Crumbling Roads Seek Funding Tool

By Chris Conde
January 25, 2017

Help is on the way for the crumbling roads in the eastern business district. The Community Improvement District Act is a tool to fund difficult projects such as the stretch of road between south Champlain and the Holiday Inn. In 2009 Kathleen Sebelius approved and enacted H.B. 2324 known as the CID Act which permits the establishment of community improvement districts. A CID can be used to finance any “cost” of a “project.”

Under the CID Act, a “cost” means the cost of land, materials, labor, and other expenses incurred in planning and doing any project, The definition of “project” is likewise broad and nearly all-encompassing and includes land acquisition, horizontal and vertical construction costs, public infrastructure costs, and ongoing maintenance costs. The business owners will file a petition under the CID to develop a tool to pay for the construction whether through additional sales tax or property taxes. The city will hold no liability in the project but will continue to monitor and guide the projects proposed under the CID.



PURPOSE AND BACKGROUND The Community Improvement District Act codified by K.S.A. 12-6a26 et seq. (the "CID Act"), allows municipalities to create districts in which certain special taxes will be imposed and the revenue therefrom will be used to fund certain public and private improvements and the payment of certain ongoing operating costs within the geographic bounds of the specified district. The creation of a Community Improvement District ("CID") is a particularly useful tool of economic development in that it can help facilitate beneficial private development and redevelopment without negatively impacting the tax base of the City. It is the policy of the City of McPherson (the “City”) to have the option to utilize the provisions of the CID Act to assist private developers by providing financing for commercial, industrial and mixed-use projects that meet the local eligibility criteria outlined below, subject to certain special local policy limitations also outlined below. A CID can exist for a maximum of 22 years.


It shall be the policy of the City to create a CID if, in the opinion of the City Commission, the petition satisfies all statutory requirements of the CID Act and if creation of such CID would meet the following criteria:

(1) The CID will sufficiently attract development which would materially enhance the economic climate of the City or otherwise benefit the City or its residents.

(2) The CID will result in the construction of public or private property improvements and/or infrastructure, or the provision of ongoing services, that would otherwise not be financially feasible.

(3) The CID will promote redevelopment or rejuvenation of properties within the City which would otherwise be unlikely to happen. Special consideration will be given to projects to targeted portions of the City as determined by the governing body.

(4) The CID will be used to assist the development of commercial, industrial and mixed-use projects, and for common area amenities in residential developments that are called for in the Comprehensive Land Use Plan.

(5) The CID will not be used for projects in which construction has been completed prior to approval by the City or that are incompatible or inconsistent with a neighborhood plan including any of the following: sexually oriented businesses, community correctional facilities, half-way houses, drug or alcohol rehabilitation facilities, new or used car lots, multi-game casino-style gambling facilities, commercial billboard siting and any other use deemed inconsistent to the governing body.

(6) The CID will support projects with total costs of not less than $400,000.



A CID is formed by the petition of landowners within the proposed CID. According to the CID Act, a petition to create a CID must be signed by the owners of at least 55% of the total land area and total assessed property value within the proposed district. However, less than 100% participation may be a factor considered by the governing body in determining whether or not to approve the creation of the CID.

A CID petition must contain:

(1) the general nature of the proposed CID project;

(2) a statement of the purpose being served by the use of CID financing;

(3) the estimated cost of the proposed CID project including maximum amount of CID funding to be paid prior to termination of CID, based on 125% of the total estimated amount of CID;

(4) the estimated amount of revenue to be collected during the proposed term of the CID;

(5) the proposed method of financing the project (special assessments or special sales tax);

(6) the proposed amount and method of special assessment, if any;

(7) the proposed amount of the CID sales tax, if any;

(8) the proposed method of financing (pay-as-you-go);

(9) a map of the proposed CID; and

(10) the legal description of the boundaries of the proposed CID.


Landowners or developers seeking to form a CID may request to draw upon one of the following two revenue sources, or a combination of both, to fund eligible improvements as set forth in the ordinance of the City Commission creating the CID:

(l) Special property tax assessments on the property within the district, or

(2) A special sales tax of up to 2% on all taxable sales within the district.

Upon the creation of a CID by the City Commission, revenue generated by these sources is available to pay for eligible improvements and costs through the use of a pay-as-you-go dedicated account. The City will not issue full faith and credit or special obligation bonds to finance a CID project Pay-As-You-Go Account:

The landowners within the CID will request the establishment of a pay-as-you-go account. This account will be a dedicated account into which the CID revenues will be deposited and will be available to be used as funds accrue to pay eligible costs. Funds used to pay



CID costs will be held by the City or a third-party trustee and disbursed to pay actual costs pursuant to a development agreement.


The CID Act provides an exclusive list of eligible improvements and costs that may be paid for with CID funding. CID revenues may be used to acquire, plan, design, engineer, improve, construct, demolish, remove, renovate, reconstruct, rehabilitate, maintain, restore, replace, renew, repair, install, relocate, furnish, equip, extend or finance:

(1) Buildings, structures, and facilities;

(2) Site improvements, including without limit sidewalks, streets, roads, interchanges, highway access roads, intersections, alleys, parking lots, bridges, ramps, tunnels, overpasses and underpasses, traffic signs and signals, utilities, pedestrian amenities, abandoned cemeteries, drainage systems, water systems, storm systems, sewer systems, lift stations, underground gas, heating and electrical services and connections located within or without the public right-of-way, and water mains and extensions;

(3) Parking garages;

(4) Streetscape, lighting, street light fixtures, street light connections, street light facilities, benches or other seating furniture, trash receptacles, marquees, awnings, canopies, walls and barriers;

(5) Parks, lawns, trees and other landscaping;

(6) Communication and information booths, bus stops and other shelters, stations, terminals, hangars, rest rooms and kiosks;

(7) Paintings, murals, display cases sculptures, fountains and other cultural amenities;

(8) Airports, railroads, light rail and other mass transit facilities; and

(9) Lakes, dams, docks, wharfs, lakes or river ports, channels and levies, waterways and drainage conduits. The CID Act also permits the use of CID funds to pay ongoing operating expenses, including security, entertainment, public events, business promotion, employee training, and market studies; however, it is the policy of the City that CID funds may only be used to pay eligible operating costs up to the maximum amount identified in the petition and may not be used for operating costs in residential and mixed-use developments. CID funds may be used to reimburse capital costs incurred not earlier than one year prior to City Commission action initiating the establishment of a CID, and City administrative costs and costs of issuance.


All projects will be subject to the notice and hearing process.

Approval Process

(1) The property owners seeking to create a CID will submit a petition to the City Commission requesting creation of the CID pursuant to the CID Act and this policy. Upon receipt of such a petition, and at its discretion, the City Commission shall adopt a resolution giving notice of a public hearing to consider the advisability of creating the CID.

(2) Such resolution shall be published once each week for two consecutive weeks in the City's official newspaper and shall be sent by certified mail to all owners and occupants of property within the proposed district.

(3) The second publication of such resolution shall occur at least seven (7) days prior to the date of the hearing and the certified mailed notice shall be sent at least ten (10) days prior to the hearing.

(4) Such resolution shall contain the following information:  Time and place of the hearing;  General nature of the proposed project;  Estimated cost of the project;  Proposed method of financing the project;  The proposed amount of the CID sales tax, if any;  The proposed amount and method of assessment, if any;  A map of the proposed district; and  A legal description of the proposed district.

(5) Following the hearing, the City Commission may by majority vote approve the CID by ordinance.

(6) The ordinance shall:  Authorize the project;  Approve the estimated costs of the project;  Contain a legal description and map of the proposed district;  Levy the CID sales tax, if any;  Approve the maximum amount and method of assessment, if any;  Approve the method of financing; and  Contain any other matters deemed necessary by the City Commission, including but not limited to, time parameters regarding completion of CID projects.

(7) Such ordinance shall become effective upon publication once in the official City newspaper.

(8) The ordinance shall also be submitted for recording in the office of the register of deeds of McPherson County, Kansas.


Prior to consideration by the City Commission, parties intending to request the creation of a CID must submit a draft version of the intended petition to the City Administrator, the Finance Director and any other City Staff designated by the City Administrator. Such draft petition need not be signed by any landowners within the proposed district until such time as it is formally submitted for consideration by the City Commission. Within ten (10) business days after the submission of any such draft petition, the referenced City staff shall hold a pre-petition meeting with the party submitting such petition to evaluate the sufficiency thereof and gather information needed to determine the eligibility of the project.


Concurrently with, or prior to, the creation of a CID by the City Commission, the City and the petitioner shall enter into a Development Agreement governing the conduct of the respective parties in relation to the proposed CID. The Development Agreement will include a site plan and elevation drawings or renderings of the CID project, and a Sources and Uses of Funds table that identifies the various sources of public and private project funds and how they will be used. Among all other provisions, the Development Agreement will set forth the method and manner for disbursement of CID funds by the City to pay for eligible project costs pursuant to acceptable documentation that such costs have been incurred. The assignment of Development Agreement rights shall be limited to a collateral assignment of all rights to a lender with written notice to the City, or assignment of all rights to any third party assignee with the written consent of the City or City Representative, at the discretion of the City. The assignment of rights shall not impair the City's right to determine the eligibility of CID costs nor require the City to subdivide any CID funds due to the developer. In addition, the Development Agreement shall provide for rapid termination of the CID sales tax and/or special assessments. City administrative fees and costs of issuance shall be paid from CID revenues. For "pay-as you-go" CID projects, the Development Agreement will set forth the method and manner of disbursement of CID funds to the developers and shall include provisions for the termination of the CID taxes when developers have been fully reimbursed for eligible CID costs


CID projects financed on a "pay-as-you-go" basis do not require a financial analysis that demonstrates that the project would not otherwise be possible without the use of CID funding.


The City will conduct a background check on all CID applicants and applicants' project partners. Applicants are required to furnish City Staff the personal and business information needed to carry out such a background check. Such information will be treated as confidential information to the maximum extent allowed by the Kansas Open Records Act.


CID revenues may not be used to pay development fees. Project management fees may be financed through CID revenues only if the need for such financing is established through analysis of financial information showing that private funding is not available to pay such costs based on a market rate of return on investment. If allowed, project management fees paid through CID revenues must be documented as actual costs incurred.

CITY ADMINISTRATIVE FEES The City shall be paid a non-refundable application fee of $1,500 with the formal submittal of any CID petition. For any approved CID, the City shall be paid an on-going administrative service fee, in an amount not more than 5% of the total eligible CID costs. The application fee shall serve as a credit against the on-going administrative service fee.


All property improvements commenced under an approved CID shall be subject to City regulations, standards, and policies, including, but not limited to: zoning and subdivision regulations, building codes, the McPherson Municipal Code, and any applicable design guidelines currently in place or hereafter approved.


The developers will provide an annual accounting to the City on the amount and use of the CID funds used to pay CID costs, by June 1 of each year. City reserves the right to examine the use of the CID financing at its discretion and expense. If during the examination any material unresolved discrepancies are discovered, then the developers will provide an audit, or an agreed upon procedures engagement by a certified public accounting firm reasonably acceptable to the City. The cost of the audit or agreed upon procedures engagement of CPA firm, if needed, will be at the developer’s sole cost.


Subject to provisions contained in development agreements, the City shall take appropriate action to terminate CIDs when all eligible project costs have been fully paid, including the maximum CID funding amount provided in the petition.

WAIVER OF POLICY Should the City Commission determine the terms of this policy inappropriate to evaluate a particular CID application, it may, by majority vote, waive the binding effect of this policy in regard to that application.