The small town of Bentley hopes that it has finally found the cure for its painful housing bubble hangover.
Bentley has fewer than 600 people amid the farms of northwest Sedgwick County, and the impact of dozens of foreclosed houses and empty lots on the city budget has been huge.
Mayor Rex Satterthwaite said that in 2014, a third of the city’s $250,000 general fund budget went to loan payments for the streets and utilities that were extended to the Castle Estates subdivision. That annual debt bill is scheduled to rise to more than half the city’s general fund by 2017 unless some of the lots can be sold.
“If these lots were filled, I guarantee you these roads would be in a lot better shape,” he said. “And that’s key to making the town the kind of place you want to move to. You have to have money to make money.”
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What happened to Bentley is simply a more extreme version of what happened to many cities in the area and across the country. When many developers stopped selling lots and builders stopped building homes in 2008 and 2009, many stopped paying their taxes and specials on the lots.
Typically, when a city takes out loans to extend water lines, sewer systems and roads to a housing development, the “specials” – which are taxes assessed on a subdivision or area – are used to pay off the debt.
But when developers stop paying those taxes, other taxpayers in the community must shoulder the costs.
And as many communities found out during the most recent housing bust, even when the homes and lots were foreclosed upon and resold at a tax sale, there wasn’t always a happy result. Many times the lots were sold to flippers who sat on them – without paying the specials or taxes – in hopes of a quick payday. Many lots went through tax foreclosure a second time.
Some cities have tried to cope by offering incentives to builders and potential homeowners or even by taking ownership of the lots and marketing them.
Park City is offering $10,000 and $15,000 cash back for lots it owns in two foreclosed subdivisions. City Administrator Jack Whitson said it’s seeing some response: The city sold 28 lots for houses last year and, so far this year, is somewhat ahead of that. He hopes to sell off the inventory of city-owned lots this year or next.
Jim Heinicke, interim city manager in Clearwater, said the city has taken ownership of the vacant lots in a partly built subdivision. Real estate agents tell the city the houses would sell if they were to be built, he said. So Clearwater is focusing on working with a builder or builders to get spec houses built.
In Bentley, the city is under the gun because of the large debt costs, Satterthwaite said. Having debt eat up that much of the city budget means less money for basics, such as street maintenance.
The Bentley City Council approved Castle Estates in 2004, despite some unhappiness among longtime residents over the sizable change in the city’s character. If built out as planned, it would have nearly doubled the city’s population. But the developer ran into financial problems in 2009 after about 50 houses were built, and stopped paying the specials and taxes.
The good news for Bentley is that nearly all of the existing houses in the Castle Estates subdivision that went through foreclosure have been sold, are occupied and the homeowners are again paying taxes, Satterthwaite said.
The 39 unsold lots are another matter. The city took ownership of the unsold lots in 2013 after they went through foreclosure a second time. The city wants to sell or give them away to builders.
It wants to wipe clean any back taxes or specials to make them more appealing, but Satterthwaite said Sedgwick County has found it difficult to remove the unpaid back taxes and specials from its records. The result is that people have shied away from buying, Satterthwaite said.
The solution, they hope, is an independent entity called a land bank. The city is in the process of transferring ownership of the lots to the land bank, which will allow them legally to remove unpaid specials more easily when a buyer comes calling.
He said city officials hope to start marketing the lots to builders and home buyers soon. The city is searching for any source of funding, such as grants, to help market and sell the properties.
The dramatic expansion promised by the subdivision followed by the unanticipated financial burden created by the housing crisis has caused some hard feelings in the town over the past decade, Satterthwaite said, but that appears to be finally healing.
It’s a nice town, far from the crowds but plenty close for commuting to Wichita, Newton or Hutchinson. It’s a place where everybody knows their neighbors.
“This town is ready to move forward,” Satterthwaite said.