Developers seek $1.45M from workforce-housing sales tax to close $1.8M funding gap for 40-unit infill project

Community Development Director Stephanie Peterson and developers presented a revised Manhattan "infill housing" package July 22 that proposes 40 workforce units across three infill sites and requests $1,450,000 from the city's workforce-housing sales tax fund plus property-tax and sales-tax incentives on a subset of rental units. Peterson said the combined proposal would yield 40 new three-bedroom, two-bath homes: 26 at the LK townhomes site, eight workforce for-sale units (plus four market-rate units) at Lee Mill Village, and six rental townhomes at Parkside. All 40 units would be targeted to households at or below 120% of area median income under the city's workforce definition. The developers propose staging construction over three years, with about 20 units in year one and 10 units in years two and three. Peterson said 50% of the requested workforce-housing grant would be reimbursed at foundation-and-footings inspection and the remaining 50% at certificate of occupancy. The development team told commissioners the project leverages $650,000 in a Kansas Housing Resources Corporation (KHRC) moderate-income-housing (MIH) grant and a $1.2 million Kansas housing investor tax credit allocation; those state resources increase oversight and require household income and residency verification. The developers and city staff said selling 22 of the units would generate cash proceeds and that private financing secured to date totals about $4.28 million. The total project cost for 40 units was presented as roughly $14.5 million (about $360,000 per unit). After KHRC funds and sales proceeds the project still shows an estimated funding gap of about $1.8 million. The developer and city staff said the requested $1,450,000 workforce-housing sales tax grant plus IRB sales-tax and property-tax exemptions on the 18 rental units would cover that gap. Staff and the developers presented an analysis comparing a now-vetoed RHID (residential housing incentive district) approach with the current workforce-sales-tax approach. They said the revised package would generate higher near-term property-tax increment (estimated about $150,000 per year within 36 months) compared with the prior RHID path, which was estimated at about $68,000 per year in early yield; projecting 15 years, staff estimated $1.8 million in property-tax receipts versus $815,000 under the earlier structure. Commissioners and members of the public raised several concerns: one commissioner and multiple neighbors opposed the Parkside/East Park townhome design, saying tall three-bedroom townhomes conflict with the neighborhood's scale and historic character. Public commenters and Habitat for Humanity staff urged stronger shared-equity protections (community land trust or deed restrictions) to preserve long-term affordability; Habitat representative Josh Brewer urged implementing a Good Steward Community Land Trust or similar stewardship to keep subsidized equity in the community. Other commenters including local builders and property managers expressed support for adding infill workforce homes and for the rental component, noting local demand and construction-cost pressure. Peterson said the workforce-housing sales tax policy has a $25,000 per-unit cap but gives the commission discretion to exceed it. She also said KHRC will monitor unit prices for the MIH grant for four to five years and that units included in a city property-tax abatement would be monitored by the city for 10 years if approved. The commission asked staff to return with a cost-benefit analysis and clarified that no vote was required at the work session; the item was informational and will return for formal consideration at a later meeting. Ending: Staff will prepare follow-up materials including a financial/cost-benefit analysis, annual disbursement projections, and additional answers on zoning, timelines and monitoring requirements for commission action at a future meeting.