City's TIF districts 'an important tool'

Taxpayers are on the hook for at least $2.6 million in development costs because of the Topeka City Council's 2006 vote to provide tax-increment financing to improve central Topeka's College Hill business district.

Still, Greater Topeka Partnership official Curtis Sneden says that project brought a positive transformation to that part of the city by replacing rundown structures with new apartment buildings and retail space.

"That entire area is better off," said Sneden, the partnership's senior vice president.

He was among those The Topeka Capital-Journal contacted this past week as it responded to a question posed through its reader engagement project, ”#TopCity What? You ask. We answer.”

Capital-Journal reader Lyndon Johnson asked for information about the city's existing TIF districts and how they are performing.

The city has two existing TIF districts.

Those are:

• The College Hill TIF District, located generally to the south of S.W. 17th and Washburn Avenue, which was formed in 2006 and hasn't done as well as city officials had hoped it would.

• The Wheatfield Village TIF District at the northwest corner of S.W. 29th and Fairlawn Road, which remains under construction.

Kansas law allows government entities to create TIF districts at the request of developers to help offset development costs. Developers pay off costs over a period of up to 20 years using the increase in property tax and sales tax revenues.

Here is how that works:

Officials determine how much property tax and sales tax revenue the property generated before the project.

Then, after the project begins, they determine how much property tax and sales tax revenue the property generates each year. The increase goes to pay off eligible types of development costs.

For example, if the city collected $100 annually in tax revenue before a TIF district was formed and $500 annually afterward, the $400 increase would go to help pay development costs, said deputy Topeka city manager Doug Gerber.

TIF districts may be established in blighted areas as well as aging or underperforming areas that aren’t blighted. Kansas law also allows for additional approaches, Gerber said.

Sneden said the Greater Topeka Partnership considers TIF districts to be "an important tool to help ensure that our community keeps moving forward."

The general purpose of a TIF is to help a project happen where it otherwise wouldn't have, Councilwoman Karen Hiller said this past week.

She expressed optimism about the future of TIF districts in Topeka, which she said hasn't seen much development over the past 50 years.

Gerber told the city's governing body this past week that the city has recently heard from five or six developers who are interested in seeing the city provide tax-increment financing for projects they hope to carry out.

The city's finance staff is putting in place a "culture of yes" in terms of trying to help developers find ways to carry out projects here, Gerber added.

The city's governing body this past week scheduled a March 19 public hearing regarding the proposed Sherwood Crossing TIF district at the former Villa West Shopping Center at the northwest corner of S.W. 29th and Wanamaker Road.

The property's owner, 29th St. Partners LLC, hopes to make significant improvements there.

If the governing body votes to establish the proposed geographic TIF district, it could later consider entering into a redevelopment agreement with 29th St. Partners.

The city of Topeka has formed four TIF districts since the Kansas TIF Act took effect in 1976.

It most recently established the Wheatfield Village TIF District in 2017 at the northwest corner of S.W. 29th and Fairlawn Road.

That district was formed to help 29 Fairlawn LLC carry out a project to construct a development that is set to include a hotel, an apartment complex, a movie theater, a coffee shop, a tavern and a pizza restaurant.

The move came after Justin Titzman, who was then in the midst of an unsuccessful run for a seat on the council, asked governing body members to deny TIF funding.

The city by providing that incentive would essentially give a “free ride” to the “rich developers,” which wouldn’t be fair to the many Topekans who are struggling, he said.

Hiller voiced enthusiasm this past week about the Wheatfield Village project, saying the property involved has been an eyesore for 30 years and "was just going nowhere."

She said the presence of Wheatfield Village will greatly benefit that area, which she called a "gateway to the city."

Wheatfield Village is the only project in Topeka that has been approved for both TIF financing and a Community Improvement District.

The CID enables the project's developers to levy a 2 percent sales tax upon customers in addition to the sales taxes they already pay. That sales tax may remain in effect for as long as 22 years, with revenue going to reimburse private investment.

Hiller acknowledged the "alphabet soup" regarding CIDs, TIF districts and other economic development incentives can sometimes get confusing.

The Wheatfield Village CID is among five CIDs in Topeka. The others involve properties:

• In the 200 block of S.E. 29th.

• At the Cyrus Hotel in the 900 block of S. Kansas Avenue.

• In Holliday Square, at the southwest corner of S.W. 29th and Topeka.

• At Crosswinds Commons in the 1100 block of S.W. Wanamaker.

CID funding wasn't yet available when the College Hill TIF District was approved in 2006.

The city issued about $5 million in full faith and credit TIF bonds for the project to build apartments, townhomes and retail space in the area. The bonds required the city to be responsible for payments if the College Hill tax revenues weren't sufficient to cover them.

The city has consequently been responsible for about $2.6 million of those costs, according to figures it provided this past week.

Those numbers say tax collections from the district through the end of 2018 totaled about $1.69 million, compared to a total debt service over that time period of about $4.29 million.

Last year, tax collections totaled $213,604.81 while debt service totaled $524,700.

But Sneden said the city learned from its experience with College Hill, and last year put in place a TIF policy that calls for the city to not enter into any TIF arrangements in which it might incur financial risk.

The city since 1976 has established two other TIF districts, which were both subsequently repealed.

Capital-Journal archives show the first, known as the "Watertower TIF District," was set up in 1990 to encourage development in the area of a water tower near S.E. 11th and Quincy.

That project "never really got out of the starting block," Hiller said.

It was repealed in 2000.

The city in 2007 formed the Eastgate TIF District at the request of 15th Street Investments LLC on property that company owned at the northeast and southeast corners of S.E. 15th and Adams.

The city in 2008 entered into a redevelopment agreement calling for the company to build one development at the northwest corner of S.E. 15th and Adams and — if that proved successful — another at the crossing’s southeast corner.

The Eastgate project essentially "got halfway and stopped," Hiller said.

Some improvements were made, including the construction of a strip mall featuring a gas station and convenience store. Others were not.

The Eastgate TIF fund collected more than $177,000 in increased taxes and the developer spent more than $14,000, leaving about $163,000 in accumulated funds, according to Capital-Journal archives.

The city’s governing body voted in 2016 to terminate the Eastgate district, arranging for the city to receive about $70,000, Shawnee County about $87,000 and Washburn University about $6,300.

Hiller said the Eastgate project was good for the city, which got a development where there used to be empty land.

The council voted to establish one other TIF district in 2009, but the proposal died when Shawnee County commissioners exercised their authority to kill it after being told a mistake by the city was forcing the process to start over.

That district would have covered an area that was mostly south of S.W. 37th Street and along both sides of S.W. Topeka Boulevard. It also included the White Lakes Center area bounded by S.W. 37th, S.W. Croix, S.W. Topeka Boulevard and S. Kansas Avenue.

As the city prepares to consider more TIF proposals, Hiller said it is important that it be able to offer such incentives.

"We want to encourage developers to make strategic investments so Topeka can grow and thrive," she said.

WHAT THEY DO

CID: When a community improvement district is established, businesses there may levy a sales tax on customers in addition to the sales taxes they already pay. Five CIDs are active in Topeka.

TIF: When a project receives tax-increment financing, officials determine how much property tax and sales tax revenue were generated before the project by the property involved. After the project begins, they determine each year how much property tax and sales tax revenue the property generates. The difference is applied to pay off eligible types of development costs. Two TIF districts are active in Topeka.

STAR bonds: The sale of State Tax Revenue bonds, also known as STAR bonds, enables municipal governments to finance major commercial, entertainment and tourism areas and repay the debt with state and local sales tax revenue generated by the developments. One STAR bond district is active in Topeka, at Heartland Motorsports Park.