Call to Order and Roll Call
The fifth meeting of the Interim Joint Committee on Local Government was held on Wednesday, October 25, 2017, at 10:00 AM, in Room 171 of the Capitol Annex. Representative Rob Rothenburger, Vice-Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Representative Rob Rothenburger, Vice-Chair; Senators Ralph Alvarado, Denise Harper Angel, Morgan McGarvey, Dorsey Ridley, Albert Robinson, Dan "Malano" Seum, and Damon Thayer; Representatives Danny Bentley, George Brown Jr, Ken Fleming, Toby Herald, DJ Johnson, Kim King, Adam Koenig, Stan Lee, Jerry T. Miller, Robby Mills, Phil Moffett, Steve Riggs, Arnold Simpson, John Sims Jr, and Kevin Sinnette.
Guests: Edwin King, Jeremy Ratliff, and Lisa Beran, Kentucky Housing Corporation; Deborah Bilitski and Laura Grabowski, Develop Louisville; Latondra Yates and Mary McGuire, Louisville Vacant and Public Property Administration; Tammy Vernon, Darren Sammons, Greg Ladd, and Travis Weber, Department for Local Government; Michael Kurtsinger and Chuck Bonta, Kentucky Fire Commission; and Sara Massey, Louisville Metro Government.
LRC Staff: Mark Mitchell, John Ryan, Joe Pinczewski-Lee, and Cheryl Walters.
Approval of Minutes
Upon the motion of Senator Thayer, seconded by Representative Johnson, the minutes of the September 27, 2017 meeting were approved.
Vacant, Blighted, and Abandoned Properties
Mr. Edwin King, Executive Director and CEO of the Kentucky Housing Corporation (KHC), gave the committee background information about KHC and its function. Since 1972, KHC has been Kentucky’s state housing finance agency. KHC is a self-supporting, quasi-governmental agency that invests in affordable housing solutions for Kentucky. KHC receives no state general funds. Corporate expenses are paid through income from the tax-exempt mortgage bond program and fee income from the U.S. Department of Housing and Urban Development (HUD).
KHC offers programs to create, preserve, and sustain affordable housing through many means including the single family mortgage program and multi-family tax credit programs.
KHC has developed investment projects through community revitalization programs, one being Recovery Kentucky, a vital program created to help Kentuckians recover from substance abuse, which often leads to chronic homelessness. In a joint effort with the Department for Local Government (DLG) and the Department of Corrections (DOC), KHC allocated low income housing tax credits and other resources for the construction of 14 Recovery Kentucky Centers. Operational funding included approximately $3 million from DLG’s Community Development Block Grant program and approximately $5 million from DOC.
Programs which KHC supports provide economic impacts for Kentucky. Some of these include: the Men’s Addition Recovery Campus in Bowling Green, for a total economic impact of $11 million; Scholar Houses in Lexington, Louisville, Bowling Green, Paducah, Owensboro, Pikeville, Newport, and Richmond; and the Lincoln Grant Scholar House in Covington, which just opened, for a total economic impact of $13 million.
Ms. Lisa Beran, Deputy Executive Director of KHC’s Housing Production and Programs, discussed KHC’s revitalization projects in the City of Somerset, in conjunction with DLG, for a total economic impact of $719,000; Robertson Apartments in Washington County, for a total economic impact of $1.4 million; and Maple Lick and Milltown Subdivisions in Owsley County, for a total economic impact of $655,000.
In response to a question from Representative Miller, Mr. King said that KHC does partner with the Family Scholar House in Louisville. Mr. Jeremy Ratliff, KHC’s General Counsel, added that Louisville partners with KHC including the Riverport Scholar House. Ms. Beran noted that KHC does provide some funding for The Healing Place from money provided by the U.S. Department of Housing and Urban Development (HUD).
In response to a question from Representative Bentley, Mr. Travis Weber, with DLG, said that mayors are educated on how to get funds for the revitalization of slums and blighted areas, and the options that are available.
In response to a question from Representative Rothenburger, Mr. King said people can stay in the Scholar Houses until they finish their education as long as they continue to meet the program requirements. In response to another comment from Representative Rothenburger, Mr. King noted that senior housing is going to be a large component of housing in the immediate future.
Ms. Laura Grabowski, Director of Vacant and Public Properties with Develop Louisville, discussed the Louisville/Jefferson County Landbank Authority. The Authority was established in 1989 and is a partnership between the Commonwealth of Kentucky, Jefferson County Public Schools, and Louisville Metro Government. The purpose of the Authority is to return vacant and abandoned properties to productive use and place them back on the tax rolls. Acquisition of vacant and abandoned properties is through voluntary donations and foreclosures. Disposition is to residents, non-profits, developers, and others. More than 300 properties have been converted to productive use since 1996.
The Authority’s recent legislative changes include: (1) elevating Louisville Metro lien priority allowing Louisville Metro to initiate foreclosure program. Since 2012, 563 foreclosures have been initiated, with 366 completed; (2) reducing processing time for foreclosures. The average time to complete foreclosure was cut from 24 to 12 months; (3) making condemnation of blighted properties more financially feasible; (4) prohibiting the sale of delinquent tax certificates to third-party purchasers in designated areas through the use of the Tax Delinquency Diversion Program; and (5) providing a funding mechanism by directing 50 percent of tax proceeds from sales to the landbank for five years.
The Authority’s new Disposition Programs include “Last Look,” “Cut It Keep It,” and “Flex Rate Policy.”
The Vacant and Public Property Administration’s targeted approach includes targeting efforts in support of neighborhood redevelopment efforts, layering resources, and measuring results of strategies to optimize the outcomes of vacant and abandoned property solutions.
Regarding the Clear Boarding Pilot Project, Polycarbonate sheets are used instead of plywood for boarding up vacant and abandoned structures. A portion of the funds is for a targeted neighborhood and the remainder will be used Louisville Metro-wide. The timeline is November, 2017 through February, 2018.
In response to a question from Senator Seum, Ms. Grabowski said that the involvement of Jefferson County Public Schools with the abandoned property issue is that the schools use tax revenue for funding. Abandoned property lowers the tax base and the school district’s resultant income.
In response to another question from Senator Seum, Ms. Grabowski stated that the vacant property, when the owner cannot be located, will go through the foreclosure process and the new owner will get a clear title in the event of outstanding property taxes.
In response to a question from Representative Brown, Ms. Grabowski said that clear boarding is more expensive initially, around $800 to $1,000 per house depending upon the use of the clear boarding, but it is more cost effective as plywood is often removed by persons seeking entry into the property. Representative Brown commented that clear boarding should be considered to be implemented statewide.
Representative Riggs commented that it is very rewarding to see legislative changes that are making improvements. In response to a question from Representative Riggs, Ms. Bilitski, Director of Develop Louisville, stated that she does not anticipate coming before the legislature during the next session of the General Assembly with changes relative to the vacant and abandoned property issue.
In response to a question from Representative Miller, Ms. Grabowski said the agency has a great relationship with non-profits, and the non-profits have to apply for vacant lots and come to the Authority with a plan and a budget, but seem to do so very easily.
In response to a question from Representative Rothenburger, Ms. Grabowski said the Tax Delinquency Diversion Program is enacted by local ordinance, and Ms. Bilitski stated that the enabling legislation is applicable statewide, but that she would confirm that applicability.
In response to a question from Representative Bentley, Ms. Grabowski said the Last Look program has a time limit of 60 days.
Special Purpose Government Entity Compliance Reports
Ms. Tammy Vernon, Cities and Special Districts Branch Manager with DLG, said that Special Purpose Governmental Entities (SPGEs) are independent, political subdivisions of the state, government entities that exercise less than statewide jurisdiction, and are organized for the purpose of performing specific services within limited boundaries. DLG will continue to monitor the requirements under KRS Chapter 65A that SPGEs register and submit certain financials online. The Cities and Special Districts Branch developed and implemented manual processes to assist SPGE compliance. Moving forward, DLG plans to transition to a new automated system for SPGEs.
DLG’s responsibility per KRS Chapter 65A is to create and maintain an online central registry, reporting portal, and public access portal, and to monitor compliance by tracking status changes, preparing statutorily required reports, and activating noncompliance procedures.
The SPGE compliance report submitted to LRC includes data as of October 12, 2017. The compliance percentages will increase as the deadline approaches. There are approximately 7,600 individual records, four records for each SPGE, and compliance is by fiscal year. The compliance report percentage for FY 2015 is 99%; 97% for FY 2016; 94% for FY 2017; and 93% for FY 2018.
The SPGE program for the future includes active communication with the Commonwealth Office of Technology to design software to allow the creation of a new SPGE report portal and central registry, and public portal for citizens to view current and historical submissions, and automating existing manual processes such as compliance administration, reporting and notifications, fire departments exiting and entering the system, and municipal utilities buying and selling components. DLG also plans to provide online tutorials for submitting and reviewing data, and continued annual SPGE training for financial disclosure and tax rate calculation, to be held at area development districts.
Senator Alvarado commented that the definition of a SPGE does not mention the ability to tax citizens. Mr. Darren Sammons, DLG staff attorney, stated that the definition is taken from the statute and the one DLG crafted is a rough definition.
In response to a question from Senator Alvarado, Mr. Sammons said the SPGE board members are not elected.
In response to another question from Senator Alvarado, Mr. Sammons said that HB 1, which passed during the 2013 legislative session, provided for more accountability.
Senator Alvarado commented that he will file a bill for the 2018 session of the General Assembly to give taxing veto power to the elected local government officials.
In response to a question from Senator Seum, Mr. Sammons said that all of the SPGEs have a statutory taxing limit.
Senator Seum requested that DLG provide a list of all of the taxing districts to committee members.
Senator Thayer commented that the elected governing body having oversight over the SPGE should have some controls over SPGE tax increases or budgets, or that SPGE board members should be elected instead of being appointed. There may be other ideas, too. There should yet be more accountability and disclosure.
In response to a question from Representative Moffett, Mr. Sammons said in 2012, over $2.7 billion was received by the special districts from local funds and that 2,000 statutes would have to be researched in order to determine whether or not the SPGEs are authorized to use federal funds.
Representative Miller commented that the election date for the fire commission should be moved from June.
Representative Riggs commented that HB 1 was a great step forward in improving transparency. More accountability should yet be pursued.
Mr. Michael Kurtsinger, Legislative Director for the Kentucky Fire Commission, said that, as of October 17, there were 427 Chapter 273 volunteer fire departments with revenues or expenditures under $100,000 required to report to the commission. Fifty-four were non-compliant in submitting their SPGE reports, 47 were compliant, and 33 of the 47 were trying to get their numbers in. The total revenue received was $16,566,000, which was an average total per department of $44,000. The commission makes great efforts in trying to contact the fire departments for the information.
Mr. Chuck Bonta, auditor with the Kentucky Fire Commission, exhibited and explained the forms the commission uses to collect the fire department fiscal and demographic data.
In response to a question from Representative Sims, Mr. Kurtsinger said there were 427 Chapter 273 volunteer fire departments with revenues of $100,000 or less, but close to 830 volunteer fire departments in total.
There being no further questions, the meeting was adjourned at 11:15 a.m.