Brief⁽¹⁾

H.B. 2590 would establish the Kansas Rural Housing Incentive District Act. The purpose of this Act would be to encourage the development and renovation of housing in rural Kansas cities and counties through the use of tax increment financing (TIF) to finance certain types of public improvement projects.

The bill includes the following provisions:

• Procedure for establishment of rural housing incentive districts. The bill would authorize a city or county to designate rural housing incentive districts upon completion of a housing needs analysis and adoption of a resolution. This resolution must contain a legal description of the proposed district, a map depicting parcels of real estate in the proposed district, and a statement of specified findings attesting to a shortage of quality housing. As a precondition for establishment of the district, the Secretary of Commerce and Housing must agree with those findings. If the Secretary fails to agree, he must provide in writing the reasons for disagreement. Other preconditions for establishment of a rural housing incentive district include: adoption by the city or county of a plan for the development or redevelopment of housing and public facilities in the proposed district and adoption of a resolution providing notice of public hearing to consider adoption of the plan. Upon conclusion of the public hearing, the city or county may adopt the plan for the district and may establish the district by city ordinance or county resolution. The city, county, or school district may exercise veto power over any ordinance or resolution establishing the district.
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• Eligible cities and counties. The bill specifies population thresholds for cities and counties that are eligible to designate rural housing incentive districts. Cities must have a population of less than 40,000 and be incorporated in a county of less than 60,000. Counties must have a population of less than 25,000 and designate districts only in unincorporated areas.
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• Disposition of real property. The bill would authorize a city or county which has established a rural housing incentive district to purchase or otherwise acquire real property. However, the city or county may not exercise eminent domain. Relocation assistance may be provided, if necessary. Any property acquired by a city or county may be sold or leased to a developer in accordance with the rural housing incentive district plan.
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• Bonds. The bill would authorize a city or county to issue special obligation bonds, but no general obligation bonds, to finance implementation of the rural housing incentive district plan. These bonds may be repaid from several specified sources, including property tax increments. If property tax increments are used, the mechanism for collecting taxes on the property within the rural housing incentive district would be the same as in existing TIF law. The maximum maturity of such bonds may not exceed 15 years, in contrast to 20 years permitted in existing TIF law.
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• Projects eligible for funding. Bond proceeds may be used to finance the following projects identified in the rural housing incentive district plan: acquisition of property; payment of relocation assistance; site preparation; and public infrastructure specified in the bill. Bond proceeds may not be used for construction of buildings.
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Background

H.B. 2590 was recommended by the Joint Committee on Economic Development as a means of authorizing TIF to encourage affordable housing development in rural areas of Kansas. Chris McKenzie, the Executive Director of the League of Kansas Municipalities, spoke in support of the bill which was drafted by the League during the 1997 interim at the request of the Joint Committee on Economic Development. Mr. McKenzie outlined several notable differences between the provisions of the bill and existing TIF law, including: establishing a streamlined process for creation of rural housing incentive districts compared to the procedure for establishing TIF districts in existing law; preconditioning creation of rural housing incentive districts on attestation by the Secretary of Commerce and Housing that there is a viable local housing need (there is no such requirement in existing TIF law); limiting use of TIF to "rural" cities and counties with specified populations (no such population limitation currently exists in TIF law); not requiring the planning commission to certify that the TIF plan is compatible with the city comprehensive plan, as is required in existing TIF law (the bill would require a copy of the resolution providing notice of public hearing to be sent to the city or county planning commission); authorizing the use of special obligation bonds, but not general obligation bonds, for TIF projects (in existing TIF law, general obligation bonds may be used); authorizing TIF financing for a more limited array of public improvements than may be financed in existing TIF law; imposing a limit of 15 years for bonds to finance rural housing incentive projects compared to 20 years to finance projects authorized in existing TIF law; and adding certain assurances to the city's or county's project plans (not required for inclusion in existing TIF law).

Karen France, Director of Governmental Affairs, Kansas Association of Realtors, testified in support of the bill. Ms. France distributed written testimony in support of the bill from Butch Hardman, Hardman Real Estate (Parsons) and Delores Dalke, a realtor and Mayor of Hillsboro. Art Brown, spokesperson for Mid-America Lumbermens Association, also testified in support of the bill.

The House Committee amended the bill to: require the Secretary of Commerce and Housing to provide written justification for not agreeing with findings attesting to a shortage of quality housing; and remove language that would have authorized the use of school mill levy proceeds to repay bonds issued to fund projects in rural housing incentive districts. The Committee also made a technical amendment.

The Division of Budget's fiscal note indicates that the introduced version of the bill would have no fiscal impact upon state government. The Kansas Association of Counties and the League of Kansas Municipalities reported that any fiscal impact related to the bill would occur at the local level.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext-bill.html.