Brief ⁽¹⁾

Sub. for HB 2005 would amend various provisions of the Tax Increment Financing (TIF) statutes. Tax increment financing allows a city to dedicate future revenues, or increments, for a fixed number of years to finance improvements. The acquisition of property and improvements may be financed through the issuance of full faith and credit bonds, special obligation bonds, or on a "pay-as-you-go" basis, to be repaid from the tax "increments" generated from the redeveloped property. In addition to the local property tax increment, other revenue sources may be committed to repayment of the principal and interest on the bonds as permitted by statute. The TIF legislation enacted in 1976 was intended to provide a financing tool for redevelopment projects in blighted, commercial areas of central cities. The TIF statutes were subsequently amended to extend use of this funding mechanism to enterprise zones established prior to 1992, blighted areas outside central business districts; conservation (not yet blighted) areas; environmentally contaminated areas within and outside cities; the Oz project; the NASCAR auto racetrack project; the multi-sport athletic complex at Kansas City Kansas Community College; and historic theaters.

Existing TIF Procedures. The existing TIF statutes require the city to: adopt a resolution and give notice that a redevelopment district will be established; hold a public hearing on the establishment of a redevelopment district; pass a resolution making appropriate findings and pass an ordinance establishing the redevelopment district; develop a redevelopment plan for the redevelopment project area, including a feasibility study, map, relocation matters, details about the buildings and facilities, and other items; have the planning commission find that the redevelopment plan is consistent with the comprehensive general plan of the city; adopt a resolution and give 30-70 days notice that a redevelopment plan will be adopted and, if full faith and credit bonds will be issued, state that intent in the resolution; hold a hearing on the redevelopment plan; and pass an ordinance with at least a 2/3 vote adopting the redevelopment plan. Once the redevelopment plan has been adopted, the city may purchase or otherwise acquire real property. Eminent domain proceedings may be pursued (except in conservation areas) upon two-thirds vote of the governing body of the city. The redevelopment plan may be undertaken in separate stages. Projects within the redevelopment district must be completed within 20 years after the transmittal of a redevelopment plan to the county and, for environmentally-related projects, within 20 years from the date of a consent decree agreement with environmental regulators. Bond financing for the Oz, NASCAR, and multi-sport facility projects may extend up to 30 years.

Reorganization and Clarification Amendments to TIF Statutes. Most of the proposed amendments to the TIF statutes involve reorganization or clarification. The most notable of such amendments are listed below:

• •New Definition Section. A new definition section consolidates many of the specialized terms used in the TIF statutes which are, for the most part, spread throughout the statutes.
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• •Provisions - No Longer Relevant. Several provisions have been deleted because they are no longer relevant. Specifically, these provisions refer to: (1) the Oz project if the project were to be located in Wyandotte County (its intended location is now in DeSoto, Johnson County); and (2) the Topeka Capitol Complex project which is currently under construction.
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• •Consolidations. The bill consolidates the provisions related to a city's procedures for establishing a redevelopment district. The bill also consolidates the provisions related to project plans for proposed redevelopment projects, the resolution requirements, hearing requirements, posthearing procedures, and the disposition of the project once it has been approved. Also consolidated are existing provisions related to the NASCAR project.
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• •Clarification Concerning Substantial Changes to the Project Plan. The current TIF statutes require notice and a public hearing if a change is made to a project plan and if that change deviates substantially from the intent of a city's comprehensive plan. The bill would amend that provision to clarify that notice and hearing will be required if a proposed change causes the redevelopment district plan or project plan to deviate substantially from the approved district or project plan and not from the city's comprehensive plan.
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Policy Changes. The bill includes several substantive policy amendments:

• •Starting Point for Tax Increments. Under existing law, the collection of tax increments is triggered by the transmittal of a redevelopment plan. The bill would make the trigger point the establishment date of the redevelopment district. The definition of the terms "tax increment" and "base year assessed valuation" in the bill would clarify that intent.
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• •Treatment of Changes to Property Within Redevelopment Districts. The bill includes procedures for treating the valuation of property that is added to or removed from a redevelopment district, or that is divided within a redevelopment district into more than one redevelopment district. The existing statute is silent concerning the valuation of remaining property within the redevelopment district when such modifications occur. Moreover, the bill defines the term "de minimus" as an amount of less than 15 percent of the land area within a redevelopment district. If the city wishes to remove more than the de minimus amount of property from the redevelopment district or if the city wishes to divide property within the redevelopment district into more than one district, a feasibility study would be required as a precondition for such action. Public notice and hearing would be required if property is divided within a district into separate redevelopment districts. (Public notice and hearing is required in current law for property added to a redevelopment district and for substantial changes to the comprehensive plan.)
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• •Completion of TIF Project. Under existing law, the deadline for completion of a project within the redevelopment district is within 20 years from the date the redevelopment project plan was transmitted to the county. The bill would amend the law to tie the completion of the TIF project to within 20 years of approval by the city of the project plan.
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Background

The introduced version of HB 2005 was recommended by the Joint Committee on Economic Development after its review during the 2000 interim of the TIF statutes. The Joint Committee undertook that review, upon request of the Legislative Coordinating Council, after receiving a request from the League of Kansas Municipalities and representatives of the Unified Government of Wyandotte County and Kansas City, Kansas for simplification of the TIF statutes and process.

The substitute bill is the product of collaborative discussions among several bond attorneys, officials from two cities, a representative of the League of Kansas Municipalities, and a bond attorney for the Attorney General's Office. In addition to various technical and clarifying amendments, the substitute bill includes provisions recommended by city officials of Roeland Park which address the valuation of remaining property within a redevelopment district if property is added to or removed from the redevelopment district or divided within the redevelopment district into separate districts.

The substitute bill also includes a provision that would require a project to be completed within 20 years from the date of the city's approval of the project plan. Finally, the substitute bill changes the date for establishment of the property tax increment to the date of establishment of the redevelopment district. In 1998, the TIF law was amended to deal with a lapsed redevelopment plan in the City of Topeka (a provision which also is proposed for deletion in the bill). The 1998 amendments apparently change the date to January 1 in the year preceding the date of transmittal of the redevelopment plan to the county clerk and, according to bond attorneys, have created confusion. Therefore, it was recommended that this provision of the law be restored to the pre-1998 version.

The Senate Committee of the Whole made technical amendments to the bill.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext.cgi