County counselor outlines risks and limits of industrial revenue bonds, questions use for housing

Riley County counselor Jacob Hansen gave an extended administrative briefing July 24 on industrial revenue bonds (IRBs), the statutory authority the county uses to consider property-tax exemptions and common local practices, and he said the county should weigh potential economic gains against reductions in the property-tax base.

Hansen pointed commissioners to the statutory language he referenced in the meeting (quoted in the discussion as “79201 a 20 fourth” as the site of the statute) and to a Kansas Legislative Division audit report from 2022 reviewing IRB use and outcomes. He said local practice around the state commonly ties the size of a tax abatement to the amount invested in a project — for example, abatements that run up to 60% in some jurisdictions — and that many counties use policy caps and project lists to limit which industries are eligible. He said that in his review he did not find local IRB policies that explicitly listed housing as an intended use.

Hansen told the board that while statutes permit property-tax exemptions in connection with IRBs, the degree of local control varies and policy language often includes limits. He said several Kansas jurisdictions he examined (Johnson County, Bonner Springs, Olathe, Wyandotte County, Sedgwick County) have formal IRB policies that generally do not promote full tax exemption for long periods without accompanying public benefits. He also cited a 2022 legislative audit finding that on a per-dollar basis the property-tax base often does not recover a full dollar of revenue when IRBs are granted — a point he said counties should weigh when evaluating projects.

On the question of residential use, Hansen said he was not confident IRBs were typically intended for housing projects: “Not one of them has said housing, not one of them,” he said, and added that IRBs are historically designed to attract job-creating industries rather than retail or residential projects. He recommended evaluating pilot payments (payments in lieu of taxes, or PILOTs) as a tool to compensate other taxing jurisdictions when a city or county grants an abatement.

Hansen said he would circulate the legislative audit report and other reference material to the board for review and that the county should consider policy guardrails if it evaluates IRB requests.

Ending: Commissioners asked staff to review the materials and policies Hansen identified; Hansen said he would provide the audit report and county policy examples for further consideration.