Cold Storage Business Seeking Tax Abatement to Build at New Century AirCenter

Staff AdminSWJCEDC Newsroom

Click here to read the full Kansas City Star  article by Roxie Hammill

Lineage Logistics, a large national cold storage business, may locate at Johnson County’s New Century AirCenter, pending discussions of a 50 percent, 10-year tax abatement.

County commissioners unanimously voted Thursday to declare the county’s intent to issue industrial revenue bonds and grant the tax abatement. The vote is a first step in the process. Final commitment depends on the details of the land lease agreement, which will be worked out in coming months.

If the deal goes through, Lineage could become the largest facility at the air center. The proposal the airport is working with calls for a 450,000-square-foot building on 34 acres. By comparison, Kimberly-Clark, the largest facility now at the airport, is 446,000 square feet.

Lineage would employ 175 people to begin, but may expand to 215 in 10 years, said Aaron Otto, executive director of the airport commission. The average pay at the beginning would be $16.48 per hour.

The latest plan is only the second time in 20 years the county has considered a tax incentive at the airport. A similar abatement was granted in 2007 for Kimberly-Clark.

The tax abatement for Lineage would be on 50 percent of the facility’s appraised value. Because the building hasn’t been erected and no assessment has been made, it’s difficult to come up with precise figures on what that would mean to the county, Otto said.

But a building appraised at $37 million would bring in $138,000 a year to the county and library and parks systems, even with the tax break, he said. After the abatement expires, that amount would double. Because the land is undeveloped, it currently brings in zero property tax.

The facility also would become one of the largest lease deals at the airport, with a potential for $200,000 a year in payments, Otto said, plus a potential for payments to use the airport rail line.

The industrial revenue bonds would be issued on a principal amount of $81 million. Typically, industrial revenue bonds are a way of having a government entity sponsor the financing to trigger a lower interest rate. However the private business is responsible for paying off the proceeds.

Lineage Logistics is expected to invest $51 million in the building and $30 million in machinery and equipment. The abatement will apply only to the improvements. Once a lease agreement is in place, the land itself will be fully taxable.

Commissioner Michael Ashcraft questioned whether the county could defend giving a tax incentive for an area that is already attractive to developers because of the nearness of the new intermodal freight facility.

But Otto said development at the county’s airports has been problematic. The county’s business model of only leasing but not selling airport property is often a deal killer for larger corporations that want to control the land they build on, he said. The airports are supposed to be self-supporting, so they need to keep the land as a source of ongoing revenue.

Also, quite a bit of airport land is classified as “airport operations,” meaning it cannot be developed, he told commissioners. Airport officials and the Federal Aviation Administration are working on an agreement to remove that classification this year.

Once that happens, hundreds of acres could come online, Otto said. “That will unlock a lot of parcels in the future.”