Wichita special assessments for repairs is bad policy

Lofts at St. Francis, Wichita, Kansas

At Tuesday’s meeting of the Wichita City Council, a privately-owned condominium association is seeking special assessment financing to make repairs to its building. In order for the association to succeed in its request, the council will have to waive two guidelines of Wichita’s facade improvement program.

Special assessment financing means that the cost of the repairs, up to $112,620 in this case, will be added to the building’s property taxes. Actually, in this case, to each of the condominium owners’ taxes. They’ll pay it off over the course of 15 years. (A conversation with the president of the homeowners association brought out the possibility that the actual assessment may be in the neighborhood of $75,000.)

So the city is not giving this money to the building’s owners. They’ll have to pay it back. The city is, however, setting new precedent in this action.

Special assessment financing has traditionally been used to fund infrastructure such as streets and sewers, and new infrastructure at that. The city, under its facade improvement program, now allows this type of financing to be used to make repairs and renovations to existing buildings. That’s if the building is located in one of the politically-favored areas of town.

By using special assessment financing in this way, the city seeks to direct investment towards parts of town that it feels doesn’t have enough investment. This form of centralized government planning is bad public policy. The city should stop doing this, and let people freely choose where to invest.

Besides this, two guidelines in the city’s facade improvement program must be waived for this project to obtain special assessment financing.

The first is the private investment match. This is designed to ensure that the property owners have “skin in the game” and that the taxes will be paid back.

Here, the city is proposing that since the building’s owners have made a past investment in this property, there’s no need to require a concurrent investment. It hardly needs to be noted that anyone who has purchased property has made a past investment in that property.

Second, facade improvement projects are required to undergo a gap analysis to “prove” the need for public financing. According to the city’s report: “This project does not lend itself to this type of gap analysis; however, staff believes that conventional financing would be difficult to obtain for exterior repairs to a residential condominium property like this.”

So the city proposes to waive this requirement as well.

There seems to me to be a defect in the manner of ownership of this building. While the homeowners association and the condominium owners might not have anticipated that repairs would be needed so soon after the building’s opening, they must have contemplated that repairs and maintenance — to either exterior or interior common areas — would be needed at some time. How does the association plan to pay for these?

So what will happen if the city council doesn’t approve the special assessment financing? The agenda report states “Each individual condo owner would be required to fund a share of the cost.”

Isn’t that what private property owners do: fund the cost of repairs to their property?

According to the Sedgwick County Treasurer’s office, the appraised values of these condos range from $103,000 to $310,200, with an average value of $201,943. The maximum amount being added to each condo’s assessment is $4,022, although the actual amount may be closer to $3,000.

That’s along the lines of what it might cost to perform a few repairs and paint a house that’s worth what these condos are worth.

Let’s ask that these owners do just what thousands of homeowners in Wichita do every year: take responsibility for the maintenance of their own property without looking to city hall for help.

Lofts at St. Francis Agenda Report 2009-08-18

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8 thoughts on “Wichita special assessments for repairs is bad policy”

  1. There you go again twisting the facts. Special assessment financing is just that, financing. The owners still pay for the repairs, it’s just through public funds and not private funds. They use the city’s bonding capacity instead of going through the private capital markets. Guess what? The city makes some money in the process.

    Also, why do you discredit yourself and the information that you provide by intimating that this is only because the applicants are “politically favored”? The fact of the matter is that the facade improvement program is availabe to anyone within a designated area. I know people who I wouldn’t consider politically connected that have made use of the program. Debate the merits of the program, but don’t muddy the waters with cronyism.

    Lastly, as you correctly noted, the facade improvement program requires the owner or owners in this case, to have skin in the game. It should be noted that often times, the developers who are using SA financing for public infrastructure don’t have skin in the game.

  2. Pat, after reading Bob’s article and your criticism of it, I would suggest that you take a reading comprehension course.

  3. Bob, you are right! The use of an exception to the special assessment financing is favoring the politically connected in this case, but I don’t believe that it will set a precedent since this Mayor and City council has shown time and time that regardless of what the rules are “only their campaign contributors” receive the special financing.

  4. Perhaps I should set forth the reasons for my prior post. It mainly deals with this statement, “The city, under its facade improvement program, now allows this type of financing to be used to make repairs and renovations to existing buildings. That’s if the building is located in one of the politically-favored areas of town.”

    First of all, “politically-favored” is misleading as it tends to intimate that the only reason why someone would use the program is that they are politically connected to city hall, which is a common mantra of Bob’s. That is not the case as the façade program has been used by some who wouldn’t fall into that category. Perhaps some clarification would help as to what is meant by “politically favored”.

    Secondly, the facade improvement program has been around for several years so it’s not “now allows”. Usage of the facade improvement in and of itself is not a “new precedent” either as is opined. Nor is the waiver of the two conditions necessarily a new precedent either because the conditions of a gap analysis and a private investment are new conditions that have been added by new manager Layton. Those requirements didn’t exist before and Layton deserves some credit for adding stricter financial requirements to this program and others.

    So, no, I don’t need a comprehension reading program. I know what the program is, what the history of the program is, how it works, how it’s been used and its shortcomings. The blog raises the issue of the program and this particular application. Have no problem with that; however it does the discussion a disservice to not be factually accurate. The discussions about condo ownership when they should of known, how would they finance it otherwise, etc., miss the point altogether, that being, among other things, is this an appropriate use of the program and is it appropriate to waive the financial requirements?

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