Fiscal Court weighs TIF participation

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TIF attorney Jim Parsons and SPEDA president and CEO Chris Girdler answer questions at Tuesday's meeting of Pulaski County Fiscal Court.

Pulaski County Fiscal Court opened Tuesday morning with an hour-plus presentation on the two Tax Increment Finance (TIF) districts created by Somerset City Council in December.

TIF districts are designated areas created by local governments which can be used to raise funds to revitalize or develop those areas. Beyond a baseline established with a TIF district's creation, a percentage of the tax revenues generated through the development of those districts can be used to fund improvement projects in those areas, such as roadways or water lines, or can be used to incentivize more businesses to move into the area.

Somerset created the Downtown Prosperity Development Area TIF district, would encompass most the area from the southwest edge of Fountain Square down Main/Monticello to the property in which the former Continental Refinery sits. The area is considered blighted and in need of revitalization.

The other, called the Education and Convention Center Local Development Area TIF district, focuses on empty properties in and around the Center for Rural Development, Somerset Community College and Lake Cumberland Regional Airport.

Beyond the 2019 baseline tax revenues from property values, which it keeps for traditional city operations, the city will contribute 75 percent of incremental increases in real property tax revenues over a 20-year period.

The county is being asked to participate as well, particularly as the main source of funding for the airport. While school or fire districts may not participate by statute, other taxing districts -- such as library, health and extension -- can. Chris Girdler, president and CEO of SPEDA (Somerset Pulaski Economic Development Authority), advised Fiscal Court that the Pulaski County Public Library board of directors has also been approached due to the main branch's proximity to the downtown TIF.

Girdler was joined in the presentation by Jim Parsons, a northern Kentucky attorney specializing in TIF districts. Should the county choose to participate, Parsons told the court, they would need to pass an ordinance establishing participation in one or both districts as well as the type and percentage of revenue contribution. The 20-year period was set with the establishment of the TIF districts.

Parsons also explained that districts calling for redevelopment of blighted areas such as the one downtown are eligible for state TIF funds, while districts that involve new development are not -- increasing the importance of creating as large a pool of taxing resources as possible. However, he added that the Education and Convention Center TIF could be eligible for state tourism funds depending on the type of development project.

In addition to the incremental increases in property tax revenue, Parsons indicated during the meeting that the City of Somerset had pledged a portion of occupational tax revenue though there is a "carve out" provision to exclude or divert those funds in the event they are needed for another state incentive project.

"What we don't want to do is create a TIF district and then have the end-user company that might need an incentive not be eligible for that," Parsons explained.

Following the meeting, Somerset Mayor Alan Keck advised the Commonwealth Journal that they city had only pledged property tax revenue, not occupational, but it was the possibility of payroll tax being used that prompted questions from magistrates Jason Turpin and Mark Ranshaw. The attorney further advised that the draft ordinance he presented to county officials called only for the contribution of tax increase revenues from real estate values, not occupational tax; it would be up to them if they wanted to contribute from that revenue source.

Insurance premium and tangible property taxes are not affected and cannot be pledged, Parsons added.

Magistrate Ranshaw also asked about changing the percentage of revenue pledged before the 20-year period was up. Parsons advised it was possible, so long as there wasn't an active project in development for which a certain amount had already been pledged.

Girdler noted that more than 35 TIF projects were active statewide -- representing a total of some $10 billion in development investment. He called the TIF effort "a bold and innovative way to promote grown in Somerset and Pulaski County" but added that SPEDA isn't trying to force anything on anyone.

"I want you to know I come here as a teammate," he continued. "…We're just asking for your help in giving us this tool to as an economic development entity.…

"If our community is going to be able to continue to provide options for our citizens; attract more good dining and shopping options; create more good-paying jobs; enhance our educational opportunities; and do what is SPEDA's number one goal which is improving the overall quality of life, then we must look at options such as TIF in order to allow us to be competitive," Girdler said.

Girdler emphasized that the county wouldn't be losing anything it currently has. The contribution comes from future tax increases. Nor do the TIF districts place any type of zoning restrictions on properties located within their boundaries or create tax exemptions.

In response to a question from County Attorney Martin Hatfield, Parsons also explained that while the city -- as creator of the TIF districts -- would ultimately distribute funds, an Incentive Review Committee made up of representatives from all participating entities (potentially city, county and library) would be established to review projects and make recommendations to the city.

Ranshaw further expressed concern about how increased property values would affect low-income and/or senior property owners in the downtown TIF. Pulaski County Judge-Executive Steve Kelley countered, however, that the city has already created the TIF district; the county can only decide whether or not to participate.

"As an economic development authority, we're in the business to create development," Girdler added, saying he respected Ranshaw's concern. "We want to see property values rise. We want to see the property values of this entire community go up. That's something that, respectfully, we will never apologize for because we want to bring more development into this community and with that development will come more jobs, more educational opportunities and more workforce development opportunities."

Parsons noted that as property values increase, tax rates could actually go down.

"You're only pledging what revenue is generated," he said. "If rates change, the percentage doesn't change but the amount of revenue may be different."

While TIF monies can't be used to subsidize those owners' property taxes, Parsons explained, the review committee could choose to offer property improvement grants for facade or streetscape projects.

In regard to a question from County Treasurer Joan Isaacs about how much the TIFs are expected to generate, Parsons acknowledged that estimates are hard to model because there are no specific projects currently tied to the local districts. Rather the districts will be in place for when developers express interest.

Fiscal Court didn't vote on the matter Tuesday. Parsons advised county officials that he would like to know what entities will be participating within the next couple of months.

"We do have several issues that we need to deal with regarding our occupational taxes and some of our departments that require shared funding between us and the city" Judge Kelley told magistrates, a reference to several city-county agreements that are coming up for renegotiation. "…I anticipate we'll be getting together pretty soon as a court and a council to discuss some of our financial needs on both sides."

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