The Reno County, Kan., Commission indicated Tuesday it would explore possible changes to its policy for issuing industrial revenue bonds.
The board briefly discussed a draft IRB policy on Tuesday but tabled the item for further discussion after commissioners raised several questions.
County Counselor Joe O'Sullivan advised the commission that the county has issued IRBs only twice in the past 30 years but that it was important to have a written policy so companies seeking IRBs know of any requirements and there is understanding by the commission about what it means.
The policy presented Tuesday put in writing a previous commission requirement that a business create at least 10 new jobs, with an addition to its payroll of at least $250,000, to qualify for consideration.
IRBs, O'Sullivan explained, are a funding mechanism for commercial or industrial development accomplished by selling bonds to investors rather than traditional borrowing from a bank. The bonds are exempt from state and federal taxes and the development funded by them is, by law, exempt from property taxes for 10 years.
The bonds are only available through a pass-through entity like the county, but the county is not required to issue them, O'Sullivan said. So the county may require, as part of their issuance, that the company seeking the bonds pay in-lieu-of-taxes due to the property tax exemption.
The county is not required to have a policy that sets out specific circumstances or criteria for considering bonds, but by adopting one, it lets the company know in advance, O'Sullivan said.
"I remember one occasion, the first time bonds were used, the staff made a recommendation to the County Commission and the application objected," O'Sullivan said. "He said 'I'll take this project to Florida, if that's what you want,' and it was never approved. We set out this policy to eliminate that surprise."
Commission Chairman Ron Hirst suggested the 10-job requirement be lower, while Commissioner Bob Bush questioned whether the bonding could be used for improvements or expansion that retained jobs, rather than add new ones.
"In the era we're in now with automation and so forth, I wonder if that's maybe a little too high," Hirst said. "Doesn't that hold our hands from issuing for someone asking whose employing only seven new people? Also, I assume it applies to new or an expansion of a business. Does that tie our hands from not issuing if they're not employing 10 new, but maybe spending $2 million on their facility?"
"We don't want to give tax breaks to companies that aren't adding at least 10 new people," Commissioner Dan Deming said.
"I expanded my business with a brand new warehouse," Bush said. "I only added one of two jobs and I didn't get any break. Why wouldn't someone like that, building a new facility but maybe not expanding a workforce, qualify? They're expanding the tax base."
"They're not expanding the tax base if they're not required to pay taxes on it," Deming said, referring to the 10-year tax exemption.
"At the end of the day, down the road, it will mean new taxes," Bush said.
"Forty-million times zero is zero," Hirst chimed in. "But $40 million 10 years from now is money."
"We have enough tax problems now we shouldn't be giving business breaks unless they employ a reasonable amount of people," Deming countered.
"I disagree with 10," Bush said. "It's a low number, I agree, but take it out and let the commission decide on a case-by-case basis, whether it's new or worthy of IRBs. Put it in the commission's hands, as opposed to a policy dictating what we do."
Bush suggested taking the word "new" out of the proposed policy, allowing consideration for new or existing business expansion, and allowing an expansion resulting in creation or retention of at least 10 jobs also to qualify.
He did, however, like tying the jobs to a minimum payroll.
O'Sullivan suggested each commissioner meeting with County Administrator Gary Meagher individually to express what they want in the policy and then bring it back in a couple of weeks.
