Small business owners looking to move out of a garage or spare room will get some help if they decide to locate in Shawnee.
The city on Monday approved an incentive program that will help startup businesses with lease or property tax payments for moving into town. The new program will give small employers in designated “high growth” industries a hand up at the earliest stage of their existence in hopes that they will eventually grow and attract even more business, said City Councilman Brandon Kenig, who first proposed the program.
The council added the assistance to its existing Shawnee Entrepreneurial and Economic Development program, which originated as a small loan program in 2012.
The program offers to reimburse companies for all or part of the expenses of an office in two ways. If a company buys or builds an office, it can get part of the property tax money back for three or four years. The reimbursement would be 100 percent of taxes paid the first year, 75 percent the second year and 50 percent the third year, with one more year at 25 percent possible under a variety of circumstances.
A company leasing space could get a reimbursement on lease payments for three years, with the amount based on the number of employees. Companies with two employees could get 20 percent of the lease payment, those with three to five employees would receive 25 percent and those with six to 10 could get 30 percent. The program is limited to companies with 10 or fewer employees.
The program is focused on business that is considered high growth, said Andrew Nave, executive director of the Shawnee Economic Development Council. Eligible businesses as defined by the Mid-America Regional Council include professional and financial services, insurance, information technology and warehousing.
The new program is necessary because small startups have different needs from the larger developers the cities have traditionally courted with special taxing districts, said Kenig, who is himself a startup owner.
For instance, startups with 10 people don’t typically need a tax increment financing district to build a big new space, he said. Scaling the assistance to partial lease or tax payments for just a few employees is more realistic for those businesses, he said.
Kenig proposed the program after talking with a number of entrepreneurs, he said.
“They’re operating very lean, their overheard is very low. They have no additional capital for anything else. For them, office rent can be prohibitive,” he said.
But small employers could help the city redevelop some vacant office space, he said.
“From my experience on the tech side, tech companies tend to relocate near other tech companies. A hub effect takes place,” he said. “And startups have the potential to become large regional employers.”
The new program seeks to offer the help in a smart way, by focusing on industry that is considered high growth for the Kansas City area, Nave said. There are no projections of how many might participate and no budgeted amount for its first year, he said, but it will be “within common sense.”
Money for the SEED program comes from the Shawnee economic development fund, which is fueled by the impact fee charged to the landfill.