HOUSING INCENTIVE POLICY February 20, 2010 Presentation to Area Banks

In 2008, the Dodge City/Ford County Development Corporation through support from Black Hills Energy completed a community housing assessment (CHAT report) for Dodge City and Ford County. The report held no real surprises, it simply documented an extreme housing shortage.

CHAT Report – Dodge City Housing Needs

FACTORS INFLUENCING DEVELOPERS The Development Corporation, with the CHAT report in hand, began heavily pursuing housing development with local contractors and outside developers. Many looked but few were willing to pursue the risk due to the following issues: 1. cost of infrastructure 2. high cost of building supplies 3. property taxes 4. low market costs/ rent rates 5. difficulties with the development process Summary – if it does not cash flow …… ……..developers will not risk the capital

Factor’s Compounding the Crisis Unlike much of the country, our community is still growing regardless of the poor state and national economy. Some of the latest reports from the Development Corporation indicate employers have over 600 available positions to staff. Our unemployment rate, as of December 2009, is 3.2%, which is compared to a 6.3% rate for the State of Kansas. This rate indicates that there are 519 citizens available for work. Our unemployment rate, as of December 2009, is 3.2%, which is compared to a 6.3% rate for the State of Kansas. This rate indicates that there are 519 citizens available for work.

What can we do to help stimulate housing? 5. difficulties with the development process 1. cost of infrastructure (programs offered through St. legislation, existing programs ) 2. high cost of building supplies (out of our control) 3. property taxes (all taxing entities have worked diligently to control this issue) 4. low market costs/ rent rates (out of our control) (currently working to address)

Steps that the City has already taken….. 1.Adopted a Housing Incentive Policy Adopted a Neighborhood Revitalization Program (NRP) 2. Adopted a Neighborhood Revitalization Program (NRP) Adopted a Rural Housing Incentive District Program (RHID) 3. Adopted a Rural Housing Incentive District Program (RHID)

Neighborhood Revitalization aka - NRP  The NRP is a program established through state statute which allows taxing entities to rebate to the property owner 95% of the incremental tax from qualified improvements to the property as a method to encourage:  renovation of properties,  demolition/infill  and new developments.

Neighborhood Revitalization Financial Impact

NRP – Historic Downtown Incentive Renovation of any property on the local, state or national register of historic places will be considered to receive a rebate of up to one hundred percent (100%) for ten (10) years. Renovation of any property on the local, state or national register of historic places will be considered to receive a rebate of up to one hundred percent (100%) for ten (10) years.

Where does the NRP apply?

Rural Housing Incentive Districts aka - RHID The RHID is an incentive authorized and guided by state statute Requires the establishment of districts for the development to occur Requires the developer and the City to reach a development agreement, which requires the developer to commit to a minimum number of units The RHID allows the City to issue tax exempt bonds to cover such things as infrastructure. The incremental tax increase from the minimum units is then utilized to pay back the bonds

Advice from Bond Counsel Bond counsel has recommended encouraging the banks who are financing the development to purchase the tax exempt bonds at the end of the project. In a perfect world, the tax exempt revenue bonds would be sold to finance the infrastructure. However, in today’s volatile markets, we must come up with a way to provide for the gap in financing the infrastructure. The City is willing to finance that gap by issuing special assessments and deferring payments for a reasonable period of time.

What is the risk to the Developer? If the bonds are sold, the developer’s risk is reduced as there is no longer special assessments causing cash flow issues. In our market, maintaining full occupancy should not be an issue, as the incentives will be withdrawn once demand is met. The risk to the developer increases if the bonds fail to sell due to the special assessment payments.

What is the risk to the City? The City will have reasonable assurances/collateral built into the development agreement. Even though these are special revenue bonds and are not backed by the full faith and credit of the City, the risk to the City increases if the bonds fail to sell due to the cash flow issue with the developers special assessment payments.

What is the risk to the Bank? The risk to the bank is limited as a cost benefit analysis had to be completed prior to completion of the development agreement. Therefore, the tax exempt bond holders can be reasonably assured that the bond payments will be made.

Where does the RHID apply? - RHID Districts

A balance is reached which benefits the whole community.