Title
CONSIDER PROPOSED CREATION OF THE SOUTHFORK TAX INCREMENT DISTRICT.
Presented by: Chris Chronis, C.F.O.
RECOMMENDED ACTION: Consider the proposal and take action as appropriate.
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On December 6, 2011, the Wichita City Council conducted a public hearing and placed on first reading an ordinance establishing the Southfork Redevelopment District. On January 4, 2012, the Board of County Commissioners adopted a resolution finding that the proposed establishment of the district would hinder effective future delivery of public services and therefore would create an adverse effect on Sedgwick County, and requesting that the City take action to terminate the district. On February 7, 2012, the City Council did so.
The principal concerns voiced by Commissioners were that much of the project would remain in the 100 year flood plain after development, and that the projected amount of tax increment funds that would be diverted to the district from Sedgwick County, USD 259 and Wichita far exceeded the identified planned uses of tax increment funds. Additional commissioner comments addressed the economic feasibility of the project and the announced intention of the developer and City to provide additional public support to the developer in the form of Community Improvement District sales taxes. In the months since, the City and developer have altered their plans to address concerns which had been voiced by Commissioners. The pertinent changes to the District Plan include a provision requiring that all property in the project areas other than drainage structures and easements must be raised above the 100-year flood plain, and a provision capping the tax increment that can be used on the project, including interest on city bonds that will be issued to finance construction, at $16.5-million.
On April 10, 2012, the City Council again conducted a public hearing and placed on first reading an ordinance establishing the Southfork Redevelopment District. It is a proposed tax increment district consisting of approximately 72 acres south of 47th Street South, west of I-135, east of Broadway, and north of Custy Street. The area is eligible to receive tax increment funding pursuant to State law because more than 50 percent of the land in the proposed TIF district is within a 100-year flood plain identified by FEMA. The proposed district includes approximately 50 acres between I-135 and the Riverside Drainage Canal (also known as the Big Slough) and approximately 22 acres between the Big Slough and Broadway. The entire 50 acre tract lies in the 100-year flood plain.
All development plans and financial projections must be considered preliminary and subject to change. They will not be finalized until the City enters into a development agreement with the prospective developer, and that will not happen until after the district is created. The County's single opportunity to approve or oppose creation of the district expires May 10, 2012, 30 days after the City's April 10 public hearing. Thus, the County's action to approve or oppose creation of the district must necessarily be based on the preliminary data that has been provided by the developer and City.
State law allows the County to oppose creation of the district if it is found to create an adverse effect on the County, but does not define the term 'adverse effect.' County policy provides five considerations, any one of which may constitute adverse effect and justify opposition to creation of the district. If none of the five considerations are found to exist, or if they do not exist to a substantial degree, County policy is to approve creation of the district. The five considerations are:
1. Does the potential loss of tax revenue hinder future service delivery?
2. Is the proposed project economically feasible without county funding support?
3. Is proposed private equity funding insufficient to effect default risk?
4. Are costs to County government greater than benefits to County government?
5. Has the County been provided sufficient data and information with which to make an informed judgement?
The devloper's representative and City staff have promptly responded to each request for information made by County staff.
Attachments to this agenda summary include
1. a summary of the project, planned sources and uses of funding, projected earnings before interest, taxes, depreciation and amortization, and the critical questions to be considered;
2. a narrative report that provides more detailed analysis of the proposal; and
3. a resolution approving creation of the district; and
4. a resolution finding that creation of the district will create an adverse effect, and therefore opposing it's creation.
Alternatives: State law provides no alternatives for the County other than approval, failure to take action - which is deemed to be approval - or denial of the tax increment district as proposed by the City. The County may not give approval subject to specified conditions or changes.
Financial Considerations: The creation of a TIF district will make possible the diversion of County property taxes to reimburse some of the developer's cost of special assessments that will be levied to repay principal and interest on City bonds that will finance drainage, street, and water-sewer improvements planned to occur in the district. Over the 20-year statutory life of the district, the amount of County property tax subject to diversion is estimated to be $5.0-million, about 30% of the $16.5-million tax increment cap. It is probable that the District will not survive for the entire statutory life; instead, it will receive 100% of the tax increment each year until it has received $16.5-million, and then will be terminated. Only if the district is created, a project is approved by the City, a redevelopment plan is adopted by the City, and the specific improvements are authorized by Council action will the tax increment revenues generated in the district actually be diverted.
Legal Considerations: Under K.S.A. 2010 Supp. 12-1771(d), a redevelopment district may not be created if the County Commission determines by resolution that the district would have an adverse effect on the County.
Policy Considerations: It is the policy of Sedgwick County to support City efforts to eliminate blight and promote redevelopment of substandard areas by allowing the diversion of County tax revenues to TIF districts when such actions are shown to create no adverse impacts.
Adverse effect to the County shall be cause for disapproval of a TIF district. Adverse effect to Sedgwick County is evaluated by the following criteria:
1. Potential loss of tax revenue would hinder effective future delivery of public services.
2. Proposed project is economically feasible without County funding support.
3. Proposed private equity funding is insufficient to effect default risk.
4. Costs to County government are greater than benefits to County government.
5. Sufficient data or notification was not provided for County staff to adequately review the proposal for a TIF district.
Outside Attendees:
Multimedia Presentation: