Bad Company

In 1991, Mike Rundle held out on the handout.

That was when Davol Inc. announced plans to expand its plant in Lawrence, where approximately 120 workers spent their days slapping together medical devices used to treat hernias and assist in “wound management.” Davol promised the Lawrence City Commission that it would put an additional 120 people to work at the sprawling complex near 22nd Street and Haskell Avenue. But it wanted something in return. Davol asked the city to slash the company’s property taxes by 50 percent for ten years. After the ten-year abatement expired, Davol would presumably start pouring tax money into the city budget.

City leaders jumped at the deal. “This is one of the best examples of tax abatement I’ve seen in a while,” City Commissioner Bob Schumm told The Lawrence Journal World in October 1991.

Added then-Mayor Shirley Martin-Smith, “I think Lawrence came out a winner.”

Rundle wasn’t so optimistic. “I’m sure the wages were somewhat lackluster,” he tells the Pitch. “And I think there were a lot of part-time workers.”

Rundle doesn’t know why he lodged the only vote against Davol. But it wasn’t a surprise. As a Lawrence city commissioner for eight of the past sixteen years, Rundle has voted against a number of tax breaks for companies and developers — and he’s earned a reputation for being anti-business.

But these days it’s hard to fault Rundle for his 1991 vote against Davol. Only forty workers still get their paychecks from the Lawrence plant. By the end of May, the company will have closed that facility altogether. Company officials announced the departure last August — less than a year after its ten-year tax abatement expired.

Davol’s pullout has inspired bad feelings on all sides of Lawrence’s political spectrum. But company spokeswoman Holly Glass says Davol fulfilled its obligation to Lawrence. “That term for tax abatements is ten years, and we went through the ten years,” she says. “So we were there, and are there, the required number of years.”

Rundle says the episode proves city commissioners should be more judicious when handing out tax breaks. And he says the city’s new abatement policy, drafted in 2001 after several special meetings on the subject, doesn’t go far enough to protect the city. Right now, Lawrence decides whether to grant tax breaks based on projections for how a company might perform over fifteen years — ten years with a tax abatement, followed by five years without any tax breaks.

“We’re really gambling that they’re going to stick through the fifteen-year period,” Rundle says. “The fear is that they’ll get the tax abatement, and then they’ll leave. [Davol], of course, proves that fear to be valid.”

That fear is part of the reason why tax abatement has become a major issue in this spring’s City Commission election. Stoking the fire is the Kaw Valley Living Wage Alliance. The group wants Lawrence to pass a law requiring that companies benefiting from tax breaks pay their workers a “living wage,” which the alliance defines as a salary no lower than 130 percent of the federal poverty line for a family of three. Currently, that translates to $9.53 an hour with health benefits, or about $19,800 a year.

Alliance spokesperson Mark Horowitz notes that over the last ten years, Davol saved $890,000 in taxes while its parent company, New Jersey-based C.R. Bard Inc., recorded annual sales exceeding $1 billion. Davol will now close three U.S. plants, including the one in Lawrence, while expanding its operations in Reynosa, Mexico. One of the other doomed plants is in Mentor, Ohio, where a tax break worth $2 million expired at the end of 2002.

“If these companies aren’t even going to stay, we should definitely hold them to the responsibility of paying a living wage,” Horowitz says.

Voters seem to agree. In the February 25 primary, candidates endorsed by the Progressive Lawrence Campaign (which also supports a living-wage law) captured the top three spots. If those same candidates — Rundle, Dennis “Boog” Highberger and David Schauner — finish first, second and third in the April 1 general election, Lawrence’s lawmaking body will be stacked in favor of a living-wage law.

“It’s very reasonable,” Rundle says. “It’s been done in over 100 cities. All the downsides claimed by the other side have not been supported by data. And I think there’s some good research out there that shows it helps reduce poverty.”

Lee Gerhard, a semiretired KU geology professor, is one of three candidates challenging Rundle and the Progressive Lawrence slate. Gerhard, Lynn Goodell and Greg D. Vilbiss have been endorsed by Truth for a Better Lawrence, a political group supportive of the city’s current tax-abatement policy. Gerhard agrees that the City Commission should adopt a “clawback” provision that would require companies to pay something back if they leave. But he says Lawrence doesn’t need a living-wage law, because the city usually gives tax breaks to companies that pay well anyway.

“As a policy, none of us, I don’t think any of the six candidates, object to bringing jobs into Lawrence that are high-paying,” Gerhard says. “That’s something we’re all working for.”

Gerhard also warns that a living-wage law could be damaging. “What I’m trying to do is find ways of bringing high-tech industry in, how to develop industry out of our university’s research labs, how to bring in that kind of private sector,” he says. “Anything that interferes with that, that sends a subliminal or quiet message that we’re not business-friendly — and I think the living-wage [ordinance] does that — those are things I don’t want to do.”

Rundle, a Community Mercantile manager seeking his third commission term, disagrees. “I don’t buy this caricature of the frail businesses who are going to be scared away,” he says. “I think we want to welcome new businesses and give them assistance when they need it, whether it’s training or infrastructure or tax incentives, but it’s got to be through a straightforward, mature negotiation that puts the public interest and the business interest on the same field.”

Critics point out that Rundle has rarely voted in favor of tax breaks, even for companies that pay well. Still, Gerhard agrees with Rundle on one point about tax abatements: Davol shouldn’t have been trusted. He says city officials didn’t know the company had earned a reputation for fleeing towns after its tax breaks expired. “Clearly, we as a city did not do our research well, or we would have known that was their corporate history,” he says.