Lawrence commission backs incentives for Reuter Building redevelopment, waives one affordable-housing requirement

The Lawrence City Commission on Sept. 9 voted 4-0 to approve a resolution of intent to issue industrial revenue bonds and to advance related neighborhood revitalization area and community improvement district ordinances to support redevelopment of the historic Reuter Building at 612 New Hampshire.

The redevelopment application from 6 12 New Hampshire LLC seeks three public tools: an IRB sales-tax exemption for construction materials, a neighborhood revitalization rebate of incremental property tax (requested at 95% over 15 years), and a community improvement district (CID) imposing an additional 2% sales tax for up to 22 years. The commission also voted 4-0 to waive a city affordable-housing requirement that would otherwise apply if the project produced residential units.

Why it matters: The Reuter Building is a large, long-vacant historic structure in downtown Lawrence that developers propose converting for mixed commercial and residential use. Developer representatives and the city’s financial adviser told the commission that the rehabilitation is expensive, that state and federal historic tax credits are in play, and that the project’s return on investment is below market without public participation.

Assistant City Manager Brandon McGuire introduced the item and said the property had been vacant and deteriorating for years and now has a local owner prepared to undertake major rehabilitation. Pat Watkins, representing the applicant, described the buildings’ history and the preservation-oriented scope of work; he said the project team has assembled preservation architects and a general contractor and is pursuing state and federal historic tax credits. Applicant Matt Gilhausen told commissioners he and his financing partners had pursued HUD financing but ultimately secured a conventional structure with Capital Federal.

Tom Kaliko of Baker Tilly Municipal Advisors presented the city’s financial review. He said the package of incentives had three elements and that the developer’s application assumed a program of roughly 10 residential units plus several commercial spaces; the development program in the analysis produced a pro-forma project cost of about $17 million. Using the applicant’s assumptions, Baker Tilly estimated a negative internal rate of return without incentives and a 1.34% IRR with the requested incentives — well below investor expectations in the PwC investor survey. Kaliko estimated the neighborhood revitalization rebate would yield about $1,380,000 in capacity for the developer and the CID roughly $1,250,000 under the analyzed program (the CID application documents included flexibility up to $3,000,000).

Public comment split. Supporters said rehabilitation will preserve a downtown landmark and bring new investment; critics urged the commission not to waive the city’s affordable-housing condition and questioned whether public subsidy was the best use of scarce funds. David Baston of 66047 said the developer’s request to waive the housing requirement would undermine the city’s affordable-housing goals; other speakers, including a longtime downtown business owner, urged approval to preserve the building.

Votes and next steps: The commission adopted Resolution No. 7631 (intent to issue IRBs) by motion of Sellers, seconded by Finkeldy (vote 4-0); voted 4-0 to waive the city economic development policy’s affordable-housing requirement for this application; opened and closed the required public hearings on the neighborhood revitalization area and the CID and approved first-reading ordinances establishing the NRA (Ord. No. 10161) and the CID (Ord. No. 10162). If the commission proceeds, the NRA process requires voluntary participation from the county and school district and will return for second reading after those reviews.

The commission and staff said the project will return for future approvals (second readings, tax agreements and the development agreement) if the intergovernmental participation steps move forward. Baker Tilly and the applicant reiterated the developer’s position that some form of public participation is required to make the rehabilitation financially feasible.