CITY COMMISSION AGENDA ITEM

Department:	City Manager’s Office		Commission Meeting Date:  12-19-2017
Staff Contacts:	Diane Stoddard, Assistant City Manager Britt Crum-Cano, Economic Development Coordinator
Requested Action:
Conduct public hearing for Plastikon Healthcare, LLC Catalyst incentive package to accommodate an expansion and consider the following items related to the request: a) Adopt Resolution No. 7233, making certain findings of fact, as required by K.S.A. 79-251, as amended, with respect to a partial property tax exemption to be granted to Plastikon Healthcare, LLC, for certain real and personal property. b) Adopt on first reading, Ordinance No. 9430, exempting a portion of ad valorem property taxation for a new addition for Plastikon Healthcare, LLC, for economic development purposes.
Executive Summary:		In April 2017, the City Commission approved the Catalyst Program, an industrial development incentive program aimed at spurring economic development in East Hills Business Park and Lawrence VenturePark.  On November 30, 2017, the City received an application from Plastikon Healthcare, LLC for participation in the City’s Catalyst Incentive Program.  Plastikon is a contract manufacturing organization that specializes in the formulation and packaging of liquid medical devices and pharmaceuticals.  The Company acquired its current facility, located in East Hills Business Park, and initiated operations in 2011. At the December 5, 2017 public meeting, the City Commission publicly received the Plastikon Healthcare LLC Catalyst application and set a public hearing date for December 19, 2017 to consider the request and incentive package. Catalyst Package Request: Plastikon is requesting a 70% 10-year property tax abatement on the new addition as they are planning to build to LEED Silver equivalency.  Under the Catalyst program, if the building is not constructed to LEED silver equivalency, the property tax abatement would default to 50% for the 10-year abatement period.  Plastikon will not need to access the land portion of the Catalyst Program since the project will be built on company-owned land. In addition, the company will be pursuing a project exemption certificate (PEC) to access a sales tax exemption on materials used in constructing the addition via a State of Kansas program.  Therefore, they are not pursuing Internal Revenue Bonds (IRB) through the Catalyst program. Project Overview: The company is proposing a 50,000 square foot expansion of their current facility located in East Hills Business Park at 3780 Greenway Circle, Lawrence, Kansas.  The expansion is needed to create space for an aseptic injection molding technology suite and accommodate future space for a large volume sterile pharmaceutical suite. Phase I includes construction of the building shell addition at an estimated capital investment of $3 million.  Phase II will cost an additional $1 million to complete interior finish on a portion of the new space for an aseptic injection molding technology suite, additional clean room, and to add utility upgrades and infrastructure.  Completion of both phases is scheduled for 4^th quarter 2018, with total capital investment for buildings, machinery, and equipment estimated at $7.3 million. It is anticipated that with the completion of both phases, Plastikon will increase their staff by an estimated 13 employees to support injection molding projection operations. It should be noted that Plastikon has tentative plans to add additional facility expansions to their site in East Hills Business Park as they are awarded new contracts in the future. Next Steps: The City Commission will conduct a public hearing at their December 19, 2017 meeting to consider Plastikon’s request, and if appropriate, authorize the project to receive a tax abatement under the Catalyst Program through approval of Resolution No. 7233 and Ordinance 9430.  Second reading of the ordinance will be scheduled for December 27, 2017.  If the request is approved, staff will draft a performance agreement with Plastikon, as required by the City’s economic development policy.  The agreement, under the Catalyst Program, would be fairly straightforward as there are no job creation targets, wage or health insurance requirements.  However, the City will want to ensure that the company pays its taxes that are due, is operating as a manufacturer in order to access the exemption, and that they cooperate with the City on their required annual renewals of the abatement during the 10- year period.  Staff will return the performance agreement to the City Commission in the near future.
Strategic Plan Critical Success Factor		Economic Growth and Security
Fiscal Impact (Amount/Source):		The fiscal impact to the City of the Catalyst Program is positive but the exact amount is unknown until buildings are constructed.  Because the program only offers a partial property tax abatement, any new development will result in net positive tax base to the City and the other taxing jurisdictions.
Attachments:		Plastikon Healthcare LLC Catalyst Application Catalyst Program Eligibility Sheet Phased Development Map (East Hills Business Park) Resolution No. 7233 Ordinance No. 9430
Reviewed By: (for CMO use only)	☐TM ☒DS ☐CT ☐BM