As city debates incentives for grocery store project, a look at how big a tax break several projects will get from City Hall in 2018
I’m the first to admit that I don’t know many details about the grocery store business. I spend 90 percent of my time playing with the self-serve machine that makes fresh peanut butter and the other 10 percent buying wipes. I hardly ever see the rest of the store. But let’s look at what is becoming a controversial grocery store project anyway.
As Journal-World reporter Rochelle Valverde has been telling you in recent days, there is a pretty good debate brewing about whether the city should back a proposed grocery store at the former Borders bookstore site at Seventh and New Hampshire streets. That such a debate is happening is mildly surprising. Political momentum has been building for a downtown grocery store for more than a decade. And the support has been from both developers and residents, which usually is a recipe for success at City Hall.
But the incentive request does have a pretty significant twist. The developers are requesting a $2.5 million loan that Price Chopper can use to equip the downtown store. City commissioners and staff members have expressed heartburn over that part of the request. A staff memo to commissioners labeled the loan as having “significant risk” and also stated “it should be noted that the city has not made a loan to a private entity of this magnitude that city staff can recall.”
Notice, however, that the memo didn’t state that the city had never made a loan to a private entity. I can recall at least one such loan in recent years. The city provided a $25,000 forgivable loan to Grandstand Glassware and Apparel in 2011 when the company moved into the East Hills Business Park from another part of Lawrence.
The loan was part of a package of tax incentives for Grandstand, which was expanding and adding employees as its business serving microbreweries across the country was booming. The loan and the broader incentive package sailed through City Hall, and Grandstand has been a big success story, with employee growth even higher than projected.
There obviously are differences between the two situations, with the size of the loan being a big one. But it is worth noting that the grocery store project isn’t the one opening the barn door on the idea of city loans to private businesses. The grocery store project is just hoping for a bigger barn.
It also should be noted that the city has turned down other requests for loans before. The one that stands out is Wicked Broadband in 2014. Wicked sought a $1 million loan guarantee from the city to help expand broadband service in the community. Plus, to be clear, I have no idea whether a loan to a grocery store is a good idea. But the conversation around the idea has been interesting, and got more so at Tuesday night’s City Commission meeting.
At the meeting, several commissioners expressed concern that providing a loan to the grocery store might give it an advantage over other grocery stores in the community. It is a fair question, but does it go far enough? Doesn’t any type of financial incentive give an advantage to a business? In fact, it could be argued that a loan is less advantageous than most incentives because it theoretically will be paid back. A tax rebate — the most common type of incentive — involves no payback provision.
For example, what about hotels that get tax rebates? Do they have an advantage over other local hotels that have to pay their taxes in full? How about a shopping center that gets part of its taxes given back to it? Or an apartment building? There are examples of all of those in Lawrence, and the amount of rebates is often significant. Here’s a look at how much the city is projected to pay each development in tax rebates in 2018, according to the city budget:
• The Oread hotel project near the KU campus: $583,000.
• The TownePlace Marriott project in downtown: $516,000
• The Bauer Farm shopping center project near Sixth and Wakarusa: $261,000
• The HERE apartment building project near the KU campus: $122,000
• The Treanor Architects headquarters project at 1040 Vermont St.: $30,000
• The 901 New Hampshire apartment building project: $29,000.
• The Warehouse Arts District project near Eighth and Pennsylvania streets: $28,000
• Poehler Lofts project near Eighth and Pennsylvania streets: $14,000
Incentives are definitely one of the more hotly debated topics in Lawrence. Proponents note that incentives help entice companies to do projects that add jobs, in some cases. In others, they add affordable housing. Other times, city leaders are told incentives are needed to make difficult projects possible. That was the case with both hotels. The incentives are being used to pay, in part, for the expensive underground parking garages that developers said were needed.
Opponents of incentives often have called them corporate welfare. It will be interesting to listen to what city commissioners start saying. If commissioners start expressing concern that incentives provide an unfair advantage to businesses, then we’ve reached a turning point.
The grocery store project is probably a bellwether. If commissioners kill the project over concerns about incentives, they will anger some vocal residents. There are residents in North Lawrence and East Lawrence who want a downtown grocery store.
But this commission might do so. It has been clear for awhile that a majority of the commission is wary of incentives, but now it may become clearer that commissioners are serious about playing a different game when it comes to tax breaks. If so, the development community will argue Lawrence is being put at a disadvantage to other communities, while other segments of the community will cheer that Lawrence is finally standing up to corporate interests.
It may be a good idea to stock up on wipes. Such Lawrence debates have been known to get messy.