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1. What are Rural Housing Incentive Districts?

• Available in Kansas since 1998
• Created for rural communities within rural counties (population thresholds by statute)
• Intended for counties or cities that have not seen residential growth despite best efforts of the governmental entity to encourage the same.
• Based on four criteria:1) There is a shortage of quality housing of various price ranges despite the best efforts of public and private housing developers; 2) The shortage of quality housing can be expected to persist and additional financial incentives are necessary in order to encourage private sector to construct or renovate housing; 3) The shortage is a substantial deterrent to the future economic growth and development of the City; and 4) The future economic wellbeing of the City depends on the Governing Body providing additional incentives for the construction or renovation of quality housing in the City.
• To form a RHID a housing study must be completed and approved by the Kansas Department of Commerce.
• An approved RHID is allowed by state statute to use property assessment/taxes to pay for the cost of public infrastructure and utilities—streets, sidewalks, water, sewer, natural gas, electric.

2. Why are RHIDs being considered?

• Lack of available housing.
• Shortage of buildable lots.
• Expense of extending public infrastructure to add buildable lots.
  • In recent years developers have asked if the City would consider incentivizing residential development by paying for a portion or all of the cost to extend public infrastructure and utilities to new subdivisions.  Historically the City had not paid for any portion of extending infrastructure, but Council could consider such an idea.  No developer has taken the effort to approach Council, but others continued to ask City staff the same question.  Staff looked at existing economic incentives approved by the City in 2017 for options to encourage residential development.  Residential development is the most likely type of development to occur in Louisburg in the near future.  Of the approved economic incentives, Tax Increment Financing (TIF) may be the most applicable.  A financial advising firm the City has used on other projects provided information about the use of TIF, but noted City might want to explore an alternative incentive allowed by the state—Rural Housing Incentive District (RHID).  To proceed with an RHID the City had to complete the housing assessment, receive state approval, and obtain approval from the required taxing entities.  The housing study, completed in March of 2019, was utilized by three separate developers to consider the type of housing they feel are marketable in Louisburg based on the needs identified, the cost of infrastructure and pace of development.

3. What does this proposed incentive cost current taxpayers?

• Nothing.
  • Since the increased assessment/tax within the development district is used to pay that cost down, no other existing property in Louisburg is expected to pay any portion of the work.  There is no cost to current taxpayers for new infrastructure or housing.

4. Are there other potential costs that will increase my property taxes?

• No.  At least not in a significant way.
  • There is no expectation that the City will need additional employees or the new homes will require additional costs beyond normal maintenance.  City streets are maintained annually and any new streets may change the annual maintenance of any given street from a 13.5-year cycle to a 14-year cycle.  In Louisburg, like all municipalities, sidewalks are typically the obligation of adjacent property owner to maintain and replace, but the City is making effort to maintain and add sidewalks for safety.

5. What about burden on, or capacity of, utility systems?

• No risk to Wastewater Treatment Plant (WWTP)
  • The City is building a new Wastewater Treatment Plant (WWTP).  That plant is designed to accommodate 0.7 MGD (700,000 gallons of wastewater per day).  Using a population equivalency of 100 gallons per capita (person), per day, that would accommodate a population of 7,000 at maximum capacity.
• No risk to the wastewater collection, water or natural gas systems
  • The burden on the wastewater collection system, the water system, and the natural gas system is not significant with the addition of residential properties.  For all these utilities a greater number of monthly rate payers will help spread the cost of the system across more people and could drive down the overall cost for each household.  For the new WWTP, the more customers paying into the system – without exceeding the current capacity – the faster the City receives funding to pay off the debt of the WWTP.  A quicker payoff of the debt could potentially decrease the rates for that utility.  In recent years, City officials have discussed the need to possibly see an increase in water rates.  Having more rate payers without a significant increase to operation costs should postpone the need for a water rate increase.  The natural gas system has not had any recent rate increases and none are expected if the new homes are built.
• New houses pay fair share for system impact and depreciation
  • Each housing unit will pay a water/sewer/natural gas connection fee of approximately $5,700.  Natural gas is not required, and there are various sewer connection fees.  With the first two development districts, at full buildout, the City will receive approximately $969,550 for new utility service connection fees (excluding optional natural gas).

6. The City will lose out on a lot of taxes over 15 years.

• What is the tradeoff?
  • By law the City was obligated to run a financial analysis of the proposed improvements, the estimated eligible costs, and the estimated increase in assessed valuation/taxes.  There is a known tradeoff for this incentive.  Each district and development would see a reallocation of the tax revenue.  The City would look to forego the collection of property taxes for a fixed number of years to capture those in the future years once the eligible project costs are paid for.  The City will still collect sales taxes for any purchases these new residents would make within the City.
• Is there more housing to be had outside of these districts?
  • The City of Louisburg is comprised of existing housing and a certain quantity of buildable lots.  Aside from those, there are approximately 1,100 acres of potentially developable land within the City limits.  Approximately 844 acres of that is identified for future residential development, including the districts under consideration.  The two districts have been platted for the proposed development for over a decade, and they collectively account for only 5.16% of the future residential land.
• Why are builders unable to extend infrastructure at their own cost?
  • With the minimal number of buildable lots (those that have existing infrastructure immediately available), the City may not otherwise see additional residential development if a developer is not willing to use the traditional method of paying for infrastructure and recouping the costs through lot or home sales, or by using special assessments.  Special assessments have been used by the City in the past to collect the cost of providing public infrastructure to subdivisions and other areas, but it has proven to be a less desirable approach.  With the past defaulting of developers for cost of new infrastructure, those failed developments were paid for by banks and eventually sold off at artificially low costs.  The RHID approach is arguably more stable from a cost/benefit standpoint of a developer.  The City stands to lose nothing currently available.  Even if the City is not collecting property tax revenue on homes in the RHIDs for 15 years, there will be tax revenue from those homes far into the future.  As unimproved land the City receives very little tax revenue on those properties.  If these properties were developed now, City officials will know there will always be tax revenue.  If no development occurs then the City is in a wait-and-see approach as to if or when the properties are built upon.  Aside from the recent construction at Rockville Place, that built out all available lots in that subdivision, there has been little significant development inside the city limits since 2007.

7. Why is the City considering this incentive now?

• In much the same way this city competes with other cities for businesses, Louisburg also competes for people.  A common statement has been in regard to the character of this community, and a desire not to lose that character.  That is a desire at all levels.  The reality is that Louisburg is still competing for people.  Any other city similarly situated that allows for building and sale of more affordable houses, all things being equal, will stand to attract more population versus this city.  A lack of growth will always run the risk of overall stagnation, and eventual decline of population.  A declining population will no doubt present additional costs to the remaining population/tax base.

8. How will the City benefit from growth?

• A continued growth of a wonderful community.
• Additional customers to local businesses.
• Additional volunteers for local organizations.
• Places for those that work in Louisburg to live and grow.
• Places for those that want to live in Louisburg to lay down roots.
• Growth may eventually lead to additional workforce, additional businesses, and an overall better community.