City of Lawrence                                

Public Incentives Review Committee

September 14, 2005 minutes

MEMBERS PRESENT:	Mayor Dennis Highberger, Commissioner Mike Rundle, Kirk McClure, Jere McElhaney, Brenda McFadden, Mike Maddox, and Rich Minder
STAFF PRESENT:	Mike Wildgen, David Corliss, Frank Reeb.
PUBLIC PRESENT:	Lynn Parman, Melinda Henderson, Heather Ackerley.

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Mayor Highberger called the meeting to order.  He noted the four items on the Agenda and requested discussion on Agenda item 1, “Discuss non-compliance among tax abated companies (those with abatements in effect prior to current Economic Development Policy).”

There was a general discussion regarding which economic development ordinance or resolution applied to specific tax abatements.  There was also general discussion about the term “substantial compliance.”

Mayor Highberger said the committee should try and establish what “substantial compliance” should be.  He said the goal was not to recommend a specific action against a particular company or specific tax abatement but to make general recommendations.  He said a good way to begin that discussion would be for Kirk McClure to review the compliance spreadsheet he prepared and briefly mentioned during the April meeting. 

Mike Maddox asked for clarification on what the specific discussion should be at this meeting.  He said he understood there would only be general discussions at this meeting but there would be some challenge in doing that because there were multiple resolutions each with different requirements.

Kirk McClure said he understood the City Commission did not place limits or constraints on its direction for PIRC to provide recommendations on compliance. 

Mayor Highberger said there may be discussion about specific abatements after the general policy discussion but there would probably not be time at this meeting.

McClure reviewed his Tax Abatement Compliance spreadsheets.  He said his spreadsheets contained information, compiled from the annual reports, in three areas: Investment, Jobs, and Wages.  He said he used 90% as a compliance rate in analyzing the reported information and there were several firms that were not in compliance.  He said if the 90% number was used, about 6 firms were out of compliance

Maddox asked McClure to clarify whether the 90% threshold was McClure’s number and that it was not stated in any economic development resolution or ordinance.

McClure said the 90% threshold number was his number.

Maddox questioned why McClure’s analysis was limited to only three criteria and asked where any of the economic development ordinances or resolutions defined the term “substantial compliance.”

McClure said the requirements were obvious and said Maddox was wasting the committee’s time.

Mayor Highberger requested that the level of civility improve from what has been demonstrated thus far.  

Commissioner Rundle briefly reviewed Resolution 5431, Section 22, which addressed the annual review of tax abated companies to ensure that those businesses continue to adequately satisfy ownership, use, and other qualifying criteria as outlined in section 12.

Brenda McFadden asked that another PIRC member or City staff define the term “substantial compliance.”

Mayor Highberger said that was a fair and legitimate question and that was why PIRC was meeting to try and define what “substantial compliance” means.

Rundle agreed and said that was why PIRC was meeting in order to clarify some of the gray area.

Jere McElhaney suggested that the economic development policy contains 14 criteria to evaluate substantial compliance and not three as McClure suggested.

Rundle asked staff for a historical perspective

Dave Corliss reviewed Ordinance 7706, page 14, paragraph 1 which addresses the annual report and the information in the annual report.  He said state law required the City to develop a procedure for monitoring compliance but state law did not define what compliance had to be.

Maddox generally agreed with Corliss.  He said determining whether a business provided information requested by the City would be easy to determine.  The more difficult question would be to determine what are the criteria used to determine compliance.  He said before determining whether 90%, 80% or some other number is appropriate, we first need to know the applicable criteria.  He said Resolution 5341 contained several criteria.

Mayor Highberger asked if members of the committee were generally in agreement that there should be a policy for substantial compliance.

Maddox said it would be helpful to have a single document that listed all three policies and which listed the criteria for each policy.

McClure said since he has been a PIRC member there has been a review of the three criteria of jobs, wages and investment.

Mayor Highberger said the criteria used by McClure could be used as a screening tool and if a business met those three criteria then there would be no further review.  If the business did not meet those three criteria then there would be further evaluation and discussion.

Maddox said he did not know any business owner who could predict with absolute certainty what would happen with his business years into the future.

McElhaney suggested that reviewing new criteria now would not be fair to a business that received an abatement based on a policy that is no longer current. 

McFadden said the criteria should be clear and well defined. 

Highberger said he did not think having a policy formulated now would be changing the rules of the game.  .

Maddox said he believed the committee may have to go back and review each company and review the criteria in the applicable resolution.

Highberger said he heard there was general consensus on moving forward.

Rich Minder said he understood from Corliss’ review that the new ordinance applied to existing tax abatements although there may need to have some standard developed that is consistent and could be applied across each resolution and agreement.  On the other hand, he heard Maddox say there was a need for a case-by-case review. 

Maddox said there those are two separate issues.

Corliss said the new performance agreement makes it clear that investment, jobs and wages are important but the new performance agreement does not spell out what substantial compliance is.  That is left to the City Commission on how to address compliance. 

Maddox said there is always going to be some subjectivity because it is impossible to know all the factors. 

Corliss said but the City Commission is asking for recommendations from PIRC on how to address compliance.

Highberger asked staff to provide information from other jurisdictions on how they address compliance issues.

Rundle said a quick review of all three resolutions contained criteria on ownership,use, capital investment, wages, and jobs.  He said the most recent ordinance added the wage floor requirement.  He said all three policies have fifteen criteria.  He said the policies are similar and point us in the general direction.

Minder said if the standard was defined for investment, jobs and wages but was too rigid, it would become unworkable.  A business is always going to be trying to balance land, labor and capital.  For example, the 90% criteria might be a good threshold but over time it would be necessary to develop some other criteria to fairly evaluate compliance.

Maddox said a lot of the criteria in the various resolutions are fairly subjective.  He said it may be helpful to come up with some agreed upon initial review criteria and if the business has met it then there would be no further review.  If the business did not meet these initial review criteria then further criteria would be reviewed.

Highberger clarified the direction for staff and said staff should provide the information from other communities on how they address ongoing compliance issues.  In addition, staff should develop the document Maddox suggested (one document containing all criteria from the three resolutions).

Highberger asked if there were other items PIRC members wanted to address.

McFadden asked about Section 4 of Ordinance 7706 and the requirements for consideration of a tax abatement.  She said the first requirement was that the business be “environmentally sound.”  She asked what that term meant.  She said the next requirement was for the business to be of “small to medium size”.  She said it would be important to have some range for those sizes. 

Maddox disagreed.  He said it is not a good idea to define a “small and medium size” business.

McClure said the committee needed to avoid the notion that everything needed to be defined and written in policy.  He said it would be better to have an economic development planner to help with these issues. 

McFadden said it would also be important to know that the business applying for a tax abatement is being a good citizen to other entities and that they are paying their taxes, for example, sales taxes.  She said during the information gathering stage it may be helpful to ask for that information. 

Highberger asked staff if that information was currently requested on the application.

Corliss and Reeb both said they did not think that information was on the current abatement application.

Highberger asked for other PIRC members’ interest on McFadden’s suggestion.  No other committee member expressly supported the suggestion.

Maddox said it might be good to have some further clarification as to how the term “environmentally sound” is defined as used in Section 4 of Ordinance 7706. 

The Mayor scheduled the next meeting for Wednesday, October 19^th at 4:00 pm in the City Commission meeting room.

Prior to the next meeting staff agreed to email committee members:

1) the three most recent economic development policies (Ord. 7706, Res. 6343, and Res. 5431)

2) Kirk McClure’s investment, jobs, and wages analysis

3) Information from other communities regarding tax abatement compliance

4) The document Maddox suggested combining the criteria from each tax abatement policy into a single document

The meeting adjourned at approximately 5:15 p.m.