HOUSINGHOUSINGINCENTIVE POLICYINCENTIVE POLICY

February 20, 2010

Presentation to Area BanksPresentation 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.

2008 - 2013 2014 - 2020 Total

Owner Occupied- Market Need

Affordable Low: $60-100,000 market value 115 149 263

Affordable Moderate: $100-130,000 142 184 326

Moderate: $130- 200,000 162 210 372

High: Over $200,000 149 193 342

Total Owner Occupied 568 736 1,303

Renter Occupied

Low: Less than $450 per month 123 159 282

Affordable: $450-700 per month 122 158 280

Market: Over $700 per month 134 173 307

Total Renter Occupied 379 490 869

Total Need 947 1,226 2,172

*This analysis assumes a split of 60% owner-occupied and 40% rental, comparable to existing proportions.*About 589 owner - occupied units, or about 49 units annually, should ideally be priced below $130,000. Many of theseunits may come from the city's existing housing stock.*There will be a demand for an additional 562 rental units priced below $700.

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 infrastructure2. high cost of building supplies3. property taxes4. low market costs/ rent rates5. difficulties with the development process

Summary – if it does not cash flow …………..developers will not risk the capital

Factor’s Compounding the CrisisFactor’s Compounding the Crisis

Unlike much of the country, our community is still Unlike much of the country, our community is still growing regardless of the poor state and national growing regardless of the poor state and national economy. Some of the latest reports from the economy. Some of the latest reports from the Development Corporation indicate employers have over Development Corporation indicate employers have over 600600 available positions to staff. available positions to staff.

Our unemployment rate, as of December 2009, is 3.2%, Our unemployment rate, as of December 2009, is 3.2%, which is compared to a 6.3% rate for the State of Kansas. which is compared to a 6.3% rate for the State of Kansas. This rate indicates that there are 519 citizens available for This rate indicates that there are 519 citizens available for work. work. http://klic.dol.ks.gov/vosnet/lmi/area/areasummary

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…..Steps that the City has already taken…..

1.1. Adopted a Housing Incentive PolicyAdopted a Housing Incentive Policy

2. Adopted a Neighborhood Revitalization Program (NRP)Adopted a Neighborhood Revitalization Program (NRP)

3. Adopted a Rural Housing Incentive District Program (RHID)Adopted a Rural Housing Incentive District Program (RHID)

Neighborhood RevitalizationNeighborhood Revitalizationaka - NRPaka - NRP

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

Assessed Valuation Assessed Valuationof Unimproved after Property

Property Improved$25,000.00 $40,000.00

Neighborhood RevitalizationNeighborhood RevitalizationFinancial ImpactFinancial Impact

AMOUNTOWNER'S DISTRIBUTED

% OF REBATE TOYEAR REBATE AMOUNT TAXING ENTITIES

1 95% 475.00$ 25.00$ 2 95% 475.00$ 25.00$ 3 95% 475.00$ 25.00$ 4 95% 475.00$ 25.00$ 5 95% 475.00$ 25.00$ 6 0% -$ 500.00$

2,375.00$ 625.00$

NRP – Historic Downtown NRP – Historic Downtown IncentiveIncentive

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

Where does the NRP apply?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 thedevelopment 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 anddeferring 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 Where does the does the

RHID RHID apply?apply?

- RHID Districts

A balance is reached which benefits the whole community.