Politics & Government

This law was meant to help tornado victims. Now it benefits landlords.

A state law to abate taxes on property destroyed in disasters was written to help victims of this 2012 tornado in the Oaklawn area just southeast of the Wichita city limits. But only two of the 145 families whose homes were destroyed or seriously damaged actually got any money from it.
A state law to abate taxes on property destroyed in disasters was written to help victims of this 2012 tornado in the Oaklawn area just southeast of the Wichita city limits. But only two of the 145 families whose homes were destroyed or seriously damaged actually got any money from it. Wichita Eagle file photo

A disaster-relief law written to help Wichita-area tornado victims was quietly changed in a Capitol meeting room and now allows landlords to get a tax break if their rental houses are destroyed by accidents or negligence.

Current and former legislators who fought to pass the law say the situation shows what's wrong with the process at the Statehouse, where bills are regularly bundled together and rewritten at the last minute to meet deadlines and political convenience — and end up with unintended consequences.

The way the disaster-relief law operates now, "it defeats the original purpose," said Sen. Oletha Faust-Goudeau, D-Wichita and one of its earliest co-sponsors.

"The people who needed help didn't get it, and now we've expanded it to benefit landlords," she said. "Wow. That's the politics of it. That is awful."

Faust-Goudeau said she'll work to try to change the law with two Sedgwick County commissioners — Michael O'Donnell and Jim Howell.

They used to be state legislators and pushed a bill through the Senate and House to try to help victims of a tornado that hit Oaklawn in 2012, along with others affected by major disasters who were being charged property taxes on homes that had been destroyed.

But the law they got passed in 2013 was rewritten a year later to expand eligibility to include rental properties and random accidents.

O'Donnell and Howell say it now goes too far.

O'Donnell, who introduced the original bill when he was a state senator, said he never envisioned it giving tax breaks to landlords or covering isolated residential fires.

"Obviously that wasn't the intent of the bill," O'Donnell said. "The intent was to fix the 2012 Oaklawn tornado tax issues."

O'Donnell and Howell
Sedgwick County Commissioners Michael O'Donnell and Jim Howell teamed up when they were state legislators to pass a bill to give tax relief to victims of major disasters. But the law was rewritten to include landlords and random house fires, and they say it's gone too far. Dion Lefler The Wichita Eagle

The case that brought the law to light again came early this month, when county commissioners granted a $734 property tax abatement to a landlord who lost a rental house in a fire. Tenants who were warming a litter of puppies with a heat lamp left it unattended and burned the house, along with all their dogs.

Because of changes in the law made between 2013 and 2014, the landlord got more tax relief for one burned-out rental house than all the people the law was originally designed to help — the 145 families whose mobile homes were destroyed or heavily damaged in the Oaklawn tornado.

Of those 145 families, only 14 completed the application for tax relief and only two got any money — $300 each, county records show.

The landlord who got his taxes refunded, Kevin Kimmel, owns about 100 rental properties and is president of Wichita's landlord association, Rental Owners Inc.

He said he doesn't think anyone should have to pay property tax on a destroyed building. He also said writing landlords out of the disaster-relief law would be discriminatory, because they pay property taxes, too.

"Why should you have to pay for a dance you can't go to?" he said.

O'Donnell and Howell said they voted somewhat grudgingly for Kimmel to get the tax break at their April 4 meeting, because he's legally entitled to request relief.

"I can't fault the guy for asking for it," Howell said. "But It wasn't meant to be a house-by-house (tax break) for every accident that happens."

The puppy fire

The push for a state law began after a Wichita Eagle story about disaster victims being billed for property taxes on mobile homes that had been flattened and hauled away for scrap metal after the Oaklawn tornado devastated the Pinaire Mobile Home Park, just southeast of Wichita, in April 2012.

The disaster victims got hung up by a quirk in state law requiring homeowners to pay property taxes for the entire year based on the January county appraisal, even if the home was destroyed early in the year. What that meant was that the tornado victims were charged about nine months of property taxes on mobile homes that didn't exist.

The issue came to the county agenda again this month when Kimmel sought tax relief for taxes on his rental house in the 1700 block of North Burns, which is now being rebuilt.

The Fire Department report traced the cause to an electrical malfunction in the living room, where the tenants had plugged in the heat lamp to warm a litter of newborn puppies and then left for work.

One woman suffered minor smoke inhalation and burns, and "several puppies perished in the fire room and were removed by Animal Control," the report said.

Firefighters estimated the damage at $30,000 on a home worth $60,000, barely enough to qualify to apply for tax relief. A county appraiser later estimated the damage at 95 percent.

Burned house.jpg
This house was burned when tenants tried to use a heat lamp to warm a litter of newborn puppies. The house is now under reconstruction, and the owner got his 2016 taxes abated under a state law originally meant to benefit victims of tornadoes, brush fires and other widespread disasters. Dion Lefler The Wichita Eagle

In addition to heading the incorporated landlord's association, Kimmel also helped found an informal neighborhood improvement association of landlords that has met regularly for 25 years.

At a recent meeting, they didn't think much of the suggestion that they be written out of the disaster-relief law.

"That opens another can of worms right there," Kimmel said. "The untold story is that rental property owners have been routinely and consistently discriminated against by governmental efforts to revitalize neighborhoods and all of that."

Kimmel said local government routinely gives homeowners in low-income areas thousands in grants to fix a roof or paint or make other improvements on their houses.

But when a rental unit needs similar repairs, landlords are told "Oh, we don't have any money for your maintenance budget." Instead, the owner is told to fix the problem or face a fine.

"We see it time after time after time," he said.

Landlord Kevin Kimmel recently claimed a tax abatement on a house that his tenants accidentally burned while using a heat lamp to warm a litter of puppies. Kimmel is president of Wichita's landlord association and a founder of this neighborhood improvement group for landlords that's been meeting for 25 years. They say it's only fair that they can use a law designed to relieve taxes on disaster victims. Kimmel met last week with fellow landlords including Martha Ray, Joe Warne and Nabil Saad. Dion Lefler The Wichita Eagle

Rewriting the disaster relief law to exclude rentals "would be another chapter in that story about how people with rental property are denied benefits that we all paid for," Kimmel said.

"We write some of the biggest property tax checks that go across the lady's desk, but when it comes time to getting benefits, they say 'no,'" he said.

Howell said the way the disaster-relief bill got passed is a microcosm of what's wrong with the way the Legislature does business.

It passed unanimously through the Senate in 2013 but stalled in the House.

Howell said he was eating dinner one evening near the end of the session when legislative leaders called him and asked whether he'd vote for a budget bill if the disaster relief bill was added as a budget proviso.

Howell said he agreed, and the budget bill passed by one vote.

But provisos last only one year — until the next budget — so it had to be brought back in 2014 to make it a permanent law.

It was at the very end of that process that the bill was bundled with several others and altered by a conference committee made up of three senators and three representatives who pounded out the final details of legislation.

That's a common practice at the Capitol.

Strange process

Every year, bills get torn apart and put back together as the end of the session looms.

Bills that died come back to life and entirely new ideas are inserted by conference committee members.

Those bills get passed without any real deliberation by the rest of the lawmakers, whose only choices are yes or no and who can't offer amendments on the floor.

"Sometimes I guess good laws evolve into things that don't make sense anymore," Howell said of the disaster-relief bill. "This kind of shows some of the bad practices of the Legislature when they insert language that isn't vetted by anybody. This is not good government. Although it's legal, it's not smart."

When the bill went to a final vote, proponents didn't notice that the tax conference committee had added an amendment that was proposed by the House tax committee but never voted on by either the House or the Senate.

It consisted basically of two letters — an A and a B — that completely changed the meaning of the legislation.

The original bill offered tax relief on a homestead more than 50 percent damaged by "an earthquake, flood, tornado, fire, storm or other event or occurrence which the governor of the state of Kansas has declared a disaster."

That was changed to read: "(A) An earthquake, flood, tornado, fire, or storm; or (B) an event or occurrence which the governor of the state of Kansas has declared a disaster."

That subtle change in punctuation opened the door for tax relief to go to anyone who lost a house in a fire, regardless of the cause.

Former Sen. Les Donovan of Wichita was chairman of the Senate tax committee and co-chairman of the conference committee that finalized the disaster-relief bill. He said he remembers the bill but doesn't remember the committee changing the definition of who could apply for relief.

"They (O'Donnell and Howell) should send that back to Topeka and get that changed," Donovan said. "I don't think it's fair" the way it is now.

Also, between the 2013 and 2014 versions of the law, the Senate eliminated language that prohibited giving tax breaks to property owners if their losses were more than 50 percent covered by insurance — a clause that eliminated most of the Oaklawn tornado victims.

And finally, the disaster relief law contains an unusual definition of a "homestead," which is defined as "the dwelling, or any part thereof, whether owned or rented, which is occupied as a residence by the household."

That's what allows landlords to claim their rental properties as homesteads to get tax relief.

Few victims helped

Assistant County Counselor Justin Waggoner analyzed the law for the commission. His conclusion was that "the household" legally means any household, so the only requirement for a landlord to qualify for tax relief is that someone is living in the housing unit when it's destroyed.

"It is a different definition than what you typically see" in state law, he said.

Under other state laws, a Kansan has to actually live in the homestead to get disability tax credits or to protect it from being seized by creditors in bankruptcy.

Kimmel's house burned on Jan. 5, 2016.

Tax appraisals are set as of Jan. 1 each year, so if the fire had happened a week earlier, he'd have had to pay only 2016 taxes on the much lower valuation after the fire, he said.

"This (tax abatement) is what I would call a midyear correction on valuation based on the disaster, and certainly a fire is a disaster," he said.

Foraker tornado
The Foraker family who lives near Burrton lost their 100-year-old ancestral farmhouse in a 2015 tornado but were denied tax relief because the house was undergoing renovation and no one was living in it when the tornado struck. Tracis Heying Wichita Eagle file photo

In addition to Kimmel's fire, four other claims have been filed for damages suffered in miscellaneous incidents.

Two homeowners filed for relief after a defective lawn mower set neighboring Derby houses ablaze in 2014. One request was granted for $1,943; the other was denied.

Another Derby homeowner was granted $2,078 worth of tax relief when her house caught fire in 2015, destroying the basement and an upstairs garage.

A Burrton family that lost its 100-year-old farmhouse to a tornado in 2015 was denied tax relief because the home was undergoing renovation and nobody was actually living in it when the tornado struck — hence, it didn't qualify as a homestead. The owner, Harlan Foraker, said he didn't want to talk about it.

While waiting on Topeka to make changes, which may or may not happen, O'Donnell and Howell have begun drafting a county policy to limit disaster tax abatements to owner-occupied dwellings and only in major emergencies — which is what the original state bill was supposed to have done.

While it wouldn't fix the state law, it would solve the county's problem for now, they said.

Dion Lefler; 316-268-6527; @DionKansas