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HOUSING DEVELOPMENT STUDY COMMITTEE

MINUTES

December 12, 1995
Third and final meeting

MEMBERS PRESENT

MEETING IN BRIEF

Minutes prepared by Ed Cook, Legal Counsel
Organizational staffing by Mike Kuehn, Legal Counsel

  1. Procedural Business.
  2. Discussion of Proposed Bill Draft.
  3. Additional Proposals for Committee Consideration.

COMMITTEE BUSINESS

1. Procedural Business.

Call to Order. The third meeting of the Housing Development Study Committee was called to order by Co-chairperson Senator Michael Gronstal at 1:25 p.m., Tuesday, December 12, 1995, in Room 116, State Capitol, Des Moines, Iowa.

Minutes Approved. Upon motion, the minutes for the November 9, 1995, meeting of the Committee were approved as distributed.

Adjournment. The third and final meeting of the Committee was adjourned at 3:30 p.m., December 12, 1995.

2. Discussion of Proposed Bill Draft.

a. Part 1 -- Extend Access to Real Estate Improvement Districts (REID) to Entire State.
Senator Maddox expressed concern about extending REID to the entire state. He indicated that problems arose in Colorado in regard to concerns over conflicts of interest and lack of notice to subsequent buyers of property that the property is included in a REID. Part 1 was adopted by the Committee.
b. Part 2 -- Housing Tax-Increment Financing Changes; Chapter 403 and 403A Changes.
(1) Background. This part provides, to an extent, for allowing flexibility in using tax-increment financing (TIF) for housing development, assuring that each TIF district generates a benefit for low and moderate-income housing.
(2) Department of Economic Development -- exceptions to low and moderate-income requirements. Ms. Kathy Beery, Department of Economic Development, stated that allowing the department to accept a plan regarding low and moderate-income family housing in a TIF district that otherwise would not meet the criteria established in the proposed legislation is necessary to provide rural counties the ability to establish a TIF district for housing. She indicated that the department would craft rules to restrict the departmental exception to only those counties that need it. Senator Maddox indicated that the proposed legislation should incorporate language to clearly limit the department's ability to make exceptions to only those situations where it is truly needed. The Committee agreed to include this modifying language in their final recommendation concerning this part of the proposed legislation.
(3) Proposed Amendment. Co-chairperson Jacobs brought a proposed amendment, relayed to her from Mr. John McKinney, bond counsel. The amendment would strike the proposed language concerning the fifteen-day limit on appeals of a municipality's decision to issue urban renewal bonds, by changing the division of revenue from calendar to fiscal years, and by deleting the changes to Chapter 403A. Upon Co-chairperson Senator Gronstal's motion, the consideration of the amendment was deferred.
(4) Passage of Part 2. On voice vote, the Committee adopted part 2 of the proposed legislation.
c. Part 3 -- No Rollover of TIF Districts for Housing.
Property in a housing TIF can be used for TIF only once. This part was adopted by the Committee.
d. Part 4 -- Cost Benefit Analysis Prior to Housing TIF.
The Committee agreed to defer a recommendation on this part but did agree that some form of cost/benefit analysis, with input from the parties affected, should be done prior to allowing a housing TIF district.
e. Part 5 -- State Income Tax Exemption for Bonds for Housing.
Mr. Ted Chapler, Iowa Finance Authority (IFA), indicated that adoption of this proposal would be of limited worth and could result in higher bond costs. Senator Maddox indicated he would like some quantification of Mr. Chapler's concerns and the Committee agreed to defer any recommendation concerning this part.
f. Part 6 -- Allow Counties to Use the Abatement Procedure Regarding Abandoned Property.
The Committee adopted this part. Currently, only cities, adjacent landowners, and nonprofit housing corporations have the ability to use the abatement procedure regarding abandoned and public nuisance property.
g. Part 7 -- Preference on Sale of Tax Delinquent Property for Low and Moderate Income Family Housing.
The Committee adopted this part.
h. Part 8 -- Require IFA to Establish a Housing Rehabilitation Revolving Loan Program.
Mr. Ted Chapler indicated that IFA can already do this through existing programs and the Committee agreed to defer any recommendation on this part.
i. Part 9 -- Anti-discrimination Protection Regarding Manufactured Homes in a REID.
The Committee adopted this part.
j. Part 10 -- Extended Phase-in of Property Taxes on New Housing Development.
This part provides a phased out exemption from property taxation over eight years for persons who acquire property for housing development. Mr. Jeff Robinson, Legislative Fiscal Bureau, indicated that this proposal could have a significant fiscal impact to taxing jurisdictions. Representative Disney expressed some concern as to how the property should be valued, e.g., as agriculture or residential property, and on whether the property tax exemption should be limited only to the value added by the developer. The Committee agreed to defer any recommendation on this part.
Part 11 -- Reduction in Super-majority Requirements Concerning Zoning Changes.
This part would require a 60 percent, and not a 75 percent, majority to enact a proposed zoning change over objections by affected owners. The part would also require 35 percent, and not 20 percent, of the owners to file an objection that would trigger the supermajority requirement. Senator Maddox expressed concern that reducing the percentage from 75 to 60 percent would eliminate any supermajority requirement in 5 member city councils. The Committee defeated this part.

3. Additional Proposals for Committee Consideration.

a. Real Estate Transfer Tax Proceeds.
(1) Proposed recommendation. The proposal, as made by Senator Judge, would divert proceeds from the real estate transfer tax currently going primarily into the general fund to the Iowa Finance Authority to be used for the benefit of local housing trust funds.
(2) Statewide vs. local county pool - discussion. The Committee discussed whether the proceeds diverted should be kept in a statewide pool, under the control of the Iowa Finance Authority, with the ability of local housing trust funds to access this money or whether the funds should be diverted to the county where the proceeds were collected for use by local housing trust funds in that county. Senator Judge indicated that diverting the tax proceeds to the county where it was collected would deprive several rural counties of the ability to establish a large enough pool of money to make the establishment of a local housing trust fund viable.
(3) Polk County local housing trust fund, Ms. Pam Carmichael, Home, Inc. Ms. Carmichael indicated that $1.2 million of the current $7 million in real estate transfer taxes comes from Polk County. She indicated that the Polk county local housing trust fund currently has $3.5 million. She expressed support for diverting the proceeds to the county where collected but indicated that she could support having 80 percent of the proceeds going to the county of collection with the remainder in a statewide pool under Iowa Finance Authority control. She also indicated that the distribution from the statewide pool of money should be made on a formula, and not a grant, basis.
(4) Committee action. The Committee adopted Senator Judge's proposal.
b. HOME Program Matching Fund.
The Committee adopted the proposal to provide $1.2 million to the HOME program in order to meet half of the 25 percent match required by the federal government under the program.
c. Miscellaneous proposals.
The Committee adopted the following proposals:
(1) Increase education efforts and capacity building regarding housing development.
(2) Encourage the development of construction trades programs through IDED workforce development, school-to-work programs, high school programs, and coordination with applicable unions.
(3) That the General Assembly show its support for continuation of federal housing tax credits.
(4) Encourage local flexibility on building codes, particularly with respect to rehabilitation of housing.
(5) Consider reviewing, and potentially developing, a state rehabilitated housing code.
(6) Committee discussion. Senator Lundby indicated that she would be working on a proposal during the upcoming legislative session to provide loan forgiveness for building trades education at community colleges. Senator Hansen also indicated that the Committee should encourage federal action to enhance the ability of families to make a downpayment on a house.
d. Federal Funding Reductions.
The Committee agreed to a proposal to appropriate up to $10 million to the Iowa Finance Authority to make up for federal housing program funding reductions. Senator Lundby indicated that this proposal is not meant to indicate that the money must be used to merely continue federal programs.
e. Housing Outreach Programs.
The Committee agreed to the proposal to provide adequate funding to agencies for housing needs assessment and to continue to assess the effectiveness of outreach efforts and increase technical assistance programs.
f. Reduce Building Materials Sales Tax.
Cost. Mr. Jeff Robinson, Legislative Fiscal Bureau, indicated that removing the sales tax on building materials for new residential housing could result in an approximate $10 million reduction in revenue to the state. Mr. Charles Wasker, counsel for the Iowa Homebuilders Association, indicated that the cost in lost revenues would be higher than $10 million.
Committee Action. The Committee agreed to a proposal from Senator Lundby that the General Assembly should continue to explore ways to remove the sales tax in a targeted way for rehabilitation and low and moderate-income housing.

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