Read the full stored bill text
HOUSE BILL No. 2737
AN ACT concerning economic development; relating to tax increment financing; providing
for alternative financing of projects through taxpayer agreements; enacting the
taxpayer agreement act; amending K.S.A. 12-1774 and repealing the existing section.
Be it enacted by the Legislature of the State of Kansas:
New Section 1. (a) Sections 1 through 3, and amendments thereto,
shall be known and may be cited as the taxpayer agreement act.
(b) For purposes of the taxpayer agreement act:
(1) "Act" means the taxpayer agreement act.
(2) "Project" means an economic development project of a city
eligible for tax increment financing pursuant to K.S.A. 12-1770 et seq.,
and amendments thereto.
(3) "Taxpayer agreement" means an agreement between a city and
a project developer that meets the requirements of and is subject to the
provisions of this act.
New Sec. 2. (a) A city authorized to undertake a tax increment
financing project pursuant to this act and K.S.A. 12-1770 et seq., and
amendments thereto, may enter into a taxpayer agreement with the
owner or developer of real property located within a tax increment or
redevelopment district after obtaining a written statement of consent
executed by each holder of an existing, previously recorded mortgage
or deed of trust on such real property securing indebtedness whereby
each such holder of an existing mortgage or deed of trust on such real
property consents to the taxpayer agreement and indicates that the
agreement does not constitute an event of default under the existing
mortgage or deed of trust. In the absence of such written statement of
consent, any lien created by the taxpayer agreement shall be
subordinate to such mortgage or deed of trust recorded before the
effective date of the taxpayer agreement. A taxpayer agreement may be
used to:
(1) Limit such owner's or developer's rights to challenge the
owner's or developer's assessment or property taxes or enforcement of a
tax lien established pursuant to this act;
(2) guarantee, enhance or otherwise secure the repayment of
bonds, notes or other obligations issued to finance project costs by such
city;
(3) provide for payments in lieu of or in addition to tax increment
revenues; or
(4) provide for any payment obligation designed to support the
financing or refinancing of project costs.
(b) A taxpayer agreement entered into pursuant to this section
constitutes a voluntary and binding payment obligation of the property
owner or developer and shall not constitute a pledge of the credit or
taxing power of the state or any city.
(c) If a taxpayer agreement provides that payments due under the
agreement are secured by a lien on real property, such lien:
(1) Shall arise and be in full force and effect automatically upon
the execution and recordation of the agreement;
(2) shall constitute and be treated in the same manner as a
municipal claim and real estate tax lien pursuant to law, except for
limitations on the property owner's or developer's rights to challenge
the lien, assessment or property taxes pursuant to subsection (a);
(3) shall have parity with real estate tax liens, taking priority over
any existing or subsequent mortgage, judgment, lien or encumbrance,
except for previously filed real estate tax liens; and
(4) may be enforced, collected and foreclosed in the same manner
as real estate taxes, except for limitations on the property owner's or
developer's rights to challenge the lien, assessment or property taxes
pursuant to subsection (a), including tax claim bureau sale, sheriff's sale
or judicial foreclosure.
(d) A taxpayer agreement containing a lien under subsection (c)
shall be recorded with the register of deeds in the county where the
property is located. Such recordation shall provide constructive notice
and perfect such lien without further action.
HOUSE BILL No. 2737—page 2
(e) (1) Payments due under a taxpayer agreement shall be deemed
delinquent if unpaid on the required date as provided by the taxpayer
agreement. A delinquency may be certified and enforced in any manner
pursuant to the taxpayer agreement and as delinquent real estate taxes
pursuant to law.
(2) All interest, penalties, fees and collection costs applicable to
delinquent real estate taxes shall apply to delinquent taxpayer
agreement payments.
(f) A taxpayer agreement and any lien securing the taxpayer
agreement may be assigned to a trustee or purchaser of bonds issued to
finance project costs secured by such taxpayer agreement. The assignee
shall possess all enforcement rights held by the city.
(g) Upon full payment of all obligations secured by the taxpayer
agreement, the city shall execute and record a release of lien, which
shall extinguish the lien effective upon recording.
New Sec. 3. (a) In addition to any powers under this act or other
law, a city may issue bonds as a conduit issuer to finance project costs
within a tax increment or redevelopment district.
(b) (1) Bonds issued under this section may be secured by:
(A) A pledge or assignment of payments due under a taxpayer
agreement;
(B) a pledge or assignment of any lien created by a taxpayer
agreement;
(C) a pledge of incremental tax revenues; or
(D) a pledge or assignment of reserves, guaranties or private
security.
(2) The city may pledge, assign or grant a security interest in such
payments, liens, revenues or other security to a trustee or purchaser of
the bonds.
(c) Bonds issued pursuant to this section:
(1) Are payable solely from the revenues and security pledged;
(2) do not constitute a general obligation of the city or the state;
(3) do not constitute municipal debt for purposes of any statutory
or constitutional debt limitation; and
(4) impose no financial obligation on a city beyond receipt and
remittance of pledged payments.
(d) A city issuing bonds pursuant to this section acts solely as a
conduit issuer, and repayment shall be limited to:
(1) Taxpayer agreement payments;
(2) pledged incremental tax revenues; or
(3) any additional private security.
(e) (1) A city may assign to a trustee or bondholders:
(A) The city's right to receive payments under a taxpayer
agreement;
(B) any lien securing such payments; and
(C) any enforcement rights pursuant to section 2, and amendments
thereto.
(2) An assignee shall have all enforcement powers held by the
city.
(f) A city may enter into agreements with any trustee, servicer or
bondholder for the purpose of implementing any taxpayer agreement or
any of the provisions of this act.
(g) Nothing in this act shall be construed to limit the powers of a
city under the tax increment financing law, K.S.A. 12-1770 et seq., and
amendments thereto.
(h) Nothing in this act shall be construed to:
(1) Require any city to enter into a taxpayer agreement;
(2) impose any financial obligation on a city; or
(3) constitute a guarantee by a city or the state of any bond issued
pursuant to this act.
Sec. 4. K.S.A. 12-1774 is hereby amended to read as follows: 12-
1774. (a) (1) Any city shall have the power to issue special obligation
bonds in one or more series and/or or execute and deliver a loan from
the Kansas transportation revolving fund pursuant to K.S.A. 75-5063 et
HOUSE BILL No. 2737—page 3
seq., and amendments thereto, to finance the undertaking of any
redevelopment project or bioscience development project in accordance
with the provisions of this act. Such special obligation bonds or loans
shall be made payable, both as to principal and interest:
(A) From tax increments allocated to, and paid into a special fund
of the city under the provisions of K.S.A. 12-1775, and amendments
thereto;
(B) from revenues of the city derived from or held in connection
with the undertaking and carrying out of any redevelopment project or
projects or bioscience development project or projects under this act
including environmental increments;
(C) from any private sources, contributions or other financial
assistance from the state or federal government;
(D) from a pledge of a portion or all of the revenue received by
the city from any transient guest and local sales and use taxes which are
collected from taxpayers doing business within that portion of the city's
redevelopment district or bioscience development district established
pursuant to K.S.A. 12-1771, and amendments thereto, occupied by a
redevelopment project or bioscience development project. A city
proposing to finance a major motorsports complex pursuant to this
paragraph shall prepare a project plan which shall include:
(i) A summary of the feasibility study done, as defined in K.S.A.
12-1770a, and amendments thereto, which will be an open record;
(ii) a reference to the district plan established under K.S.A. 12-
1771, and amendments thereto, that identifies the project area that is set
forth in the project plan that is being considered;
(iii) a description and map of the location of the facility that is the
subject of the special bond project or major motorsports complex;
(iv) the relocation assistance plan required by K.S.A. 12-1777, and
amendments thereto;
(v) a detailed description of the buildings and facilities proposed
to be constructed or improved; and
(vi) any other information the governing body deems necessary to
advise the public of the intent of the special bond project or major
motorsports complex plan.
The project plan shall be prepared in consultation with the planning
commission of the city. Such project plan shall also be prepared in
consultation with the planning commission of the county, if any, if a
major motorsports complex is located wholly outside the boundaries of
the city;
(E) from a pledge of a portion or all increased revenue received by
the city from: (i) Franchise fees collected from utilities and other
businesses using public right-of-way within the redevelopment district;
(ii) from a pledge of all or a portion of the revenue received by the city
from sales taxes; or (iii) both of the above;
(F) with the approval of the county, from a pledge of all of the
revenues received by the county from any transient guest, local sales
and use taxes which are collected from taxpayers doing business within
that portion of the redevelopment district established pursuant to
K.S.A. 12-1771, and amendments thereto;
(G) if a project is financed in whole or in part with the proceeds of
a loan to the municipality from the Kansas transportation revolving
fund, such loan shall also be payable from amounts available pursuant
to K.S.A. 75-5063 et seq., and amendments thereto; and
(H) by any combination of these methods.
The city may pledge such revenue to the repayment of such special
obligation bonds prior to, simultaneously with, or subsequent to the
issuance of such special obligation bonds.
(2) Bonds issued under paragraph (1) of subsection (a) shall not be
general obligations of the city, nor in any event shall they give rise to a
charge against its general credit or taxing powers, or be payable out of
any funds or properties other than any of those set forth in paragraph
(1) of this subsection and such bonds shall so state on their face. This
paragraph shall not apply to loans from the Kansas transportation
HOUSE BILL No. 2737—page 4
revolving fund pursuant to K.S.A. 75-5063 et seq., and amendments
thereto.
(3) Bonds issued under the provisions of paragraph (1) of this
subsection shall be special obligations of the city and are declared to be
negotiable instruments. They shall be executed by the mayor and clerk
of the city and sealed with the corporate seal of the city. All details
pertaining to the issuance of such special obligation bonds and terms
and conditions thereof shall be determined by ordinance of the city. All
special obligation bonds issued pursuant to this act and all income or
interest therefrom shall be exempt from all state taxes. Such special
obligation bonds shall contain none of the recitals set forth in K.S.A.
10-112, and amendments thereto. Such special obligation bonds shall,
however, contain the following recitals, viz., the authority under which
such special obligation bonds are issued, they are in conformity with
the provisions, restrictions and limitations thereof, and that such special
obligation bonds and the interest thereon are to be paid from the money
and revenue received as provided in paragraph (1) of this subsection.
(b) (1) Subject to the provisions of paragraph (2) of this
subsection, any city shall have the power to issue full faith and credit
tax increment bonds to finance the undertaking of any redevelopment
project in accordance with the provisions of K.S.A. 12-1770 et seq.,
and amendments thereto, other than a project that will create a major
tourism area. Such full faith and credit tax increment bonds shall be
made payable, both as to principal and interest: (A) From the revenue
sources identified in paragraph (1) of subsection (a) or by any
combination of these sources; and (B) subject to the provisions of
paragraph (2) of this subsection, from a pledge of the city's full faith
and credit to use its ad valorem taxing authority for repayment thereof
in the event all other authorized sources of revenue are not sufficient.
(2) Except as provided in paragraph (3) of this subsection, before
the governing body of any city proposes to issue full faith and credit
tax increment bonds as authorized by this subsection, the feasibility
study required by K.S.A. 12-1772, and amendments thereto, shall
demonstrate that the benefits derived from the project will exceed the
cost and that the income therefrom will be sufficient to pay the costs of
the project. No full faith and credit tax increment bonds shall be issued
unless the governing body states in the resolution required by K.S.A.
12-1772, and amendments thereto, that it may issue such bonds to
finance the proposed redevelopment project.
The governing body may issue the bonds unless within 60 days
following the date of the public hearing on the proposed project plan a
protest petition signed by 3% of the qualified voters of the city is filed
with the city clerk in accordance with the provisions of K.S.A. 25-3601
et seq., and amendments thereto. If a sufficient petition is filed, no full
faith and credit tax increment bonds shall be issued until the issuance of
the bonds is approved by a majority of the voters voting at an election
thereon. Such election shall be called and held in the manner provided
by the general bond law.
The failure of the voters to approve the issuance of full faith and
credit tax increment bonds shall not prevent the city from issuing
special obligation bonds in accordance with this section.
No such election shall be held in the event the board of county
commissioners or the board of education determines, as provided in
K.S.A. 12-1771, and amendments thereto, that the proposed
redevelopment district will have an adverse effect on the county or
school district.
(3) As an alternative to paragraph (2) of this subsection, any city
which adopts a redevelopment project plan but does not state its intent
to issue full faith and credit tax increment bonds in the resolution
required by K.S.A. 12-1772, and amendments thereto, and has not
acquired property in the redevelopment project area may issue full faith
and credit tax increment bonds if the governing body of the city adopts
a resolution stating its intent to issue the bonds and the issuance of the
bonds is approved by a majority of the voters voting at an election
HOUSE BILL No. 2737—page 5
thereon. Such election shall be called and held in the manner provided
by the general bond law.
The failure of the voters to approve the issuance of full faith and
credit tax increment bonds shall not prevent the city from issuing
special obligation bonds pursuant to paragraph (1) of subsection (a).
Any project plan adopted by a city prior to the effective date of this act
in accordance with K.S.A. 12-1772, and amendments thereto, shall not
be invalidated by any requirements of this act.
(4) During the progress of any redevelopment project in which the
redevelopment project costs will be financed, in whole or in part, with
the proceeds of full faith and credit tax increment bonds, the city may
issue temporary notes in the manner provided in K.S.A. 10-123, and
amendments thereto, to pay the redevelopment project costs for the
project. Such temporary notes shall not be issued and the city shall not
acquire property in the redevelopment project area until the
requirements of paragraph (2) or (3) of this subsection, whichever is
applicable, have been met.
(5) Full faith and credit tax increment bonds issued under this
subsection shall be general obligations of the city and are declared to be
negotiable instruments. They shall be issued in accordance with the
general bond law. All such bonds and all income or interest therefrom
shall be exempt from all state taxes. The amount of the full faith and
credit tax increment bonds issued and outstanding which exceeds 3% of
the assessed valuation of the city shall be within the bonded debt limit
applicable to such city.
(6) Any city issuing special obligation bonds or full faith and
credit tax increment bonds under the provisions of this act may refund
all or part of such issue pursuant to the provisions of K.S.A. 10-116a,
and amendments thereto.
(c) Any increment in ad valorem property taxes resulting from a
redevelopment project in the established redevelopment district
undertaken in accordance with the provisions of this act, shall be
apportioned to a special fund for the payment of the redevelopment
project costs, including the payment of principal and interest on any
special obligation bonds or full faith and credit tax increment bonds
issued to finance such project pursuant to this act and may be pledged
to the payment of principal and interest on such bonds.
(d) A city may use the proceeds of special obligation bonds or full
faith and credit tax increment bonds, or proceeds of a loan from the
Kansas transportation revolving fund pursuant to K.S.A. 75-5063 et
seq., and amendments thereto, or any uncommitted funds derived from
sources set forth in this section to pay the redevelopment project costs
as defined in K.S.A. 12-1770a, and amendments thereto, to implement
the redevelopment project plan.
(e) As an alternative to financing the undertaking of a
redevelopment project as provided by subsections (a) and (b), a city
may issue bonds pursuant to a taxpayer agreement entered into in
accordance with the provisions of sections 1 through 3 , and
amendments thereto.
HOUSE BILL No. 2737—page 6
Sec. 5. K.S.A. 12-1774 is hereby repealed.
Sec. 6. This act shall take effect and be in force from and after its
publication in the statute book.
I hereby certify that the above BILL originated in the House, and passed
that body
HOUSE concurred in
SENATE amendments __________________________________________________________________
Speaker of the House.
Chief Clerk of the House.
Passed the SENATE
as amended
President of the Senate.
Secretary of the Senate.
APPROVED ______________________________________________________________________________
Governor.