Multimedia Reporting (Bradford-Utsler)

No one could have imagined back in 1968, that the Packerware company would change the face of Lawrence tax history.

The company, which makes plastic lids and containers, set a city precedent in February after the Lawrence City Commission approved, 4-1, the companys request for a 90% tax abatement. The abatement request that will last for a 15 year period is the biggest ever in Lawrence history, which typically hasnt exceeded the 80% mark.

According to a 2001 University of Kansas Policy Institute review, Lawrence has long adopted an across-the-boards tax abatement policy. The city has never turned down an abatement to any company that has made it through the citys application process. Lawrences anything goes policy could be wasting thousands upon thousands of dollars, by not reviewing each request more carefully and tailoring it to meet the specific needs of each business. The city could be throwing away money on businesses that wouldnt normally require the abatements to sustain themselves and the community.

The small Berry Plastics manufacturing facility is embarking on an expansion with the help of a 90% tax abatement.

Though advocates claim that abatements have the exact opposite affect.

Packerwares new abatement, by request of its parent company Berry Plastics, will be bringing a $118 million investment to Lawrence in new machinery and expansion construction. Beth Johnson, Vice President of Economic Development for the Lawrence Chamber of Commerce said the investment is the largest made by any company in Lawrence history and the largest in the Kansas City metro area in the past five years.

Ideally, abatements are commonly used to encourage economic growth and attract new businesses to the local community. Robert Weilminster, Vice President of Corporate Development for Berry Plastics, said the company needed the tax abatement to secure a competitive advantage in the Lawrence facility.

From the standpoint of the technology we are putting in Lawrence, it will be our second site, we see building our business on this primary growth in the future, Weilminster said. The tax abatement allowed us to financially justify making this kind of investment in Lawrence.

To justify its investment, Berry Plastics requested the 90% abatement that would allow it to pay only 10% of its taxes during the 15-year abatement period. While this may be good for the company, it also means lost revenues for the city. To make up for the loss of tax revenue, the company has promised to bring over 150 new jobs to Lawrence by the end of the expansion and abatement period.

Proponents of across the board abatements claim that they are necessary to promote expansion and the growth of the workforce, while companies are still held accountable to pay remaining taxes and make investments in the community.

Ultimately it means that the business stays in Lawrence, Johnson said. Even though Berry Plastics gets an abatement they are already paying 10% of those taxes and they already are continuing to pay the full price for what they have. The abatement is only on the expansion.

With Berry still paying 10% of its $118 million investment, Ed Mullins, Finance Director for the city of Lawrence, compared the benefits of abatements to a ripple effect.

The assumption is that there is a multiplier affect from wages, so as they hire people, those people will live in and buy products in the county, Mullins said. People in other industries will also need to be hired to compensate for the growing population.

Though critics worry that many of the new jobs will not exceed Lawrences living wage requirement. City commissioner Mike Rundle, who was the only commissioner to vote against the abatement at the commissions meeting in February, said he was worried that the average wages paid to most of the new employees would still not allow them to sustain a family, buy a house and participate economically in Lawrence.

The majority of new jobs provided by Berry Plastics hinges on the company's third phase of development, of which outcome is determined by the first two phases.

Kirk McClure Ph. D., University of Kansas Associate Professor in graduate programs in Urban Planning, is another opponent on the side of tax abatement reform. McClure worries about Lawrence’s ability to properly enforce compliance from companies with abatements. McClure said out of the 17 tax abatements that Lawrence has granted in recent history, 13 or 14 are currently in non-compliance.

“The firm has either not produced the jobs, not made the investment in real property or is not paying the wages promised,” McClure said. “If the city was in a position of strength we wouldn’t have this struggle.”

While McClure said he is not totally against tax abatements, he is against their misuse. McClure claims that handing out abatements “across the board”, “eliminates the capacity of cities to negotiate effectively with firms.”

“I don’t oppose tax abatements, they are just a tool, of economic development,” McClure said. “The difficulty is that tax abatements have proven to be a tool that is overused and misused.”