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Agenda Item No.

III-2

City of Wichita
City Council Meeting
February 9, 2010

TO: Mayor and City Council

SUBJECT: Extension of EDX Tax Exemption (Sharpline Converting, Inc.) (District IV)

INITIATED BY: Office of Urban Development

AGENDA: New Business

Recommendation: Approve the extension.

Background: On March 5, 2005 City Council approved a tax abatement through the Economic
Development Exemption program (EDX) for Sharpline Converting. Sharpline Converting has a very
large and diversified product mix. The products range from automotive aftermarket to custom graphics
for Original Equipment Manufacturers (OEM) customers. The custom graphics are the largest part of
Sharpline’s business. These products include graphics for recreational vehicles, boats, aircrafts, and
sporting goods. The automotive aftermarket is also a large part of the Company’s business. These
products include both graphics and roll striping and these are done for over 1,200 customers. The
Company has also ventured into three dimensional graphics and have recently filed a patent on a
revolutionary 3D Badging process that will give Sharpline a competitive edge in the 3D market.

Sharpline Converting committed to increasing employment by 56 new jobs over five years, at an average
annual salary of $30,700. The expansion project includes construction of a 30,000 s.f. addition and
purchasing new equipment. Sharpline is requesting approval of the second five-year period of abatement.

Analysis: The majority of the Sharpline sales are exported outside of the State of Kansas. Sharpline
increased their employment above the commitment by 2007; however, market changes and the economic
downturn have brought the employment down below the commitment.

A measure of Sharpline’s initial five-year project commitments and outcomes are as follows:

2003 Commitment January 25, 2010 Status


Construct and equip a 30,000 s.f. expansion Expansion is complete
Create 56 new jobs in five years Created all jobs, currently 100 jobs below the
commitment

Staff conducted a site visit in October 2009. Sharpline has purchased a small company in Florida that
produces similar products. The company brought the book of work and some employees to Wichita.
They company is also experiencing some economic recovery, however, not at the level that was
experienced in 2007. The company anticipates reaching the job creation goal again prior to the end of the
ten year period.

Staff has developed some thresholds to evaluate extending property tax abatements for companies that are
not in compliance. The measures include the peak job creation number, capital investment made as
committed, and meeting the established return on investment minimum of 1.3 to one. The analysis also
takes into account the WSU annual Current Conditions Index as a measure of how the current economic
conditions impact a company’s ability to perform. Sharpline has met two of the three conditions.

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Extension of Tax Exemption, Sharpline Converting
February 9, 2010
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Financial Considerations:

New benefit-to-cost ratios are as follow:

City of Wichita .12 to one


General Fund .12 to one
Debt Service -.53 to one
Sedgwick County .38 to one
USD 259 -25.30 to one
State of Kansas 1.00 to one

Goal Impact: Economic Vitality and Affordable Living. Granting an ad valorem property tax exemption
will encourage the business to create new job opportunities and stimulate economic growth for the City of
Wichita and Sedgwick County.

Legal Considerations: In each exemption ordinance, the City Council reserves the right to terminate the
exemption at the end of the first five-year period. Further, if a company is not in compliance with local
conditions for abatement as of March 1 of any year during the term of abatement, the City has the option
to effectively terminate the abatement by declining to certify to the County and State that the company is
in compliance with local conditions.

Recommendations/Actions: It is recommended that the City Council extend the tax exemption on
Sharpline Converting for a one-year period and review further extension at the end of year 2010.

Attachments: None

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