Archive for Thursday, March 9, 2006

Incentive policy update pushed

March 9, 2006

In Sara Ritter's opinion, tax abatements and other economic development incentives are misunderstood.

"Everyone thinks they're giveaways," the executive director of the De Soto Economic Development Council and Chamber of Commerce said. "Abatements are actually a diversified tax base increase for the city. Even if you give a 50 percent tax abatement for 10 years, right off the bat from year one they are putting new tax dollars into the city."

Last Thursday, Ritter took that argument to the De Soto City Council. She and the De Soto Economic Development Council have been attempting to develop an economic development incentive policy for a good deal of the past year. But that got put on hold with the departure of former City Administrator Greg Johnson, who was helping with the project. Now that Pat Guilfoyle has arrived in City Hall, it was time for work on the policy to resume, Ritter said.

In 2000, the council agreed to limit abatements to 50 percent. But Ritter said she didn't have a written copy of that policy to share with prospects.

"To make my job easier, I would like a policy that says this is what is available," she said. "It would establish guidelines on what we would consider. It would help to limit special requests we take to the council."

Furthermore, Ritter said incentives available to the city have changed and there is more to offer in the way of inducements than abatements. Any written policy adopted should be reviewed annually to ensure the city was competitive with its neighbors, she said.

Ritter said she wouldn't propose incentives to all who came knocking on the city's door. Incentives should be available to companies of the kind identified in the city's target industry study and those willing to locate in sites of the city's choosing.

The targeted industry completed in 2003 suggested the city concentrate on recruiting companies in the life sciences, distribution and packaging centers, satellite administrative centers and those ventures that would compliment businesses already located in De Soto.

Locations the city should be encouraging are those that don't require the city to make expensive investments in streets and public utilities. Ritter suggested the Corridor 10 Commerce Park could be a place to start because streets, sewers and water were already there.

Reached Friday, Commerce Park owner Kent Fry was unaware of Ritter had approached the council, although he understood she was working on updating the policy.

"I think she had indicated she would focus on existing industrial properties," he said. "We would include ourselves in that group."

Fry endorsed the effort, saying abatements had a proven record in De Soto and elsewhere.

"People want to go where they are wanted," he said. "The abatements they have granted so far worked very effectively. The return on the Sealright/Huhtamaki property has been pretty dramatic."

Ritter shared a spreadsheet with the De Soto City Council that compared the tax revenue the city would receive on a property at a 50 percent abatement to that it would receive if it remained undeveloped and retained its agriculture zoning.

It's not just a theoretical exercise. Figures from the Johnson County Tax and Records Department shows the city is now benefitting from taxes paid by De Soto companies currently receiving abatements. The department's director, John Bartolac, said the four companies paid $299,000 in taxes this year.

Council members were receptive to the need for an incentive policy, pointing out that abatements were approved for the Sealright plant Huhtamaki Americas Inc. purchased in 2000, Custom Foods, the Mr. Goodcents Inc. headquarters, the Rehrig Pacific Co. plant, and the Intervet campus.

"You have to have tax abatements," Councilman Ted Morse said. "You really don't have much choice. Our neighbors are doing it."

But Councilman Tim Maniez was concerned about speculation in De Soto that the Commerce Park wasn't filling up because the land was too high. Ritter acknowledged property in Commerce Park was selling for twice the per-square-foot rate of Shawnee's Perimeter Park at 83rd and Kansas Highway 7.

The commercial advantages Commerce Park's frontage to the busier Kansas Highway 10 could account for the land price difference from that in the strictly industrial Perimeter Park, Ritter said.

Those factors and the sale price of like properties in the county helped set the price of land in Commerce Park, Fry said.

"There's no doubt in my mind it is priced where it should be," he said. "Price has not been an issue in any of our dealings."

Thirty-six acres -- 25 retained by the original investment group -- remain in the 213-acre Commerce Park, Fry said. Although there is currently one proposal that could be before the city in the next few months, there has been no new activity in the park since the Mr. Goodcents headquarters was approved in 2001

Fry said he was unable to pinpoint the reason the remaining land in Commerce Park has been slow to develop but said the De Soto's proximity to more available land closer in more urban parts of Johnson County could play a part.

Mike Mitchelson, a senior associate with CB Richard Ellis that markets Perimeter Park and who helped Rehrig locate in De Soto, said that could soon change. The bubble of Johnson County expansion was spreading west. Especially in demand were larger parcels of land that were becoming harder to find in more urban settings, he said.

Mitchelson and Mayor Dave Anderson said Olathe was offering package abatement arrangements to help spur development at chosen locations. But Anderson agreed with Maniez that the city's offer to extend abatements to favored sites should come with an incentive for action from the sites' developers.

"I also want a sunset," the mayor said. "We're going to give you a little juice. If you don't move it, that's it."

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