Memorandum

City of Lawrence

City Manager’s Office

TO:	Tom Markus, City Manager
CC:	Casey Toomay, Assistant City Manager
FROM:	Britt Crum-Cano, Economic Development Coordinator Diane Stoddard, Assistant City Manager
DATE:	August 15, 2017
RE:	Consider BTBC request for proposed lease repayment schedule on the BTBC expansion facility.

Background:

The City and County are partners, along with other stakeholders, in BTBC (Bioscience and Technology Business Center) business incubator facilities and services. In January 2010, the City of Lawrence and Douglas County, Kansas entered into a lease agreement with the BTBC (formerly Lawrence-Douglas County Bioscience Authority) for the building located at 4950 Bob Billings Parkway. Commonly known as the BTBC-West or expansion facility, the City and County agreed to subsidize rent for this facility for the initial years of operations. As per Article V, Section 5.01, the BTBC,

“…agrees to pay as Basic Rent to the City and County on each February 1 and August 1 (each a “Rent Payment Date”) beginning August 1, 2010 through and including August 1, 2014, the sum of $12,500.00. On each Rent Payment Date thereafter, the BTBC shall pay as Basic Rent to the City and the County the principal portion of Basic Rent as shown on Schedule I hereto plus the Interest Portion of Basic Rent.”

The BTBC submitted a letter dated February 23, 2015, requesting, “…the bond payment structure of the last five years be extended for an additional three years through 2017. Under this proposed extension, the City and County would continue to make the bond payments with semi-annual lease payments provided by BTBC.”

On March 31, 2015, the City Commission considered and authorized the 1^st amendment to the lease agreement which extended the BTBC expansion facility’s lease repayment schedule for three years, through 2017 as requested.

Annually, since the lease was executed, the BTBC has been paying two semi-annual payments of $12,500 each (or $25,000 total per year), with the City and County splitting annual bond payments. Starting in 2018, BTBC rent payments are to include both an interest and principal portion that would cover all bond debt service.

Request for 2^nd Amendment:

The City received a letter from the BTBC on June 27, 2017 requesting the bond payment structure of the last eight years be extended for an additional year through 2018.

If approved, the extension will provide the City an opportunity to work with BTBC staff and the County on long-term options related to the BTBC expansion facility. The BTBC contribution would remain at $12,500 twice per year (a total of $25,000 annually) for one extra year, through 2018. The request would result in a net decrease in BTBC rent payments of approximately $232,200 for 2018. The City and County would cover 2018 bond debt service, estimated at approximately $116,100 each.

Note the City has budgeted for this extension in the 2018 budget, having assumed equal payments from the City and County to cover bond debt service and the BTBC paying a total of $25,000 in rent for the year.

The below table shows a comparison of annual rents due on the BTBC West facility with and without the public rent subsidy extended through 2018.

BTBC Expansion Facility: Comparison of Annual Rent Payments
Year	No Public Rent Subsidy			With Public Rent Subsidy Through 2018
Year	Principal	Interest	BTBC Rent Payment	BTBC Rent Payment	Rent Payment Difference	Amount Due from City (to cover difference)	Amount Due from County (to cover difference)
2018	$115,000	$142,193	$257,193	$25,000	$232,193	$116,096.25	$116,096.25

A 2^nd amendment to the lease agreement along with a revised basic rent schedule has been prepared to respond to the request.

In addition to the City Commission, Douglas County will need to consider approving the 2^nd amendment at a future County Commission meeting.

Requested Action:

Approve 2^nd amendment to the lease agreement between the City of Lawrence, Douglas County and the Bioscience Technology Business Center (BTBC) to extend the lease repayment schedule for the BTBC expansion facility located near Bob Billings Parkway on Wakarusa Drive for one year through 2018.