Memorandum

City of Lawrence

TO:	David L. Corliss, City Manager
FROM:	Victor Torres, Director of Neighborhood Resources Ed Mullins, Finance Director R. Scott Wagner, Management Analyst – Dept. of Legal Services John Miller, Staff Attorney – Dept. of Legal Services Lynn Zollner, Historic Resources Administrator Lesley Rigney, Neighborhood Programs Specialist– Neighborhood Resources
CC:	Debbie Van Saun, Assistant City Manager Sheila Stogsdill, Acting Planning Director
Date:	May 24, 2007
RE:	Next Steps in Implementation of Kansas Neighborhood Revitalization Act

Pursuant to your direction, we have investigated and researched other communities’ plans under the Kansas Neighborhood Revitalization Act (NRA) for possible additional opportunities for use in Lawrence. We have prepared draft plans for two additional areas of Lawrence as follows:

Downtown Commercial District (map)
Target Neighborhoods (map)

Additionally, we have a draft policy resolution for consideration which would set forth the goals and policies for use of the NRA in Lawrence.

Background

The City Commission has frequently indicated an interest in implementation of the Kansas Neighborhood Revitalization Act (NRA) as a tool to encourage quality redevelopment of portions of our community (1/19/05 memo, 3/15/06 memo, 8/3/06 memo). During the 1994 legislative session, lawmakers passed Senate Bill 732, creating the NRA. Since that time, numerous Kansas communities have adopted tax rebate plans under the act. The NRA (K.S.A. 12-17,114 et seq.) allows a municipality to adopt a revitalization plan and designate an area(s) as a revitalization district. In essence, a property owner within a designated revitalization area may request a rebate of a portion of the incremental increase in the property taxes resulting from improvements by the taxpayer to property – all subject to the requirements of the revitalization plan. The rebate is only from municipalities (city, county and/or school district) which have agreed to participation in the revitalization plan. The revitalization plan must include 12 required elements, including the criteria for determining eligible property, length of rebates, amount of rebates, and other criteria as determined by the governing body.

On April 3^rd, 2007 the Commission adopted Ordinance 8093 which enacted the first plan under the act for Lawrence – the 8^th and Pennsylvania plan. The plan area for this district encompasses a relatively small area of east Lawrence (roughly from 8^th Street to 9^th Street between Delaware and the alley east of Pennsylvania) and was designed especially for the developers of the project to recapture related infrastructure improvement costs.

This memorandum requests Commission direction on adoption of a City policy regarding the NRA and beginning the implementation of NRA districts for the Downtown Commercial District and for Target Neighborhoods in Lawrence.

NRA Policy Statement

Attached is a draft resolution outlining the City’s policies for use of the NRA in Lawrence.

Two principal areas are considered for inclusion within NRA boundaries: Target Neighborhoods and the Downtown Commercial District (Downtown). Target neighborhoods are defined as those where a majority of households have a low/moderate income based on U.S. Census data. In Lawrence, the City’s consolidated plan for use of federal Housing and Urban Development funds, identifies the below as target neighborhoods:

Brook Creek Neighborhood (data)
East Lawrence Neighborhood (data)
North Lawrence Neighborhood (data)
Oread Neighborhood (data)
Pinckney Neighborhood (data)

The Downtown Commercial District is targeted for its historic properties and to help meet the City’s goals of encouraging development and redevelopment in the central urban core. The boundaries of the district match the boundaries of the urban conservation overlay district established by Ordinance 7395.

The draft policy does provide the flexibility for the Governing Body to consider other areas or properties outside of these boundaries on a case by case basis (see Section 3), if the property meets the conditions of the NRA statute.

Commission input is requested on the draft resolution.

NRAs – Downtown, Target Neighborhoods

Commission input is also requested to begin implementation of NRA districts in the Downtown Commercial District and the target neighborhoods. City staff has reviewed numerous NRA plans adopted throughout the state and has spoken to municipal staff involved with the implementation and operation of these plans. A draft plan of each district is attached and both are based largely on the adopted 8^th & Penn plan.

Highlights of the Plans:

Term of the plan is 2 years in order to allow for an evaluation of the program after the initial rollout
$10,000 minimum increase in appraised value for single and two family residential in order to qualify for rebates – Target Neighborhood Plan.
$10,000 minimum increase in appraised value for multifamily residential and commercial in order to qualify for rebates for the neighborhood plan, $5,000 minimum increase for the Downtown Plan[1].
95% rebate allowed for new construction, remodels, additions - 10 year rebate period on residential properties.
95% rebate allowed for new construction, remodels, additions - 10 year rebate period on commercial properties.
95% rebate allowed for remodels, additions, 15 year rebate period for historic properties.
Creation of a committee consisting of representatives from the City, County, USD 497 to administer capital or other expenditures inside the plan areas for amounts not rebated.

Areas of overlap – there are parcels located in both districts (red boundary indicates the Downtown District - map). The plan documents note that if a property is located within the Downtown Commercial District, it must comply with that plan’s requirements and is eligible for rebates only under that plan. In the East Lawrence neighborhood there are areas of overlap with the already established 8^th & Pennsylvania district. Properties located in the 8^th & Pennsylvania district must comply with, and are only eligible for rebates, under that NRA plan.

Tax Implications of NRA Plans

The attached report analyzes the potential tax effects of adopting the two NRA plans. It is based upon actual building permit valuation data over the past 3 years. For discussion purposes, the data presented assumes that appraised valuations increase by the same amount as the building permit valuation. Staff recognizes that building permit data does not automatically translate to a like increase in appraised value. It also assumes that some improvements would not take place without adoption of the plan. In summary, net revenue to the taxing entities adopting the plans does not decline after adoption of a NRA plan, in fact there should be an increase in property tax payments due to increases in appraised values and a portion of the rebates are retained by the fund. The Act is designed to provide for an overall increase to the tax base which should provide increased revenue for taxing units over the lifetime of capital investment into the designated areas. Over the past three years (2004-2006) roughly 300 residential building permits, (100 per year) were applied for in the target neighborhoods and 85 commercial permits (28 per year) were issued in the downtown district. Staff anticipates a similar or greater level of properties would be eligible for tax rebates should the plans be adopted.

Staff has presented initial drafts of the plans, informally to Downtown Lawrence Inc., DLI and to the Lawrence Association of Neighborhoods – LAN.

Policy direction is needed on several items, including but not limited to:

1) Next steps – staff recommends meetings to be held with the county and USD 497

2) Meetings with key stakeholders – DLI, neighborhood groups

3) Other policy issues of the plans?

· Financial cap on program rebates

· Assign rebate fund to an existing committee

· Annual report to evaluate the NRA plans

· Incentives for owner occupancy only

· Transfer of rebate upon change in ownership

· Additional improvement fund for the Downtown district (City of Shawnee Programs: Downtown Improvement Grant Loan Incentive Program)

· Creation of a Downtown Improvement Program and Vision Document

[1] Average commercial remodels in the downtown district, have averaged $5,210 over the past 3 years. Staff recommends a lower minimum commercial threshold for the downtown district so that more projects will qualify under the plan.