Park City offers cash incentives to buy subdivision lots

Park City Manager Jack Whitson at one of the subdivisions the city is marketing, north of 85th Street and Hydraulic.
Park City Manager Jack Whitson at one of the subdivisions the city is marketing, north of 85th Street and Hydraulic. The Wichita Eagle

Park City has taken a big financial hit since a developer stopped paying specials on two subdivisions – and it’s taking dramatic action to sell those lots.

The city, which pioneered sales incentives to speed up development years ago, bought the subdivision lots out of foreclosure. It is now offering large cash payments to lot buyers in exchange for a promise to build a house within a year.

Park City will market the lots from its own booth at the Wichita Area Homebuilders Association Home Show, which started Thursday at Century II and runs through Sunday.

The city has about 25 lots in the Bearhill subdivision and about the same number in the Saddlebrook subdivision. Both subdivisions were started by Lusk Communities, which stopped paying the taxes and other levies known as specials in 2009, said Park City Manager Jack Whitson.

In Bearhill, the city will give the owner $15,000 cash at closing. That money can help pay down the cost of the house, cover closing costs or allow the owner “to go to the Bahamas during construction,” Whitson said. The lots sell for $20,000.

In Saddlebrook, the city will give the owner $10,000 at closing. The lots sell for $15,000.

Homebuyers can bring their own builder, Whitson said. The city will supply a list, if asked. Homebuilders must have a house started within six months and completed in a year.

“It’s a pretty good deal,” Whitson said. “We’ve priced them to move.”

For Whitson, getting the lots off the city’s books and having somebody else pay the specials is critical.

The city has had to pay about $700,000 since 2009 – and $461,000 in 2014 – to cover the debt it incurred to build the water and sewer lines and roads into the developments. In 2011, the city had to lay off seven people to cover a hole in its budget.

Lusk Communities developer Bill Lusk has worked with the city, handing over development rights, Whitson said. Lusk did not respond to a request for comment.

Wess Galyon, president of the Wichita Area Homebuilders Association, said he appreciated what Whitson and Park City were trying to do.

“In Jack’s circumstance, it’s a smart move to protect the investment that they’ve made in extending infrastructure to these developments,” he said. “It has the potential to grow the tax base quicker than it ordinarily would.”

Whitson said Park City has designed other incentives for developer-owned subdivisions. If the developer has kept up the tax and special payments, the city will pay $5,000 to the builder and $5,000 to the buyer. If a developer has not kept up with its tax and specials payments, the city will give the homeowner $2,500 in cash and the builder must match with $3,000 worth of value.

Robert Conger, city administrator of Kechi, said most cities don’t want to get into the real estate business but may be forced to to protect taxpayers.

Kechi last year bought two commercial lots and a residential lot out of foreclosure, and is considering incentives to sell them.

He said Park City is trying to break the cycle in which speculators snap up foreclosed lots for pennies on the dollar and then sit on them until demand returns. The way the tax rules are written, these speculators wouldn’t be faced with losing the lots until they are three years in arrears on taxes. That means cities would have to pay specials for years longer, he said.

“It’s a real bold move; not many cities would do that,” Conger said. “They’ve already paid for the property, they might as well take title to it.”