Sedgwick County won’t participate in a property tax rebate plan for new-home buyers, a program that some public officials now say was “oversold” to them by supporters.
Wichita City Council members, who approved the rebate plan on Feb. 14, say they stand behind it, although one councilman is upset that he didn’t learn until Tuesday that the rebate program produces a net short-term loss for the city.
The program was sought by the Wichita Area Builders Association to revitalize the new home construction market by rebating five years of property taxes and special assessments to the first 1,000 new-home buyers in the area.
City council members voted 6-1 to approve the plan last month. But some of them said that builders association officials indicated the county and its school districts, including the Wichita school district, would not oppose the plan.
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The county won’t consider the plan because state law prohibits the county from rebating property taxes, Commissioners Dave Unruh and Richard Ranzau said.
“I don’t know that it would have passed over here because our own study shows we stood to lose almost $2 million ($1,832,294),” Ranzau said. “But it’s a moot point now.”
The Wichita school board has taken no action on the plan, district officials said Wednesday..
WABA president Wess Galyon said he conveyed no commitment from the school district and Sedgwick County to city officials.
“We never told them anyone had approved the program,” Galyon said. “We just told them we felt they were willing to listen and felt like we’d get a fair shake.”
With the county and school district not participating, though, critics of the plan say it’s worth less to prospective new home buyers.
“It’ll save people a few hundred dollars a year in Wichita, maybe $500 to $700,” city council member Michael O’Donnell said. “But not nearly as much if you’re not adding in taxes from the school district and the county.”
According to e-mails provided to The Eagle by Ranzau, the county’s rebate discussions apparently prompted city officials Tuesday to provide council members with a Feb. 1 report on the rebates by Wichita State’s Center for Economic Development and Business Research.
That report, released by City Manager Robert Layton to council members Tuesday afternoon, showed that the city’s short-term “net public benefits” would be best served without the rebates. The city’s general fund would net $2.3 million from the construction of an estimated 787 new homes over the next 18 months without the rebates, the study said. The net gain to the general fund with the rebates and the thousand homes the program would generate would be $730,457, because of the large amount of property tax money being rebated.
However, Layton said Wednesday that the WSU report doesn’t account for the rebate program’s major benefit to the city: It could force the city’s struggling builders and developers to make delinquent tax and special assessment payments on qualifying lots, helping cover more than $3.3 million in delinquent special assessments on more than 2,600 unbuilt lots owned by developers who have been hit hard by the downturn in new home sales and can’t pay their taxes.
All lots in a development must be current on taxes in order for a developer to participate in the program.
“My interest in this, although I’m sympathetic to those arguments and the policy concerns, is that if we don’t turn this around we’ve got a growing number of delinquencies in special assessments and property taxes,” the city manager said. “That’s the compelling part for me, and it certainly does support the notion that we have some major developers in trouble. We’re told that many of them won’t be able to satisfy those delinquencies in 2012. That’s the reason I thought we needed to do something to get those satisfied.”
Exactly what part of the $3.3 million delinquency bill would be satisfied if the rebate program succeeds is unclear, Layton said. But even a portion of that tab — $2 million — would make the initial property tax investment in the rebate program worthwhile, with further gains from the new home valuations coming in five years when they return to the tax rolls. Otherwise, city taxpayers will foot the bill, Layton said.
Mayor Carl Brewer and council member Jeff Longwell remain firmly behind the rebates program.
“We’re looking at a good return on the city’s investment ($1.48 for every city dollar invested, according to WSU) and the good it does the city in a very competitive environment ... with all these neighboring cities and their new-home incentives,” Longwell said. “I don’t know how you could frame this as a bailout when it clearly moves the city forward.”
Ranzau, along with city council members Michael O’Donnell, Longwell and Janet Miller, said builders association officials indicated that the county and its school districts would not oppose the rebate plan.
O’Donnell said he now believes the builders “oversold” the program to the city council.
Miller, the only council member to vote against the rebate, said, “I never talked to anyone at the county, but those who had — the builders group, people like that — indicated they had support for the program from the county and the school district.”
O’Donnell also complained that the WSU report wasn’t made available to council members before their Feb. 14 vote on the rebate plan, although all council members learned during that meeting that the rebate plan met the city’s return on investment criteria.
“I told the manager that if it was something controversial like this, I wanted the information,” he said. “I wasn’t aware there was a study, and I’m not happy about not getting that information.”
Layton said he routinely releases the results of studies to the council before votes, but not the entire document given the size of council members’ agenda packets — frequently 200 to 600 pages. The reports are routinely available from staff upon request, a contention Miller backed up.
“We’ve all been on the City Council a year or longer, and if we don’t know by now that reports are available for review, we’re not paying attention,” she said.