City begins Gates incentives

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February 10, 2015 - 12:00 AM

Iola City Council members began the process Monday of setting up incentives to accommodate a $17.5 million expansion project at Gates Corporation’s Iola plant.
Council members voted, 7-0, to direct City Administrator Carl Slaugh and other staffers to begin filing paperwork with the Kansas Department of Commerce regarding a potential 10-year property tax abatement for the expansion.
The paperwork details Iola’s financial health, Slaugh explained, and is used by KDC to decide whether to endorse the tax abatement.
If the state gives its OK, the abatement plan goes back to the City Council for final approval.
In addition, the city has agreed to provide about $300,000 worth of electrical upgrades to accommodate the 82,000-square-foot expansion.
The first step in that incentive is for the city to begin taking bids on transformers at Iola’s South Washington substation and a pair of transformers to serve the building. Council members voted, 7-0, to begin the process. Councilman Bob Shaughnessy was absent from Monday’s meeting, as was Mayor Joel Wicoff.
Bids are necessary for those transformers because they each will cost more than $20,000, Assistant City Administrator Corey Schinstock said.
The rest of the donated equipment comes under the $20,000 threshold and will be handled with Iola’s purchasing policy.
The $300,000 obligation from the city is lower than it otherwise would have been, Slaugh noted, because Iola employees are doing some of the work in-house.

COUNCILMAN Gene Myrick asked about a scenario in which the Department of Commerce does not approve of Iola’s tax abatement plan.
In that case, Iola would make available its own tax abatement made available to other property owners through the city’s neighborhood revitalization plan.
In that case, the additional property taxes would be refunded at nearly a 100-percent rate (5 percent would be kept by Allen County for administrative fees) over five years, before the abatement is tapered off over the next five years in 20-percent increments.
“Remember, it only affects the future, new building,” Councilman Steve French said. “It doesn’t affect what we’re collecting today” in property taxes from Gates.
Slaugh also noted the incentive is a tax abatement, not an exemption.
“There’s a fine distinction,” Slaugh said. “With a tax abatement, they pay the taxes, and then its paid back. A tax exemption is a different process” in which the taxes do not need to be paid to begin with.
Gates announced Feb. 2 it planned to build an 82,000-square-foot expansion. With equipment, the project is expected to cost about $17 million, including $4.6 million for the building itself, Slaugh said.
Construction is expected to begin this summer and will take 18 months to complete, including equipment installation.

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