Garmin International Inc. is asking for $200 million in industrial revenue bonds and a 10-year partial tax abatement to get an expansion at its Olathe campus moving in the right direction.
The Olathe City Council on Tuesday held a public hearing on a request by the global maker of electronic navigation devices for an agreement that would include the economic incentives.
No one spoke at the hearing, and council members didn’t discuss the agreement, which they are scheduled to vote on at their Feb. 7 meeting.
According to city documents, Olathe-based Garmin has requested $102 million in industrial revenue bonds for the expansion project’s first phase, which involves building a 750,000-square-foot manufacturing and distribution facility on 29 acres near 151st Street and Mahaffie Circle.
A second phase, requiring about $98 million in bonds, would be requested later and involve retrofitting the company’s existing manufacturing and warehouse facility for research and development office space.
The company said the project will create 150 new jobs with an average salary of $66,653 in the first year.
Industrial revenue bonds are issued by local governments to cover development costs and are repaid by the developer, not taxpayers. Project owners use the bonds because they typically receive better interest rates and help the developer avoid paying sales tax on construction materials.
In its application, Garmin said it plans to spend $164.5 million on buildings, $26.8 million for machinery and equipment and $8.7 million on design costs on the entire project.
The company is also seeking to slash its property tax bills on the project by 75 percent over 10 years.
Just considering the 750,000-square-foot building, city officials estimated Garmin would avoid paying almost $20 million to the city, Johnson County, the Olathe School District and other taxing jurisdictions during the 10-year life of the abatement. The city of Olathe’s share of the abatement would be almost $4 million.
The analysis noted, however, that the city and other taxing jurisdictions will still see a significant gain in tax receipts, considering that the vacant site now generates just $1,850 in property taxes annually for all jurisdictions.
During the 10 years, staff estimated that the taxing jurisdictions would receive a total of $659,438 a year, or $6.6 million for the full decade, on the new manufacturing and distribution facility. Olathe’s share would be $129,163 a year or $1.3 million over 10 years.
Once the abatement expires, the city said, the new facility would generate $516,653 a year in property tax revenue.
Dianna Wright, the city’s superintendent of resource management, said it’s unclear when Garmin would specifically ask the city to sell the revenue bonds. But she said developers typically wait toward the end of the project to get reimbursed.
“The council has discretion when they look at a proposal in an application,” Wright said. “They look at the total investment that the applicant is making, they look at the number of jobs which it creates and then they also will look at the salaries that are paid for those positions, so it’s really kind of all-encompassing when the council looks at a project.”
Olathe in September approved a similar agreement with Garmin, sponsoring $30 million in industrial revenue bonds for a parking garage.
In other business:
▪ The council unanimously approved rezoning 10 acres at 117th Street and Lone Elm Road for the Lone Elm Senior Community, a 173-unit mix of apartments and bungalows.
The council had sent the project back to the city’s Planning Commission in November because of a number of concerns, including the four-story apartment buildings. The developers agreed to reduce the height to three stories and make other architectural design changes to keep the buildings from looking so uniform.
▪ The council also considered a consultant’s report on potentially changing how the city charges property owners for collecting and treating storm water. Currently, residential and commercial property owners are charged a fee based on the square footage of their lot.
David Hyder, with consulting firm Burton & Associates, said the vast majority of governments charge based on the amount of impervious area, such as buildings or pavement, on a piece of property.
He recommended keeping residential storm water fees the same but increasing the fees for commercial properties over 10 years to better reflect the greater generation of storm water runoff from those lots. He also suggested charging everyone a service fee to cover the city’s costs to provide customer service.
While council members said they generally agreed with Hyder’s recommendation to switch to a fee structure based on impervious area, several raised concerns with increasing fees for commercial properties, saying 10 years was too fast and that many property owners deal with runoff by building retention ponds. Some also opposed not increasing residential rates as well.
In the end, they asked city staff and Hyder to come back at a future meeting with more options.
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