Brief ⁽¹⁾

Sub. for HB 2971 would create the Kansas Housing Development Corporation (KHDC) which would function as a quasi-governmental housing finance agency. In addition, the KHDC would administer the housing programs currently administered by the Housing Division of the Department of Commerce and Housing (KDOCH). The KHDC would assume all the duties and functions of the Housing Division.

Purpose of the Bill

The stated purpose of the act is to ensure that as businesses locate in Kansas and as existing businesses continue to expand, to provide a sufficient supply of adequate, safe, and sanitary residential housing in all geographic locations within the state and to assist Kansas families of low, very low, and moderate income in obtaining such housing.

Corporate Structure

KHDC would have a seven-member Board of Directors which would be appointed by the Governor with the approval of the Senate. The Board would conduct a national search to select a president. The president, who would not be a Board member, would manage the operations of the corporation.

Corporate Powers

The corporation's responsibilities would include administering the state housing program in accordance with the federal Department of Housing and Urban Development (HUD) and assisting in the development of affordable and accessible housing in Kansas.

The bill sets out a variety of powers and responsibilities to be conferred on KHDC relating to the administration of the corporation and the corporation's housing finance functions. Included in these enumerated powers are the powers currently given to KDOCH relative to that agency's housing functions as well as the power to:

• �Make, amend, and repeal bylaws, rules and regulations for the management of its affairs.



• �Sue and be sued.



• �Make contracts and execute all instruments necessary or convenient for carrying out its business.



• �Acquire, own, hold, dispose of, and encumber real or personal property of any nature, both tangible and intangible.



• �Enter into agreements or other transactions with any federal, state, county, or municipal agency and with any individual, corporation, enterprise, association, or any other entity involving housing development.



• �Acquire real property or an interest in real property, by purchase or foreclosure, where such acquisition is necessary or appropriate to protect or secure any investment or loan in which the corporation has an interest.



• �Sell, transfer, and convey real property or an interest in real property to a buyer, or to lease the property to a tenant in the event that sale, transfer, or conveyance cannot be done with reasonable promptness or at a reasonable price.



• �Invest certain funds appropriated by the state in investments that are lawful for fiduciaries in this state, and invest funds received from gifts, grants, donations, and other operations of the corporation in investments which would be lawful for a private corporation having purposes similar to the corporation.



• �Borrow money to issue negotiable bonds or notes as evidence of any such borrowing and to secure such bonds or notes by the pledge of revenues, mortgages, or notes of others.



• �Appoint officers, consultants, agents, and advisors, and prescribe their duties and compensation.



• �Appear in its own behalf before boards, commissions, departments or other agencies of municipal, county, state, or federal government.



• �Procure insurance as may be necessary to protect it against loss or liability.



• �Accept any and all donations, grants, bequests, and devises; accept moneys which are appropriated by the Legislature for effectuating its corporate purposes;.



• �Trade, buy, or sell qualified securities.



• �Make or participate in the making of uninsured or federally insured construction loans to approved mortgagors of residential housing for occupancy by persons and families of low, very low, or moderate income or occupancy by persons and families of any income level in distressed communities as defined by the act; however, first priority mortgages for single-family dwellings would not be permitted.



• �Purchase or participate in the purchase of uninsured, partially insured, or fully insured loans; however, first priority mortgages for single-family dwellings would not be permitted.



• �Adopt bylaws for the regulation of its affairs and the conduct of its business and define the terms "low income, "very low income," and "moderate income" to conform to federal guidelines.



• �Make and execute contracts, releases, compromises, and other instruments necessary or convenient for the exercise of its powers, or to carry out its purposes.



• �Collect reasonable fees and charges in connection with servicing its loans, notes, bonds, obligations, commitments, and other evidences of indebtedness, and in connection with providing technical, consultative and project assistant services. These fees and charges would be limited to the amounts required to pay the costs of the corporation, including operating and administrative expenses, and reasonable allowances for losses which may be incurred.



• �Consent, when considered necessary or desirable to the modification of financial terms governing loans or contracts to which the corporation is a party.



• �Issue renewal notes, to issue bonds to pay notes, and whenever it deems refunding expedient, to refund any bonds by the issuance of new bonds, whether the bonds to be refunded have or have not matured.



• �Apply the proceeds from the sale of renewal notes or refunding bonds to the purchase, redemption, or payment of the notes or bonds to be refunded.



• �Provide technical services to assist in the planning, processing, or rehabilitation of residential housing for occupancy by qualified persons and families.



• �Provide consultative project assistance services for residential housing and land development for such housing to be occupied by persons and families of low and moderate income or persons and families of any income level in distressed communities. This assistance would include management, training, and social services.



• �Promote research and development in scientific methods of constructing low cost residential housing of high durability.



• �Make, purchase, or participate in the purchase of uninsured, partially insured, or fully insured loans and home improvement loans to finance the weatherization of single and multifamily dwellings, and issue its negotiable bonds or notes for such purpose.



• �Create a housing equity fund for the purpose of purchasing low-income housing tax credits.



• �Exercise any other powers necessary for the operation and functioning of the corporation within the purposes authorized in this act.

Private Activity Bond Allocation Authority

The Corporation would be authorized to issue qualified private activity bonds to the extent authorized in other sections of the bill and to the extent that the corporation is allocated a portion of the state ceiling ($150 million) to that end.

Corporate Prohibitions

The bill also sets out a variety of activities in which the corporation would be prohibited from engaging. The corporation would not be authorized to:

• �Originate single family home loans, except as specifically provided in this act.



• �Purchase or participate in the purchase of single-family home loans or make, purchase, or participate in the purchase of home-improvement loans when the mortgagor or borrower does not meet the definition of low-income, very-low income, or moderate income.



• �Originate multifamily first mortgages, except when no other lender will provide financing as evidenced by the submission of letters of denial by two financial institutions.



• �Participate in lending activities for nonresidential purposes.



• �Own real property for long periods of time; such property that has been acquired for the purpose of debt restructuring or otherwise providing financial stability should be returned to private ownership within 18 months or as quickly thereafter as possible.



• �Participate in any housing related function in a community which has not conducted a housing need study.



• �Participate in housing construction as a general contractor or subcontractor.



• �Participate in any housing function which can be handled economically or efficiently by private industry.

Corporate Exemptions

Under the bill, the corporation would be exempt from all franchise, corporate business, and income taxes levied by the state. The corporation would also be exempt from purchasing laws governing state agencies.

Background

The topic of housing as it relates to economic development was studied by the Joint Committee on Economic Development during the 1999 Interim. Upon the request of the Department of Commerce and Housing, the interim Committee agreed to postpone any recommendations until the Governor's Commission on Housing completed their recommendations and report to the Governor in December 1999. HB 2971 is patterned after one of the recommendations in the report by that Commission.

The House Committee held hearings on the bill at which time conferees included Representative Jerry Aday, the primary sponsor of the bill; and representatives of the Governor's Commission on Housing; the Mid-America Lumberman's Association; the Housing Assistance Council; the Bankers Mortgage and Investment Group; the Kansas Bankers Association; the Sedgewick County Division of Community Development; the Heartland Community Bankers Association; the Topeka Independent Living Resource Center; KDOCH; and Kansas Advocacy and Protective Services, Inc.

After adopting several amendments, the House Committee passed a substitute bill. Some of the substantive amendments made by the Committee include:

• �Change the criteria for defining a distressed community from an area which has a median household income of "under 70 percent" to "under 80 percent"of the median income for the specified area.



• �Conform language in the bill to the language used in federal housing laws regarding "low, very low, and moderate income."



• �Limit corporation fees to the amounts required to pay the costs of the corporation.



• �Add a requirement that the corporation hire private businesses to the greatest extent possible.



• �Specifically include the need for accessible and integrated housing in the bill.



• �Prohibit the corporation from making loans for nonresidential purposes.



• �Remove a provision which would have allowed a municipality negotiating to attract an employer that would create jobs in the area to qualify as a "distressed community."



• �Create an equity fund to be administered by the corporation for the purpose of purchasing low-income housing tax credits.



• �Remove a provision in the preamble section stating that there is a serious shortage of affordable, sanitary, decent, and safe residential housing in Kansas.



• �Limit the authority for the corporation to make uninsured loans.



• �Require a housing needs study before a community could avail itself of corporation programs.



• �Require the submission of letters of denial by two financial institutions before the corporation could originate multifamily first mortgages.

The House Committee of the Whole amended the bill to add the prohibition against the purchase of single-family home loans and home-improvement loans unless the borrower meets low income criteria.

The Budget Division reports that HB 2971 would result in no fiscal impact to the state because KDOCH's budget would be reduced by the same amount that would be budgeted for the new corporation.

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/bill_search.html