Commission reviews development incentives including IRBs, TIF, RHID and special benefit districts

The Ottawa City Commission on April 9 heard a staff-led review of the economic development incentive tools the city can use to encourage commercial, industrial and residential growth.

The presentation, led by Bruce Kimmel of Eller's and bond attorney Tyler Ellsworth, outlined how each tool works and noted legal and policy constraints the city currently applies. Bruce Kimmel summarized the practical limits the city uses, saying the city’s policy “is that that minimum issuance size needs to be at least $2,000,000.”

The discussion covered several tools commonly used in Kansas. Industrial revenue bonds (IRBs) can provide a sales tax exemption on construction materials and, in some cases, a property tax abatement; the city’s current policy allows up to a 50% abatement for up to 10 years with additional considerations in specific situations. Constitutional tax abatements serve projects that fall outside IRB eligibility; Kimmel and Ellsworth cited the Hasty Awards expansion as a recent local example where a constitutional abatement was used because the IRB statute did not clearly apply.

Neighborhood revitalization programs (NRPs) were described as incremental property tax rebate programs that require review by the city, county and school district and typically need projects to increase property valuation by at least 25% to qualify. Tax increment financing (TIF) was explained as a pay-as-you-go mechanism to capture incremental property or sales tax revenue to reimburse eligible redevelopment costs; staff emphasized identifying eligible costs clearly and preferring pay-as-you-go reimbursements rather than bond issuance to reduce risk.

Ellsworth described residential housing incentive districts (RHIDs) as a specialized tax-increment tool for housing that must be approved by the Kansas secretary of commerce and requires a feasibility study and a “but-for” analysis to show the need for assistance. He said, “RHIDs require approval from the secretary of commerce” and reiterated that RHID projects commonly target 10 or more rental homes under the city policy.

Community improvement districts (CIDs) and transportation development districts (TDDs) were presented as district-level sales taxes or assessments that can fund public and, in some cases, private infrastructure or vertical improvements. The city’s policy sets a $250,000 minimum investment for CIDs and collects an annual 5% administration fee on CID revenue. Special benefit districts (SPDs), used primarily for subdivision streets and utility infrastructure, involve city-issued municipal debt repaid by special assessments on properties in the district; staff said a developer financial guarantee—“typically…a letter of credit”—is commonly required to protect city taxpayers.

Commissioners asked about past experience with the Coves subdivision, a project that stalled after the 2008 housing crash and later required city intervention. Kimmel and Ellsworth urged careful vetting of developer partners and structuring deals to limit city exposure, for example by requiring developer contributions or guarantees before city funds are committed. Kimmel noted that assessment rates are sometimes set above the bond rate to provide a cushion against delinquencies.

No formal action was taken; the presentation served as an educational review for commissioners and staff. Commissioners were told the city’s economic development incentive policy will likely return for amendments soon to account for tools such as RHID.

The commission and staff also noted a separate 2024 annual economic development report included in the packet and said staff can share the incentive application materials with interested developers once the city’s web page reconstruction is complete.