Archive for Wednesday, December 16, 2015

Shawnee considers changes to incentive program for new businesses, entrepreneurs

December 16, 2015

Changes are being considered for the Shawnee Entrepreneurial and Economic Development program to make various tax incentives and forgivable loans available to a wider variety of companies.

The goal of the changes, according to Andrew Nave, the director of the Shawnee Economic Development Council, is to be able to attract more business to Shawnee in key “high growth” industries like transportation and warehousing, finance and insurance, information and professional services.

The differences will include changes to the way the city can measure business’ requirements through the SEED program and the creation of a new Property Tax Assistance Program and a new Lease Assistance Program.

Council Member Brandon Kenig has been working with nave to craft the changes to the city’s SEED program for several months. Kenig said he wanted to find a way to help attract entrepreneurs and new businesses to Shawnee and said the previous restrictions under the SEED program precluded some key employers from applying for the loans and other incentives. He knows firsthand the challenges of launching a business as he is the founder and president of his own company, Brandaway Digital LLC.

“It is very difficult to get out of the garage or out of a basement and into an office for these startups,” Kenig said.

He added that startups have a typical timeline that doesn’t produce profitability until their second year of operation. The challenges entrepreneurs face, Kenig said, provide Shawnee with an opportunity to help them and attract new employers to the city.

“There’s a huge opportunity for this city to provide and fill a void in this area,” Kenig said.

The majority of the rest of the City Council agreed with Kenig and said modifying the SEED program to allow for more diverse applicants can only benefit the city.

Council Member Mike Kemmling pointed out that six of the city council members have started their own businesses.

“This council understands the challenges of starting a business,” Kemmling said.

The SEED program was established in June 2012 and receives its revenue from approximately half of the landfill impact fee contract. To date, the SEED program has assisted eight employers in Shawnee, expending approximately $325,000 and creating 230 new jobs in Shawnee.

The SEED program provides an approved business with an initial one-time cash loan with increments of the loan forgiven over time as specified targets are met, like new employee numbers and employee salary requirements. The amount of the loan is generally determined as 1.5 percent of committed new payroll with an additional .5 percent awarded for meeting other criteria such as hiring Shawnee residents, using Shawnee-based contractors and vendors or making a “substantial contribution to a Shawnee-based charitable organization.”

The council discussed the changes at last week’s council committee meeting and voted 7-1 in favor of forwarding the changes to a council vote on Jan. 11. Kemmling, although voicing support for the SEED program as a whole, voted against the measures because he thought there should be changes to some of the language used in the forgivable loans that would specifically define what punishments there are for companies that don’t fulfill SEED requirements and don’t adequately use Shawnee services in building there.

Nave explained that vague language like “substantial” was used and that a range of penalties are presented against companies who fail to meet their targets because each applicant’s story is different. A company that makes substantially more revenue and has more employees may face harsher consequences than a company with two employees and marginal profits.

New salary requirements

Nave said that SEED program’s policies have turned off some potential companies targeting Shawnee because of the program’s measuring tools. Nave said the requirement of companies to provide employee salary information, which can include some personal information, was turning some businesses away.

So, a proposed change is to shift the emphasis from salary growth to payroll growth due to concerns about privacy of salary information. Another change is to allow for median salary within an applicant’s industry category to be a criteria.

Council member Eric Jenkins voiced some concern with limiting the city's ability to monitor a company’s progress if the city is giving them money.

“This is public money,” Jenkins said. “I would really like to know that we have a way to hold their feet to the fire.”

Nave tempered Jenkins’ fears by saying that the city will maintain the ability to audit any company if their numbers do not seem to meet requirements.

Property Tax Assistance Program

This program would be for smaller, entrepreneurial employers that are constructing a building but may not be eligible or interested in property tax abatement.

The program would only be available to “high growth “ industries. The city would provide a reimbursement to the approved companies over a four-year period. The city would reimburse a company 100 percent in the first year, 75 percent in the second year, 50 percent in the third year and 25 percent in the fourth year.

For example, if a company built a new $1.75 million, 10,000-square-foot building in Shawnee with a $650,000 payroll, it normally have to pay $63,000 in new annual taxes for the city. Through the property tax assistance program, the company would benefit by having $173,250 of those taxes reimbursed to them over four years.

Leasing Tax Assistance Program

Nave said that the Leasing Assistance Program was specifically design to meet the needs for entrepreneurs looking for office space in Shawnee.

The program would be a reimbursement for an annual lease payment for the first three years of a new business. It would be available to companies with under 10 employees.

The reimbursement structure would be 20 percent for companies with two employees, 25 percent for companies with three to five employees and 30 percent for companies with six to 10 employees.

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