capital investment was realized.

 

Prosoco continued to expand in 2015, purchasing the property directly south of their main facility in East Hills Business Park to support a new product line.

 

Industrial Revenue Bonds (IRB)

Seven companies had NRAs in 2015, the majority of which were not affiliated with a property tax abatement, but instead used to obtain a sales tax exemption on project construction materials (a.k.a. stand-alone IRBs). Estimated sales tax exemption savings for stand-alone IRB projects completed in 2015 was $907,477.  Of that total, the City contributed an estimated $214,610, the County contributed an estimated $36,367, and the State contributed an estimated $656,500 in sales tax exemption savings.[2]   Note sales tax exemption savings are realized during project construction.

 

IRBs are a conduit financing tool with the companies being entirely responsible for principal and interest payments on the bonds. 

 

Neighborhood Revitalization Areas (NRA)

Three companies received NRA rebates in 2015 (720 E 9th Street, 1040 Vermont Street, and 810/812 Pennsylvania Street/Cider Building), generating an average of 10.5% more real property tax revenues as compared to property tax revenues that would have been realized if the properties were left in original condition

 

Overall (for all years in which a NRA rebate was given), the three NRA revitalized properties generated an average of 8.7% more real property tax revenues as compared to property tax revenues that would have been realized if the properties were left in original condition.

 

Four additional NRAs have been authorized, but are not yet due to receive rebates: 1106 Rhode Island Street, 1101/1115 Indiana Street, 900 Delaware Street, and 705 Massachusetts Street. 

 

Tax increment Financing (TIF)

Three TIF districts were active in 2015:

 

·         The Downtown 2000 Redevelopment TIF District was created to support the development of the parking garage at 10th and New Hampshire and other cultural, commercial, office, and apartment developments.  At the end of 2015, approximately $3.37M million remained outstanding on the bond debt (approximately $8.6 million). 

·         The Oread TIF District was created to help fund public improvements supporting the multi-level lodging, hospitality, and business venue at 12th and Oread.  Public improvements to streets and infrastructure, including a parking garage, were financed initially by the developer and are reimbursed annually through both TIF and TDD revenues generated within the district.  The district began generating TIF revenues in 2009. 

·         The 9th & New Hampshire TIF District was created in 2012 and includes two project areas: South and North.  During 2015, the South Project area generated both TIF sales and property tax revenues.  The North Project area was still under construction in 2015 and did not generate TIF revenues.

 

Transportation Development Districts (TDD)

Currently, the City has three authorized TDD districts.  In all TDD districts, public improvements are financed initially by the developer and are reimbursed annually via a one percent transportation district sales tax on retail or taxable services occurring within the district. 

 

·         The Oread TDD District (located at W. 12th Street & Oread Avenue) began generating sales tax revenues in 2009. 

·         The Free-State (Bauer Farm) TDD District (located at West 6th Street and Wakarusa Drive) began generating sales tax revenues in 2009. 

·         The 9th & New Hampshire TDD District was created in 2012 and includes two project areas: South and North.  During 2015, TDD revenues were generated by the South Project, but not the North project since it was still under construction.

 

 

Direct Support Economic Development Programs

The City also participates in other programs which directly assist economic development services and projects. The programs and projects supported in 2015 are shown below.

 

 

2015 Direct Support Programs

Program

Description

Operations & Fixed Assets

BTBC

Economic Development Services

EDC, KU-SBDC

Neighborhood Infrastructure/Improvements

9 Del Lofts

Shared Infrastructure, Development/Permit Fee Rebates

Rock Chalk Park

Development Grant

1106 Rhode Island Street

Relocation Assistance

Integrated Animal Health

Workforce Training: Development Grants & Loans

Peaslee Tech Remodel

Workforce Training: Operations

Peaslee Tech Operations

Business Expansion

PROSOCO

Affordable Housing

Cedarwood Sr. Cottages

 

 

Historic Assistance and Investments

As a whole, companies participating in pay-as-you-go (PAYGO)[3] economic development programs received approximately $981,400 in assistance for 2015 ($149,197 in tax abatements, $69,705 in Neighborhood Revitalization Area rebates, $553,056 in TIF property and sales tax reimbursements, and $209,410 in TDD sales tax reimbursements). [4]

 

In 2015, for every $1 in public sector assistance provided for these programs, approximately $5.61 in private sector capital investment was realized.

 

Community Development

It should be noted that in 2015 several City programs provided assistance for projects that fell outside the purview of job creation.  In 2015, the City authorized public assistance totaling over $101,000 in support of Cedarwood Senior Cottages, a 14-unit affordable housing project. 

 

Another affordable housing project supported by public assistance was the 9 Del Lofts project, which received a 15-year, 95% NRA to add affordable housing stock to the revitalized East Lawrence Warehouse District.

 

Located within the North Rhode Island Street Historic Residential District, the 1106 Rhode Island project was supported by both a $26,000 City development grant and a 10-year, 85% NRA to preserve and revitalize the property’s historic structures.

 

Recommended Action

City commission to receive the 2015 Annual Report: Economic Development Support & Compliance and refer to PIRC, JEDC, and the County for review and recommendation.

 

 


[1] KU would normally enjoy a 100% property tax abatement on their property for the duration of ownership.  However, given the structure of the Rock Chalk Park project with KU Athletics entering into a long term lease with a private developer to construct the facilities, an automatic property tax exemption was not possible. A property tax abatement was utilized to assist KU in pursuing this project.  Due to the unique nature of the project and its primary benefits related to assisting KU Athletics and drawing visitors from outside the community rather than job creation, no job creation performance or wage requirements were imposed.

 

[2] Amounts shown were estimated based on project cost assumptions provided by applicant, 50% materials cost for new construction projects and 100% materials and labor costs for remodeling projects.  IRB sales tax exemption savings are realized during project construction with the State administering and monitoring the program.

[3] PAYGO programs require the property developer/owner to front expenses for project improvements. Once the project is completed and begins to generate new tax revenues, a portion of project-generated tax revenues is reimbursed back over a specified period of time to the developer/owner to help offset the costs of these improvements.

 

[4] Amounts shown include all revenues distributed by the state and county.  However, at the end of 2015, the City had not reimbursed all Oread TIF and TDD distributions due to a contractual dispute.