LOUISBURG — Two proposed Rural Housing Incentive Districts (RHIDs) will not take root in Louisburg.
The Louisburg City Council voted 5-0 to deny Louisburg Land Holdings, LLC’s proposed RHID to build 20 single-family homes and 61 townhome units along a portion of Danford Drive, a recently completed through street south of the aquatic center and west of Wea Creek Apartments that provides a second entrance into the lake subdivision.
The vote to deny the RHID drew applause from the estimated 140 people who attended the two public hearings for the RHIDs Monday night at Louisburg City Hall. The council chamber was filled to the brim, and the crowd spilled into the hallway.
Developer Bob Bazin of MBB, LLC withdrew his proposal Monday night to establish an RHID to build the remainder of the Prairie Crossings subdivision.
RHID projects are privately funded by the developer, City Administrator Nathan Law said Monday night and during previous presentations to the Louisburg USD 416 school board and county commissioners.
RHID captures 100 percent of the incremental increase in property taxes created by the housing development project for up to 15 years to help the developer pay down the cost of extending streets, utilities and some other preapproved costs. Under these RHIDs, three taxing entities — the city, school board and county — would have to agree to forgo incremental increases in property taxes for 15 years to cover development costs.
“The developer carries an obligation in this circumstance (not the city), and if a developer didn’t recoup all the reimbursable costs within that 15-year period, the developer is just out that money,” Law previously said.
RHIDs are not low-income housing projects, Law said. They are designed for young families and professionals in the hopes of providing affordable housing for those who would like to live near where they work.
Providing affordable housing for young teachers who want to live in the community where they teach was offered as one example at a previous meeting. The inventory of available housing and buildable lots in the community is low at present, some city officials, real estate professionals and developers have said.
Louisburg qualified for RHID through the results of a housing analysis that was approved by the Kansas Department of Commerce. The analysis satisfied the state’s four requirements: shortage of quality housing, shortage is expected to persist, shortage is a substantial deterrent to future economic growth, and development of quality housing is dependent on incentives.
PROPERTY TAX CONCERNS
Giving up incremental property tax increases on these developments for up to 15 years did not sit well with many of the 29 audience members who spoke during the public hearing.
“I don’t have a beef with people that like it (RHID), or even with the developers. I just don’t think it fits for here,” Tad Gieman said.
Gieman said the RHID program was designed to help struggling agriculture communities that have no chance of attracting developers without providing incentives. That description does not fit Louisburg, Gieman said.
“I think we’re underestimating what a great community Louisburg is,” Gieman said. “This is a cool place to live. It’s close to the city, it has a hometown feel and it has great schools.”
IMPACT ON SCHOOLS
Gieman said he was also concerned about the impact on schools and what the additional development would mean for the growth of the school district’s population, without property taxes for 15 years to expand or build new schools.
“The high school has an enrollment of 575 which is great, but it’s pretty full,” Gieman said. “God forbid if we have to start building classrooms on top of this with no real estate revenue growth. I don’t think we need to do this. I think we can have the same type of growth organically.”
Superintendent Brian Biermann said at a recent school board meeting he didn’t think the RHID developments would require the district to build a new school.
David Wood, a former member of the Louisburg school board who served for 12 years, expressed concerns about the effect the growth would have on schools. Wood noted he was on the school board during the city’s last housing boom.
He agreed with Biermann that the school district probably could handle more students, but he cautioned that growth in grade levels isn’t uniform and that caught the district somewhat off guard when dealing with the last influx of students.
He noted some classes might not see any growth, while others could see substantial growth. As an illustration, an earlier speaker referenced the current freshman class at the high school is 160 students, the largest class in the district’s history.
Wood said he was concerned that scenario could result in the need for another school. He asked if other incentives had been considered other than RHID.
Other speakers expressed concerns that the additional housing would cause the city to increase services, such as adding employees and equipment to the police, fire and public works departments, without the benefit of increased property tax revenue.
Speaker Chris Kelly expressed concerns about the city’s street maintenance program and how it would be affected by losing 15 years of property tax revenue.
“I’m greatly concerned that adding an additional three percent to our street inventory (from the RHID developments) without any revenue is going to greatly strap that program,” Kelly said. “… I think further delaying street maintenance would be a poor decision for the ongoing quality of our streets.”
Ross Vogel, one of the partners in the proposed Danford Drive development, previously said that establishment of an RHID would reduce the listing price of a single-family home in his development from $275,000 to $225,000.
Several speakers said the developments would drive down the value of their homes.
“Say I currently own a home anywhere in the city, and it is currently appraised at $275,000. In 12 to 18 months when this similar house is built for $225,000 in an RHID district, my house is devalued,” Jenny Dover said. “Now when I get my appraisal, I’ve immediately lost $50,000 in my house.”
That kind of devaluation would prevent homeowners from getting fair market value if they tried to sell their properties, she said.
“If I go to sell my house, my neighbor’s house, the brand new (RHID) house next to me, it is now my comp,” Dover said. “I’ve immediately lost $50,000 in the value of my house, even though my neighbor’s house is the same house with the same square footage.”
Also expressing concerns about devaluation, Donna Hipp told the council her home could be put on the market today for $370,000 and it is literally on the corner of Lake Hill and Danford drives.
“These houses are going to be right in our backyard,” Hipp said.
Dover raised several other concerns, among them stormwater drainage issues. She said the Danford Drive development would compound stormwater drainage problems already occurring at the nearby lake and other areas near the proposed developments.
Hipp also referenced erosion issues at her property which she feared would be compounded by the Danford development.
The crowd erupted into applause after each person who expressed opposition to the RHIDs finished speaking.
Some speakers voiced concerns about the density of the proposed housing.
But not all speakers were opposed to the plan.
RHIDS ON THE TABLE
Andy Sauber, a longtime member of the Louisburg Planning Commission and its current chair, said the proposed developments are platted the same way they were in 1998.
“The volume of homes is nothing new,” Sauber said. “The RHID is the only thing that’s new. So the only thing that should be considered tonight is the RHIDs.”
Sauber said the City Council and city staff haven’t done anything out of the ordinary.
“There’s been so many comments tonight about your integrity and things like that,” Sauber said to council and staff. “I just want to stand up here and say you are doing a good job … I want you to vote your conscience.”
He noted the low number of building permits issued in recent years and that new housing starts in general have stagnated.
The city issued 133 new housing permits in 2005, but after the 2007-2008 financial collapse, the number of permits issued annually has declined. The city issued 14 new residential building permits in 2018.
Other concerns were raised about what would happen if developers left their projects half-finished, for whatever reason. Dover said that would create a blight on the community.
Several speakers said they were pro growth.
“I really don’t know if I’m for (RHID) or against it, but I’m for growth,” Wayne Knop said. “If the city takes the right approach, it could be positive. If not, we could be in trouble. Commercial will not come without rooftops, and this would definitely bring rooftops.”
Some speakers urged the city to focus its attention on commercial growth and incentives to attract more businesses. They questioned the city’s forecast that sales tax growth would somewhat help offset the loss in property tax revenue.
Barbara Smith disputed the idea that more rooftops would bring more businesses. She also said housing shortages are not new to the community, dating back to 1967 when her family moved to town.
“This is not a new thing. We are a very desirable community,” Smith said. “More rooftops will not bring more businesses. In 1967 we had three or four times as many businesses than we have today.”
Smith said if the demand is there, the builders will come.
“We do not need to throw ourselves under the bus and make other people pay, make us pay, the taxpayers pay, for these developers to come in and take advantage of us because that’s exactly what they are doing,” Smith said.
Developer Randy Wilbanks addressed some of the audience’s questions and concerns.
“It’s nice to see the passion in the community. It’s a great thing and I hope you never lose it,” Wilbanks said. “There have been a lot of good comments tonight.”
In answering a question about whether his land deal was predicated on the RHID being passed, Wilbanks said it was not and that the land had already been purchased. Local developer Bazin said his Prairie Crossings proposal was contingent on passage of the RHID.
“There’s no way I’m going to put down $300,000 on a piece of property that I’ll sit on until I die,” Bazin said.
Wilbanks said he did not know anyone in Louisburg prior to pursuing the Dandford Drive development.
He said the developers have not requested any changes in zoning.
“The property was platted in 1998 for a combination of single-family and multi-family,” Wilbanks said. “We haven’t applied for any additional zoning. It calls for 20 single-family and 61 multi-family, and that’s what we would intend to build.”
He didn’t rule out the possibility of developing the land without the RHID.
“To answer the question if we will go forward in the absence of the RHID, the answer is ‘I don’t know.’ And that’s an honest answer,” Wilbanks said.
He recounted the history of the property.
“It’s changed hands three times, and the bank took it over in 2012,” he said. “And there’s nothing on it yet. There may be a myriad of reasons for that. We have to make a decision whether we’re going to spend $14 million in your community or not. And it doesn’t have to be an all-or-nothing thing.”
Wilbanks said groundwater and other concerns would be addressed in the engineering and building of the development to ensure it goes in adequately.
“The communities we build are safe,” he said. “We would have a functioning HOA, we would have professional landscaping with sprinklers. These are nice communities.”
Wilbanks explained the history of development in the region and how the need for incentives came about.
“In the early 2000s, developers didn’t want to put money up for infrastructure,” Wilbanks said. “The city issued bonds, and the specials got put on the lots, so the people buying the houses might be paying an extra $1,500 in property taxes (annually) to make sure it got paid for.
“In 2007 or 2008 (after the financial collapse), everybody pulled out, and it left the city holding the bag. The city had to make good (on the bonds) whether the development was finished or not,” he said. “With the RHID, the developer does put up the money up front. If he doesn’t perform, he gets nothing.”
He said profit margins are thin on RHIDs.
“Somebody said the developer doesn’t have any skin in the game. I would say $14 million is a lot of skin,” he said. “Candidly, if we took 15 years, we would lose everything. Our ability to risk that kind of money requires us to get the project done (quickly).”
Vogel has completed more RHIDs than anyone in Kansas and said those projects are doing well and have been well-received by community.
He said if the RHID wasn’t approved, he would recommend not proceeding with the development because it would be too risky.
Bazin withdrew the Prairie Crossings proposal at the start of the public hearing for his RHID, but he took the podium to address comments and questions from the audience.
He said he was surprised the public was so adamantly opposed to the plan.
Bazin said the city is competing with Spring Hill, Gardner, Paola, Overland Park and other communities for residents and businesses.
The Spring Hill City Council was set to discuss a proposed RHID for the community’s Park Village development at its meeting Thursday, Aug. 22. A public hearing date has not yet been set.
The development is on the Miami County side of Spring Hill. Johnson County does not qualify for RHIDs because its population exceeds the threshold.
Bazin echoed many of the comments Wilbanks made about RHIDs and development in general, and he corrected a misconception about the property tax dollars residents would be paying for the RHID.
“You weren’t paying a dime. The developer pays it,” Bazin said of the RHID development. “The only thing your property taxes would go for is for services, and I was told those would be minimal.”
Before voting on the Danford Drive development, three of the commissioners commented on the proposals. Two of those council members, Kalee Smith and Thor McKiearnan, had voiced their concerns and opposition to RHIDs at previous meetings before Monday night’s hearings.
Before Monday’s vote, Smith said residents at the hearing had clearly expressed opposition to RHIDs.
“I just think we need to listen to our community members; they don’t want it,” Smith said. “I teach in this district, we will have to have more schools built and more staff. The thing is growth over time is one thing and to do this quickly, it’s going to be too much for us to handle. I don’t see why we need to provide the incentive. If someone wants to build here they’ll build here.”
Council Member Sandy Harris said he appreciated the public in attendance and later referred to it as democracy in action.
“I support the RHID concept. I’ve spoken with three other cities around Kansas who have been through the process, and it has been a very positive experience,” Harris said. “But I cannot support these plans. I have concern for the city and the community if developers don’t follow through to completion for whatever reason. I have serious reservation about the proposed density of the building programs.”
McKiearnan was the last council member to speak. He passed a photograph of his 3-year-old granddaughter to the other council members before addressing the staff and audience.
“I want to thank the staff of all their hard work on this,” McKiearnan said.
Focusing on the public comments about the staff’s integrity, he said, “I have never seen them try to sneak anything by us or do anything underhanded. I appreciate everything they do.”
McKiearnan said, however, he couldn’t go along with the staff’s recommendation to approve the RHID.
He said the requirements of the RHID statutes are very vague. As for the housing study, he said a housing shortage of some type could be found in any city across America.
He challenged the notion that the developments would not cause the city to add staff, and said those expenses had not been factored into the proposals.
McKiearnan said he had researched some of the RHIDs Vogel had been involved with in McPherson, Newton, Liberal and Garden City. He said one thing each development has in common is that they are rental properties being managed by an investment company.
“I’m sure they are renting those properties at market value, and we would be subsidizing their investment,” he said.
He also agreed RHIDs would drop home values and that would not be fair to the people who live in Louisburg. He said 80 percent of the community’s workforce goes north into Johnson County and shops there on their way back home at night. He thought it was unrealistic to think additional rooftops would bring more businesses to town or that more people would be shopping in town.
McKiearnan said he didn’t think the incentive was necessary and that the free market should dictate growth.
“I don’t think we need this (RHID) incentive,” he said. “Every time the government gets involved in the free market, we screw it up. Let the free market do what it does.”
McKiearnan referenced the photograph he had passed among council members.
“That’s my 3-year-old grandbaby,” he said. “She’s going to be graduating from high school, if this program passes, before we see a dime of tax money from either one of these projects.”