A westward view shows Ninth Street as it stretches toward downtown Lawrence.

Topeka ? In 1994, the state of Kansas enacted a new program aimed mainly at helping cities lure new investment and development back into distressed neighborhoods.

The Neighborhood Revitalization Act was largely the idea of Topeka city officials who were looking for ways to revitalize that city’s troubled downtown and crumbling inner-city neighborhoods.

“The original impetus behind this was downtown,” Topeka Planning Director Bill Fiander said recently. “When the act passed, Downtown Topeka Inc. president Joe Swalwell (now retired) went to the Legislature to support this thing. The real impetus was to get more investment downtown, and then it evolved into the neighborhoods as well.”

It’s a program that encourages property owners to improve or rehabilitate their property by offering rebates of all or a portion of the new property taxes that result from the improvement project.

In the 21 years since passage of the act, Lawrence and Topeka have taken vastly different approaches in using NRA incentives.

While Lawrence has used the program sparingly, reserving it mainly for large commercial developments involving millions of dollars worth of new construction or renovation, Topeka has adopted a much more expansive policy, allowing any property owner in a large section of the city — about 14 percent of the city’s total territory — to apply for the rebates, provided their project meets certain qualifications.

Ironically, though, Topeka officials say the results have been much the same, with most of the benefits going toward commercial projects backed by large corporations or investment groups.

“When it got pitched, it was really going to benefit neighborhoods,” Fiander said. “As we’ve gone on through the years, we’ve seen fewer and fewer home renovations or rehabs. Even small business or small residential rehabs. I would agree that that program really serves the bigger fish. At least that’s who has gravitated toward it.”

Reviewing Lawrence’s policy

The use of tax abatements and other public investment to spur private business development is controversial in every community, and Lawrence is no exception.

In this year’s spring elections, it was a major issue in races for the Lawrence City Commission, in part due to controversy over how the city handled development of Rock Chalk Park.

The city’s Neighborhood Revitalization Act policy has stirred controversy as well because even though its name suggests it’s meant to benefit neighborhoods, Lawrence has used it almost exclusively for a select few large commercial developments.

Some of the more notable recent examples have been the Treanor Architects headquarters at 1040 Vermont St., begun in 2013, and most recently the pending Eldridge Hotel expansion project at Seventh and Massachusetts.

In recent weeks, there have been suggestions that Lawrence might want to consider adopting a more expansive policy, similar to Topeka and other cities.

“I’m wondering if there is a way for us to be as creative and generous for regular folks as we are for large developments,” Douglas County Commissioner Nancy Thellman said during a recent joint study session with city, county and school district officials.

That idea quickly ran into stiff resistance at the Lawrence City Commission last week when Vice Mayor Leslie Soden said she worried it would lead to “gentrification” of Lawrence’s older and predominantly lower-income neighborhoods, like East Lawrence.

That’s a phenomenon where new development, or redevelopment, in an older neighborhood raises property values so much that existing residents can no longer afford to live there.

Soden is one of three new commissioners elected in April, and she said the only projects that should qualify for public incentives were those that create “permanent full-time jobs with benefits, and affordable housing.”

“Those are the two things I’m interested in,” Soden said. “If they aren’t doing either of those, I don’t want to look at it. We just had an election. People lodged their complaint at the ballot box, and I’m sitting here because of that.”

Topeka’s experience

According to Topeka officials, however, gentrification has not been a problem, despite the city’s more expansive and, in some cases, more generous use of NRA incentives.

“Only two concerns have ever been voiced to me, and I’ve been overseeing this, or been a part of this, for the last 15 years,” planning director Fiander said. “The first was that it was too broad and the rebates were too generous. And the second issue is, ‘Why isn’t my neighborhood in the area?’ We’ve never had an issue with gentrification.”

An area of North Topeka that was once crumbling in decay is now bustling with art galleries, restaurants and shops. Commonly known as NOTO, the arts district is an example of how neighborhoods can be revitalized without the use of tax incentives. But Topeka city officials say some property owners in the area now regret not having applied for Neighborhood Revitalization Act funds.

In fact, Fiander said, the one area of Topeka where gentrification has become an issue recently is an area where the new developers failed to use NRA incentives, an area known as the North Topeka arts district, or “NOTO.”

That’s an area on the north bank of the Kansas River with its own downtown-like avenue — an area crippled by floods in the 1950s and ’60s, where many of its 19th century storefronts were vacant, boarded up and in decay.

Fiander said recent development there was driven largely at the grassroots level by local artists, musicians and small investors who were apparently unaware of the city’s NRA program or how it worked.

“We’ve seen 30 new businesses there in the last four to five years,” Fiander said. “All of a sudden, property values went way up. Most of them did not apply for the rebate. When it came time to pay the property taxes, they were shocked at how high their tax bill went up.”

NRA economics

Despite Topeka’s broader, and sometimes more generous, NRA policy, Fiander said it still is not enough to spark the kind of residential development that would change the overall character of a neighborhood and drive out lower-income residents.

An office building in downtown Topeka, originally built as the headquarters of American Investors Life Insurance Company (now known as Athene), received Neighborhood Revitalization Act tax incentives. It replaced a vacant, 1930s-era art decco building that others had tried and failed to rehabilitate.

That’s because real estate values, especially for residential property, are driven by the volume of square footage, and not necessarily the overall condition of the property.

Under Topeka’s policy, a project has to add at least 10 percent to the value of residential property, and 20 percent for commercial property, in order to qualify for the NRA rebate.

“If you just put a new roof on and paint it, or even new air conditioning and heat and plumbing, appraisers will not add a lot of value,” he said. “They’ll add some, but not enough to qualify. You have to do moderate to significant investment. Because of that, we’ve seen fewer and fewer homeowners and small businesses over the years that apply. It benefits the most those who build from the ground up.”

Another factor, he said, is that in Topeka, as in most cities, owners still have to pay the new taxes generated by the project up front, and it can take as long as two years — after the project has been inspected and certified to qualify — before they see their first tax rebate.

“So if you’re in the business of a more sophisticated developer or business person that can wait to have that credit against your taxes, then it works,” he said. “If you need more of an infusion of cash up front, it’s not going to help you.”

Despite that, Fiander said, Topeka’s policy has sparked significant development since that city’s program launched in 1995.

Among the more significant early projects, he said, were the Capitol Plaza Hotel just south of downtown, and the American Investors Life Insurance Company headquarters, which replaced a vacant 1930s-era bank building that others had tried and failed to rehabilitate.

Through 2014, according to Topeka city records, the city’s NRA program has been used on 530 projects totaling $334 million. That includes $78 million of investment in the city’s downtown core.

Rebates paid out over that time have totaled $31 million.

But Fiander said the program has been successful enough in Topeka that local governments are now recouping their investments as many of the early projects, including the Capitol Plaza Hotel and the downtown insurance building, are now fully back on the tax rolls.

“More are coming back on the tax rolls now than there are new rebates being granted,” he said. “It’s been good for the city.”