In Olathe, philosophical discussions about the city’s use of economic development tools have continued as some city councilmembers express discomfort in giving incentives to projects that don’t offer high wages or have fallen short in their eyes in other ways.
Last week, the Olathe City Council voted 5-2 to approve a resolution of intent to issue $23 million in industrial revenue bonds on a project in the Lone Elm Commerce Center. The resolution also outlines a proposed 10-year partial property tax abatement.
Councilmembers Matt Schoonover and Dean Vakas cast the no votes, echoing past conversations on the matter.
What are these incentives for?
- The plan is to construct a roughly 205,000-square-foot building near Lone Elm Road and 167th Street in southern Olathe.
- This building, according to city documents, would likely be used for light industrial uses or warehousing, though its exact tenant is unclear.
- In the Lone Elm Commerce Center, the speculative building would neighbor things like a Chick-fil-A warehouse and facilities for both Wesco and Lineage Logistics.
- Over the next decade, the development is expected to create 154 new jobs, with an average starting salary of $38,000 in the first year.
Councilmember hung up on low wages
During the discussion last Tuesday, city staff once again pointed out that the application for the bonds is in line with the city’s existing standards.
Those standards include a minimum private investment threshold of $10 million, as well as cost-benefit ratio requirements largely focused on how much property tax a development will ultimately generate.
Still, Councilmember Schoonover questioned whether the proposed average starting wages of $38,000 per year for jobs at the Lone Elm project would be something people could live on in Olathe. He also questioned whether that projected average wage was even accurate.
He raised concerns that some jobs at the facility could pay much lower than that as well.
“Are these companies bringing jobs to the city that, quite frankly, will actually be a benefit to the city?” Schoonover said, noting that he’s been “struggling” with the issue.
He also wondered what factors contributed to the cost-benefit ratio the city uses in determining if a project is worthy of incentives.
John Page, Olathe’s financial strategy manager, said the chief consideration city staff uses in that calculation is property taxes.
Currently, Olathe collects $55 in property taxes from the property where the speculative industrial building is being proposed. After the abatement rolls off, the city could collect around $76,000 a year in property tax revenues.
Other Olathe councilmembers could support changes
In the past, Councilmember Vakas has also questioned whether the city could require projects that receive incentives like property tax abatements to include more green design elements beyond what is already laid out in Olathe’s development codes.
Additionally, Councilmember Marge Vogt, who is Mayor Pro Tem, has signaled at times an interest in reviewing some of the city’s incentive policies to use them to encourage projects that meet more specific criteria or priorities, like higher wages.
Mayor John Bacon, on Tuesday, said there will be “an opportunity” to reexamine these policies later on this year.
Olathe tends to review its incentive tools and the rules attached to them in the fall every year but doesn’t always make substantive changes.
Next steps:
- The resolution of intent adopted last week only formalizes Olathe’s plans to eventually issue bonds for the speculative industrial project.
- Later, the city council will have to vote again for the bonds to be issued and the tax abatement to be finalized. A date for that vote has not been set.
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