The program also includes an administrative regulation change to increase available developmentlots. Currently Administrative Regulation 6.2 (AR 6.2) requires developers to be current on specialassessments in existing developments before they would be considered for additional newdevelopment. This limits exposure for the City of Wichita. However, it also could preclude the useof special assessment financing to complete a development and allow new homes to be marketed andsold. For that reason, the program includes a one year moratorium on this section of AR 6.2.
The program will not have a direct cost to the City; however, it willresult in an opportunity cost in the form of lost property tax revenue for the next five years. The Citywill rebate 100% of City property taxes for the first five years for eligible home buyers. On a homevalued at $200,000 (assuming appreciation of 2% annually) and a stable mill levy, the cost of this program would be an estimated $3,873 in lost property tax revenue per home over five years.
Year Home Value City levy Refund portion Refund Amount Cumulative1 200,000 .0324 100% $744.26 $744.262 204,000 .0324 100% 759.14 1,503.403 208,080 .0324 100% 774.32 2,277.724 212,240 .0324 100% 789.81 3,067.535 216,490 .0324 100% 805.62 3,873.15
The maximum City exposure in terms of lost revenue is estimated at $3.8 million over five years.This lost property tax revenue is expected to be offset by increased property and sales taxes based onthe additional employment and spending by the residential construction industry. In addition,assuming 1,000 new homes are constructed at an average value of $200,000 each, at the end of thewaiver period, an estimated $23 million in additional assessed valuation would return to the City taxrolls, generating an estimated $745,200 in new property taxes annually. City operating expendituresto service developments in which eligible new homes are built are expected to be minimal, sincethese areas are currently platted and annexed by the City.The program will also result in accelerated collection of delinquent taxes. Developments are eligibleonly if taxes are current in the development through 2010. In addition, taxes on new homes sold arerequired to be current at the time of sale. This impact is difficult to estimate; however, currentdelinquent specials on vacant lots within the City of Wichita are an estimated $3.3 million.The Center for Economic Development and Business Research at Wichita State University analyzedthe fiscal impact of the proposed New HOME incentive program on the City’s General Fund. Theanalysis compares the present value cost of incentives to the present value benefits of direct andindirect jobs created and construction expenditures. In this case, a 1.48 to one ratio of benefits-to-costs is reported.
The City Council’s goals for Economic Vitality and Affordable Living and Quality of Lifeare advanced through the stimulation of new home construction and ownership in the City of Wichita.
The Law Department has prepared the ordinance and approved it as to form.
It is recommended that the City Council adopt the home rule ordinance and place on first reading.
Program summary materialSummary of incentive programs offered by other communities in the MSAHome Rule Ordinance