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Minutes for HB2147 - Committee on Commerce

Short Title

Increasing bond maturity limitations in the Kansas rural housing incentive district act.

Minutes Content for Thu, Mar 14, 2019

Chairperson Lynn opened the hearing on HB 2147 and requested Revisor Charles Reimer to provide an overview of the bill.

Chairperson Lynn recognized Patrick Vogelsberg, Kansas Association of Realtors (KAR), who provided testimony in support of the bill, which would amend the Kansas Rural Housing Incentive District Act (RHID)  (Attachment 3)

The RHID was first enacted in 1998 and provides cities and counties a program to assist developers to build housing in rural communities by assisting in the financing of public improvements.  The testimony included an explanation of how an RHID is formed and specifications concerning the use of special obligation bonds for the RHIDs.  

HB 2147 would make an amendment to K.S.A. 12-5248(a)(2)(4) that would change the maximum maturity on bonds to finance projects from 15 years to 25 years.  The purpose of this change is to spread the financing of such projects over a greater period.  It is hoped an expanded payback period would make more projects financially viable in rural communities.  This change may help with the affordability of new housing in rural communities, while also freeing up existing inventory.  

Upon further review of the RHID Act, KAR says it is necessary to make similar amendments (changing 15 to 25 years) to K.S.A. 12-5245(a) and K.S.A. 12-5250(b)(2)(B).  KAR requested floor amendments be offered to make these changes.  The House adopted the requested floor amendments on a voice vote and passed HB 2147, as amended, 123-0 on February 27, 2019.

Senator Baumgarder asked if there was a limitation as to where this incentive could be applied.  Mr. Vogelsberg responded in a city of less than 60,000 and a county of less than 80,000 in population.  She asked if there was a limitation of how many RHID's could be applied per county and he responded there was no limitation to his knowledge.  There could be multiple districts per county. 

Senator Givens asked if there was a list of all the districts in the state.  Mr. Vogelsberg said he did not have one but listed several RHID's he was aware of.  He said the Department of Commerce approves the RHID's and should have a comprehensive list.

Senator Olson indicated his support for the RHID program in consideration of the state's declining population and the aging of rural housing.   

Senator Holland requested Legislative Research staff to provide him with an overview to what extent local districts have abated development of residential properties.  He also requested a listing of all of the RHID projects in the state, including the size of the total project and a description of the level of housing that were developed.  In addition, he was interested in the completion status of the projects and whether the bonds have ever defaulted. 

Senator Holland asked Mr. Vogelsberg questions relating to the financing of the projects, the payment of relocation assistance, and the level of the commitment the developer needs to show to the local authority.  

Senator Longbine relayed information about the success of the RHID project in Emporia.  

Senator Baumgardner asked if the 15-year program has been successful, why is there a need to extend the program to 25 years.  Mr. Vogelsberg responded there are properties which will not be explored for development because it would not be financially viable within the 15-year time period.  By extending to 25 years, it is hoped there would be more projects that developers would consider taking on the risk to build in that area of the state. 

Senator Baumgardner noted no testimony was received from the state or from the counties.  The only testimony at this hearing is being offered on behalf of realtors and developers. 

Chairperson Lynn recognized Jamie Sauder, private citizen, who provided testimony in support of the bill.  He said the RHID is a valuable incentive and reviewed information concerning how the incentive is being used in a new subdivision in Emporia.  Extending the timeframe in which a developer can recoup their investment through the collection of property taxes is important to the survival of rural communities.  Allowing more time will:

 - Enable developers to pursue projects with lower valued housing options that do not generate as much in property taxes but would be more affordable to more people.

 - Alleviate much of the risk that is associated with developing in non or slow growth areas.

 - Encourage infill projects which do not extend a community's infrastructure beyond its physical boundaries.

 - Encourage developers to extend into new markets and generate competition that would drive prices down and benefit the consumer.

 - Help end the cycle of waiting for demand for a certain type of housing to grow and then developing in reaction to that demand growth and help rural communities to get out in front of the current housing shortage.   

Extending the timeframe to 25 years is a first step for housing markets in rural communities to grow and thrive under current and future market conditions.  (Attachment 4)

Senator Alley asked if the project does not sell if the developer was responsible for the cost of the infrastructure.  Mr. Sauder responded the answer varies from development to development.

Chairperson Lynn closed the hearing on HB 2147