‘Secret’ taxes blindsided these homeowners. Johnson County city will now restrict them
The Olathe City Council has tightened its policy for creating special taxing districts, following months of protests from homeowners who argued the practice was overused and not transparent.
Many residents have been pushing for the city to stop the use of benefit districts, which impose an additional tax on property owners to fund infrastructure improvements, such as roads and sewers. The debate over what some residents call the “triple tax” on homeowners became a major talking point ahead of last month’s City Council elections.
State law requires that sellers notify buyers of any established tax districts. But some homeowners previously told The Star they were never informed that they had bought property within a benefit district until they received a tax bill of more than $10,000 for the district.
Residents organized after a new benefit district was proposed in the Cedar Creek development off of Kansas 10 highway, where the developer sought to not only add taxes to new homes but to existing ones as well. That original proposal was withdrawn, and many Olathe City Council members agreed they had no interest in slapping additional taxes on existing homes.
On Tuesday, the council voted 5-2 to tighten its policy on benefit districts, which would likely block proposals like the one initially proposed for Cedar Creek.
Kansas law requires that petitions to create the districts include approval from more than 50% of the property owners in the district. Some Olathe residents worried the rule catered to developer interests, especially in districts where a single developer may own the majority of land.
Now under Olathe’s new policy, the creation of a residential benefit district will require signatures of agreement from 100% of affected property owners. City staff previously said that will intentionally limit the creation of such districts.
In addition, platted lots under three acres cannot be subject to benefit districts without the signed consent of the property owners.
The changes also include improved communication with property owners. The policy states that upon creation of a benefit district, the city will post signs informing prospective buyers of the existence of the district, among other steps to notify homeowners of assessments.
Before the new policy was considered, Tim Danneberg, Olathe’s external affairs director, had said the city already was taking steps to put up signs and find other ways to better inform residents.
Some residents, though, have argued that the new policy does not go far enough.
Cedar Creek resident Nick Payne has helped organize a group of homeowners, which aims to completely eliminate the formation of benefit districts in the city.
“End benefit districts completely and the right thing will be done,” Payne recently wrote on the group’s Facebook page, which has about 550 followers. “Don’t end them and we will know developers’ interests have more say at City Hall (than) the multitude of homeowners.”
Developers for decades have relied on benefit districts in Olathe and other Kansas cities to help cover the costs associated with new residential development. The districts are generally proposed by developers, but must be approved by local governments who administer the taxes.
Payne has said that he felt the additional taxes were kept too “secret.” City leaders contend they haven’t been keeping any secrets about the longstanding practice.
Olathe city leaders say that new developments must cover the upfront costs of roads, sewer and water rather than burdening the wider tax base.
Ideally, city officials have said a developer would petition the city to create a new tax district before homes are sold. And every buyer would know about the assessments before purchasing.
Mayor John Bacon previously told The Star that benefit districts have been useful. He said that developers can either pay for infrastructure costs up front and raise home prices for sellers, or they can use mechanisms like benefit districts in which they pay down those costs over time.
“They’re going to pass on the cost one way or another,” he had said, but added that he was supportive of reviewing the city’s policy.
Includes reporting by The Star’s Kevin Hardy.
This story was originally published December 8, 2021 at 2:51 PM.
