Sunday, February 24, 2008

Gambling on land

The Statesman has an article about the effect of the real estate market cooling off in Kuna. At the request of developers, and landowners I suspect, Kuna started to build an enlarged sewage treatment plant. The city had run out of capacity, and couldn't accommodate any more homes. This limited Kuna's growth.

So Kuna created a local improvement district. If you agree with the growth, then the LID was a good way to go; it put the expense on new development. So, lots of landowners joined the district and were annexed into the city, and agreed to pay for new sewage treatment plant. Land prices jumped substantially in value.

But then the market tanked. Landowners had anticipated selling the property either before the bill came due, or had planned to pay the bill with their sales proceeds. If they can't sell, they have to pay the bill anyway. They don't want to, of course, and the city council is casting about for a way to bail the landowners out.

One option would have the city issue a bond, thus shifting the costs to all city taxpayers. I hope this doesn't happen. The landowners took a risk. They gambled, and had they hit they would done very well for themselves. Well, sometimes when you gamble you lose. It would be wrong for the taxpayers to cover the gamblers' bets.

Even if the landowners have to pay, they'll eventually be able to sell the land. They'll just have to wait a while. Or, they may have to sell for less than they wanted, but certainly still at a profit. To the Kuna city counsel I say, let the market work it out.

3 comments:

slfisher said...

Well, they took a risk, but they also were saving Kuna's bacon by giving the city the ability to expand its sewer treatment plant. I don't think it's that simple.

A number of these people are friends of mine, and a lot of them are older. It's not that easy for them.

I hope a solution can be worked out. I don't think anybody -- least of all the city of Kuna -- wants to be in the position of foreclosing on these people.

Alan said...

They were only saving Kuna's bacon if Kuna HAD to have the new plant. Kuna did not have to have that plant. Not getting the plant would not completely stop growth,, of course, because Nampa and Meridian would just step in an expend their city limits, to a point. Still, Kuna was facilitating growth, which not everyone wants.

slfisher said...

Uh, yeah, it would pretty much have stopped growth altogether in Kuna. I believe there were fewer than a hundred sewer connections at the time.

I talked to a friend of mine yesterday who's one of the people in the LID. He says they were indeed warned about the downsides. He has 125 acres, which means he's facing a bill of $1.2 million.

The Kuna City Council has passed a law giving these people the right to transfer their sewer connections, which will help. However, all their sewer connections go into a pool and when some get sold, they are applied proportionally to everyone. So it'll be pretty slow. But it's a help.