From: Rhonda Underwood <prettyidangel@yahoo.com>
Date: Wed, Jan 17, 2024 at 5:58 PM
Subject: Lauren's Bay
To: Henry McClure <mcre13@gmail.com>
Developer: City can't stand pat regarding problems with Lauren's Bay Estates
Situation could leave city on the hook to pay $11.1 million
The city of Topeka will "get every lot back" if it charges the current estimated special assessment of $3,318 per parcel in southwest Topeka's Lauren's Bay Estates, said Perry Marney, who owns 28 of the lots.
"The bottom line is that, if nothing changes, that subdivision will never go," Marney told The Topeka Capital-Journal on Friday.
The failure of the 178-lot development — located just west of S.W. 47th and Wanamaker Road — could cost the city as much as $11.1 million, council members learned at their meeting this past week.
Brandon Kauffman, the city's chief fiscal officer and controller/treasurer, said Gene Jani's Brainstorm Development Group initiated the Lauren's Bay Estates project using a process through which the city forms special assessment benefit districts to encourage development.
Developers ask the city to form geographic districts to pay the city's costs to provide such services as water, sewer and street infrastructure. The city, after the work is completed, requires each lot owner to pay a certain amount annually as part of their property tax bill, generally for 20 years.
But the city is legally obligated to pay any bonds it has issued if the developers or property owners default on the special assessment payments, Kauffman told the city governing body in a recent memorandum.
Kauffman said the city has assessed a payment of $701 per lot to put in sanitary sewer system infrastructure to serve Lauren's Bay Estates, and governing body members soon will be asked to approve assessments for projects the city completed to make improvements to a pond and provide water and street infrastructure. Work has yet to be completed on a separate project to make improvements to a second pond, he said.
Meanwhile, Jani went into bankruptcy in 2008 and ownership of the 178 lots is now divided between two banks, four developers and three individual owners. Those lots contain only three houses, Kauffman said.
He said CoreFirst Bank and Trust owns 68 parcels, James Klausman owns 45, Marney owns 28, The Lawrence Bank owns 19, Sam Campbell owns 10, Mark McGivern owns five and individual homeowners own three.
Kauffman's memo indicated the estimated total special assessment rate for the lots is $3,318 a year, at a time when the market rate is $1,800 to $2,160.
"The primary concern for the City is that the specials per lot are higher than the market rate, which will make the lots difficult to sell," Kauffman wrote.
Marney said the city consequently needs to do something other than maintain the status quo."The best way would be to extend the bonds out from 20 years to 30 years, but they say they can't do that," he said. "If they don't do anything and they just run the specials straight, they get every lot back."
The city's governing body on Tuesday will consider scheduling a June 9 public hearing to discuss its options, which Kauffman said include:¦ Assessing the estimated $3,318 per lot.
¦ Putting in place a "partial pre-payment" option, which the city hasn't used in the past but its staff considers to be viable.
¦ Lowering the interest rate owners must pay on the lots, which would require the city to cover the part of the rate they don't pay.Developer Chuck Dultmeier asked the city not to take the latter step at this past week's meeting.
Dultmeier said he owns 237 lots south of Lauren's Bay Estates and about 230 elsewhere in the area.
He said he would be "pounding my fist" if Lauren's Bay Estates got a special rate when he "made it work" without one.Dultmeier suggested the city pursue the partial pre-payment option.
Kauffman explained that option in his memo to the governing body.
He wrote that, during the process to apply special assessments to properties, there is a 30-day window to pay special assessments in advance so they don't apply to the property. The city currently only allows full payment of those assessments but multiple cities in Kansas allow partial prepayments.
"For example, instead of an individual paying $1,000 for their share of the special assessment projects, the City would allow them to pay $500, resulting in the remaining $500 being spread over the 20 years of the bonds," Kauffman said.
He said partial prepayment would allow the city to reduce the debt load and enable Lauren's Bay Estates developers to bring the special assessments on the properties down to a rate that is closer to what the market is dictating.
In addition to dealing with the problems regarding Lauren's Bay, city officials are considering taking steps to mitigate the risk the city takes by offering special assessment benefit districts.
Kauffman said the city collected 97 percent of the special assessments it levied up until 2008, the year of a housing market crash, but has collected only 83 percent since that time.Planning director Bill Fiander said the city will hold an open developer forum from 11:30 a.m. to 1 p.m. Thursday, May 21, at its Holliday Building, 620 S.E. Madison.
Fiander said the city will seek input regarding potentially changing its policy by requiring developers to:
¦ Pay for certain improvements.
¦ Obtain financial sureties. Put down a certain percentage of the project costs.
¦ Allow the city or a third party to perform due diligence on the developer's finances.