Public Incentives Review Committee

Meeting Minutes

October 19, 2005, 4:00 p.m.

 

PIRC Members Present

Mayor Dennis Highberger, Kirk McClure, Brenda McFadden, Mike Maddox (arrived approximately 4:15)

 

PIRC Members Absent:

Jere McElhaney, Rich Minder, Commissioner Mike Rundle

 

Others Present:

Melinda Henderson, Heather Ackerley

 

City Staff Present:

David Corliss, Frank Reeb, Scott Wagner, Jonathan Douglass

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Mayor Highberger called the meeting to order.  He noted the four main items on the agenda and said because there was a lack of a quorum (Maddox had not arrived at this time) the Committee could not approve the September 14th meeting minutes (agenda item 1).  He asked staff to review the policy table summarizing existing City policies (agenda item 2).

 

Dave Corliss explained the policy table.  He said it contained key sections from Resolution 5341 (adopted September 17, 1991), Resolution 6343 (adopted November 13, 2001), and Ordinance 7706 (adopted October 28, 2003).  He said Ordinance 7706 required a performance agreement. 

 

Highberger asked staff to review the tax abatement policies collected from area communities.  He said from his review of those area policies, Lawrence’s policy was not the most aggressive. 

 

Corliss said the area policies generally fell into two types – formula based compliance and an annual review compliance.

 

Highberger asked about the annual adjustment mentioned in some policies and asked whether it as automatic or adjusted in some other manner.

 

Scott Wagner mentioned the Manhattan, Wichita, and Topeka policies and said they generally were adjusted in some other manner but staff had basically collected the policies but did not analyze them.

 

Corliss reviewed the Manhattan policy and specifically noted the Manko job creation targets which required an increasing number of jobs for each successive year during the period of the abatement.

 

Highberger said Lawrence did not get as detailed as the in the Manko job creation targets.

 

Corliss said it was not unheard of to have some cumulative targets, for example the Serologicals abatement.

 

Reeb said that was accurate and also said the Sauer Danfoss abatement contained targets or phases.  He said in most cases there was usually one projected number for the period of the abatement with not much detail per year.

 

Corliss said it was not unusual to have a formula like the City of Manhattan.  He also reviewed the City of Lenexa PILOT, which he said, was just for IRBs. 

 

Highberger said for example if the company was 5% less than promised then the taxes would go up 5%.  He said to summarize, the formula driven versus the annually calculated review of criteria was a tradeoff of instantaneous versus accountability.

 

Highberger directed the discussion to Kirk McClure’s compliance analysis (agenda item 4).

 

McClure said nothing had changed since the last discussion during the September 14th meeting.

 

There were no questions from other committee members about the analysis spreadsheets.

 

Highberger said a majority of the PIRC at the last meeting expressed interest in developing a policy and asked if that was still the case.

 

Maddox asked what the policy would contain and what it was intended to do. 

 

Highberger said the PIRC would develop a policy to make recommendations to the City Commission on compliance move forward.

 

Maddox said we need to be fair to the process at the time the abatement was approved.

 

McFadden said that was part of the process.  She said we should be able to develop a policy that takes those items into account.

 

McClure said PIRC was an advisory board and it was the City Commission that should decide what is substantial compliance.  He said 90% is the number used in many other communities for reviewing jobs, wages, and investment.  If a company has less than that then a letter is sent to the company asking them to submit a plan for when they plan to be in compliance.  In addition, if the business does not report required information then they recommend stopping the abatement until the business submits the required information. 

 

Maddox said staff should have more time to review the policies from other communities.

 

McClure said Kansas communities may not be the best to review.  He appreciated staff’s work but said staff would be reinventing the wheel.  He said they would find that cities need to be more firm. 

 

Maddox said Lawrence competes with Wichita and Lenexa for businesses.  He said if we know of cities with good policies then PIRC should review those policies.  He said if other PIRC members had research then he or she should forward it to other members.

 

McClure said he already did that.

Highberger said in his opinion we know enough about the policies from other communities.  He said the Manhattan policy seemed to work for jobs, wages, capital investment, and investment in real estate and there was a compliance formula.  He said a question would be whether any adjustments would be automatic or occur in some other manner. 

 

Corliss asked for clarification about whether the Manhattan compliance criteria would apply to existing abatements or to just new firms under the current ordinance.  He said Lawrence has the legal authority to remove or modify existing abatements. 

 

Highberger said we need to determine what substantial compliance is.  He said we should not be treating new abatements like existing ones.  He said we created the expectation that currently exists; however, we need some guidelines on how to handle compliance. 

 

McFadden asked if staff was aware of any definition of substantial compliance. 

 

Corliss said no.  He said state law requires monitoring existing abatements but does not define substantial compliance. 

 

McFadden asked what firms did not report required information. 

 

Reeb said Microtech initially did not report any information but did submit information following the letter this committee directed staff to send to Microtech.  He said Prosoco provided some information but the wage information was incomplete.

 

McClure said any formula should be simple.  It should require 100% of what was promised or the firm should provide a detailed explanation of why it has not and the firm should also supply a plan for when it will be at 100%.  He said if we use a formula it would not be wise to use a number less than 100%.  He gave the example of Sauer Danfoss which is not yet at 100% but the firm came before PIRC, explained why it had not met projections, and PIRC said OK and that the lack of compliance was justified. 

 

Maddox agreed with what McClure said.  He said it is a subjective process not objective. 

 

Highberger agreed with McClure’s suggestion of using the 100% number as the compliance standard. 

 

Maddox said we should review the annual report.  Based on that information, PIRC should decide what businesses to review further. 

 

McClure said any formula would tie our hands. 

 

Highberger said so we would use 100% and review the information in the annual report as a starting point. 

 

Maddox said we should review the annual report information but not include a specific number (e.g., 100%) in the review.

 

Highberger said a threshold number like 100% would seem to be preferable to companies because otherwise it would seem like every decision made would be politicized.

 

McClure said the analysis could get sticky.  For example, a formula looking at jobs would not be able to consider whether the jobs were new jobs or whether they were brought in from somewhere else.  That distinction should be important for this committee. 

 

Maddox said it was not PIRC’s job to run the company receiving the tax abatement. 

 

McFadden said we could bring the company in and ask about that issue. 

 

Highberger said it appeared there was some consensus for not wanting a formula but to review the annual report and possibly bring in a company to ask about why it has not fully met projections. 

 

Maddox said PIRC should generally study the list of those out of compliance but we don’t want to tie our hands with a formula. 

 

McClure said there were approximately three businesses that had not met investment projections, and four businesses that had not met jobs or wages projections.  He said his analysis was based on the information in the annual reports from 2001 to 2004.

 

Highberger said since there was now a quorum it would be appropriate to go back to item 1 on the agenda, the approval of the September 14th PIRC meeting minutes. 

 

It was moved by McFadden, seconded by McClure to approve the September 14th PIRC meeting minutes.  Motion carried 4-0 (Highberger, McClure, McFadden, Maddox). 

 

Highberger said agenda items for the next meeting would include: 1) a discussion of which companies may not be in substantial compliance; and 2) discuss possible definitions of items in the current ordinance.

 

The committee then briefly discussed staff sending a letter to Prosoco officials requesting the abatement related information that was missing from the annual report which was similar to the letter staff sent to Microtech earlier this year. 

 

It was moved by Maddox, seconded by McFadden, to direct staff to send a letter to Prosoco and requesting required wage information within 15 days of receipt of the letter.  Motion carried 4-0 (Highberger, McClure, McFadden, Maddox). 

 

McFadden said staff may want to provide some notice to companies. 

 

It was moved by Maddox, seconded by McClure, to adjourn.  Motion carried 4-0. 

 

The meeting adjourned at approximately 5:05 p.m.