Sedgwick County rejects incentives for apartment project
The Sedgwick County Commission has vetoed Goddard’s plan to give a developer $3.5 million in state incentives to build apartments at the Genesis Sports Complex.
Commissioners voted 5-0 against the incentive package, which would have diverted property taxes from that land to pay for up to $3.5 million in eligible costs for a 108-unit apartment complex.
County staff recommended nullifying Goddard’s agreement with Goddard Housing LLC, a Delaware corporation with unknown ownership and ties to Rodney Steven II, who owns the Genesis Sports Complex land with his brother, Brandon Steven, through Goddard Sports LLC.
Commissioners said the development deal would create “adverse effects” on Sedgwick County, which would have foregone $1.45 million in property tax dollars over the years to fund the project.
Brent Shelton, deputy chief financial officer for Sedgwick
County, said the RHID incentive would have a negative fiscal impact on the county, unnecessary costs for taxpayers and a risk of wasted taxpayer funds. The commission had two options: block the deal or take no action, allowing it to pass by default.
Shelton said the county
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would get back 28 cents for every dollar it invests in the project and the fire district would get back 18 cents for every dollar it invests in the project. Meanwhile, Goddard Housing LLC stood to turn a profit of at least 7% on the project without the RHID within three years. He also said the apartments were not likely to spur other substantial economic development in the area.
“While we have heard that the additional housing units may create the opportunity for a sit-down or casual dining restaurant in the area, what we see is that’s about the only economic driver that has been mentioned by the city as something that would come about potentially as a result of this development,” Shelton said.
Commissioner Sarah Lopez said she also had concerns that Goddard Sports LLC, the company owned by the Steven brothers, is $17,000 delinquent on its property taxes at the Genesis Sports Complex.
“There’s a Goddard Sports LLC. There’s a Goddard Housing LLC. Goddard Sports is about $17,000 delinquent in property taxes,” Lopez said. “So who is — I’m trying to understand. Is that the group — who’s delinquent in taxes — asking for this? Is it Goddard Housing? I’m trying to understand who this is, and I can’t follow the line.”
Shelton did not identify the owners of Goddard Housing LLC.
“Commissioner, that’s another thing that we always want to know — is the developer qualified, have they done this type of work before, do they have the financial capacity to carry it forward? Goddard Sports LLC is the current owner of the site for this potential RHID. Goddard Sports LLC also owns all the property adjoining it, including the property that’s in the STAR bond district.
“Our understanding of the development agreement is Goddard Housing LLC would be the developer of the project. They’re going to acquire — either through purchase or transfer of some sort — this land. The delinquent taxes that you refer to are Goddard Sports LLC, and they’re on this parcel as well as some others right there within that complex.”
Shelton said a federal grant meant for moderate income levels does not ensure the apartments are affordable for most residents of Sedgwick County.
“These would need to be affordable to someone making $90,000 a year,” Shelton said. “30 percent of that generates about a $2,200 a month rent rate. I’m not saying that’s what they’re going to charge; I’m just saying that the rates could fall between $900 and $2,200 a month.”
“I don’t know that $2,200 a month is what I would consider affordable or moderate, so I have concerns on that piece alone,” Lopez said.
A Wichita Eagle report last week found $1.2 million of the incentive package would be used to fund a land transfer from an LLC owned by Rodney Steven II and Brandon Steven to Goddard Housing, according to the development agreement passed by the Goddard City Council on April 15.
Steven and a spokesperson for Genesis Health Clubs later told The Eagle that he no longer planned to use $1.2 million for land acquisition and that those dollars would be used on other expenses for the project. No formal change to the development agreement was approved by the Goddard City Council.
The land was to be the site for 108 garden-style apartments near baseball and softball diamonds at the Genesis Sports Complex south of Kellogg in Goddard. It would have been the second time Goddard had used state incentives to buy the 7.57 acre site for a developer.
Goddard’s city administrator told The Eagle the apartment project could not be completed “but for” the $3.5 million in Reinvestment Housing Incentive District funds.
Goddard, a Wichita suburb, has already approved a $2 million federal housing grant and $17.35 million in industrial revenue bonds – which eliminate sales tax on construction materials – to subsidize the apartment project. IRBs can also be used to abate property taxes, but Goddard left them in place so the project could use property taxes to pay off the RHID funds. Combined, the federal grant and IRB sales tax break amount to a $2.6 million subsidy.
Similar to tax increment financing — or TIF — RHIDs divert local property taxes within the district to reimburse developers for eligible costs such as land acquisition and public improvements. RHIDs can last up to 25 years — five years longer than TIF districts — meaning properties in reinvestment housing districts this year would not return to the tax rolls until 2049.
Any local taxing jurisdiction in the district may nullify an RHID project within 30 days or the incentives automatically take effect. In Goddard, that includes the Sedgwick County commission and the Goddard school district.
The RHID incentive program had been confined to rural areas but has been expanded by the Kansas Legislature to allow its use in urban and suburban housing projects. Much of Wichita and its suburbs are now eligible for the housing incentive.
The Goddard apartment project was the first RHID project approved by a local government in Sedgwick County.
Commissioners said they don’t think developers need incentives to turn a profit on apartments in Wichita suburbs.
Commissioner David Dennis said apartments are being built in other suburban communities around Sedgwick County — such as Maize and Park City — without incentives. He questioned why incentives are needed to build apartments in Goddard.
”How can they build apartments and make money on them, but you can’t build apartments in Goddard and make money on them?” Dennis asked Goddard’s Mayor George Liebe, who attended the county meeting to advocate for the project.
“That’s kind of getting beyond my level of expertise, to be quite honest,” Liebe said. “I’m a banker, and I’m retired at that.”
Joe Oaks, a Kansas City-area real estate attorney representing Goddard
Housing LLC, insisted that the developer would not turn a profit without a package of incentives, including the $3.5 million in RHID.
“You’re going to have a negative return without incentives, and you’re going to have a 1.8 percent return without this RHID,” Oaks said of the developer’s profits for the project.
Sedgwick County’s resolution outlined three reasons the commission should nullify Goddard’s incentives agreement:
“The negative fiscal impacts of the Proposed District on Sedgwick County exceed the benefits.”
“The apartment complex in the Proposed District is economically feasible without incentives, thus the Proposed District creates additional cost for the county’s taxpayers unnecessarily.” “Financial guarantees by the developer are insufficient to mitigate against default risk, thus creating a risk that county taxpayer dollars will be spent on a project with increased risk of default and wasted taxpayer funds.”