Shawnee Dispatch

Lenexa approves $26 million package for Perceptive Software

July 12, 2012

It took the Lenexa City Council about 26 minutes to approve $26 million in tax-increment financing for the Perceptive Software headquarters relocation project.

Following a brief July 11 public hearing, during which no one from the public spoke, the project was approved 7-0. It calls for Perceptive Software, currently headquartered in western Shawnee, to begin work on the first of two four-story, 120,000-square-foot buildings by Oct. 31 and to have it completed by Aug. 31, 2014. The second building must be started by June 30, 2014, and completed by Oct. 31, 2015.

“We feel like we have selected a site that is visionary and innovative,” Sherlyn Manson, Perceptive Software communications manager, said of the new headquarters location southwest of 89th Street and Renner Road in the Lenexa City Center development.

Steve Davis, director of real estate for Lexmark International, which bought Perceptive Software for $280 million two years ago, said one of the first orders of business after the acquisition was to find a site for the software company’s continuing growth. The mixed-use Lenexa City Center project, which has been stalled by the recession, “fits in with the high-tech nature of Perceptive Software,” Davis said.

Shawnee city officials, however, have suggested that Perceptive Software’s move, to a site just four miles away, was motivated primarily by lavish incentives offered out of desperation to get Lenexa City Center on track after 10 years.

Mayor Jeff Meyers said he thought Shawnee was in the ballpark with the incentive offer it made to keep Perceptive Software from moving its nearly 700-job headquarters to Lenexa.

“But $26 million? Oh, my God,” the mayor said after learning of the tax-increment financing package offered to the company.

Tax-increment financing, or TIF, allows tax revenue generated by project improvements to be diverted for an extended period, in this case 20 years, to cover eligible development expenses.

To help finance Perceptive Software’s relocation and expansion plan, the Lenexa City Council approved $15.15 million in TIF reimbursements to the company and another $10.85 million in TIF reimbursements to the city of Lenexa.

The city’s reimbursable costs include $3.4 million for the 12.4 acres of land it agreed to convey to Perceptive Software as part of the incentive offer. The $3.4 million is based on a land value of $6.36 per square foot. And according to the TIF plan, Perceptive Software will have to pay that price for 56,000 square feet of the land — a total of $354,160 — if it has not begun construction of a third building on that parcel by Aug. 1, 2017.

Shortly after Perceptive Software’s June 1 announcement that it was moving, Mayor Meyers and Andrew Nave, executive director of the Shawnee Economic Development Council, told The Dispatch they had heard Lenexa had sweetened the pot with free land.

“They’ve opened a can of worms,” Meyers said. “All of a sudden, people are going to be expecting free land to be part of incentive packages. That’s not good for the communities, the county or the state.”

Blake Schreck, president of the Lenexa Chamber of Commerce, said Lenexa isn’t the first Johnson County city to offer free land to entice a development. In 2006, the city of Olathe donated 92 acres for a Kansas Bioscience Authority business park and adjacent satellite campus for Kansas State University,

Nevertheless, Meyers called the Lenexa incentive offer “shocking.”

“Holy cow, that’s unheard of,” the mayor said of the $26 million total — nearly half of the $54 million value of the phase 1 and 2 buildings Perceptive Software plans to build.

“Were we going to offer anywhere close to $26 million? Absolutely not,” Nave said.

However, Perceptive Software’s cost of staying and expanding in Shawnee, where it would have had to build only one building, was about half of the cost of its plan for Lenexa City Center and, thus, required fewer incentives, Nave said.

In 2005, Shawnee approved a 10-year, 75 percent tax abatement for the building Perceptive Software currently leases at 22701 W. 68th Terrace in the Shawnee Crossings development. But a year ago, with four years remaining on its lease, Perceptive began exploring expansion alternatives and soliciting incentive proposals.

One of the cities considered was Lexington, Ky., home to Lexmark International. But according to Meyers, Lexington was ruled out, narrowing the competition to sites in Shawnee, Lenexa and Olathe.

Nave said he was confident Shawnee could fill the Perceptive Software space by the time the company vacates it in two to three years.

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