Tuesday, October 7, 2014

Council takes first move for tax-increment financing plan for mixed-use redevelopment of Midway Station

The Midway City Council voted Monday night to start the official process that could secure the financing for large, mixed-use development at Midway Station.

The council voted to schedule a public hearing at 6:30 p.m. Nov. 3 on a plan for development that would be funded by tax-increment financing, a device that uses increased tax revenue from development to pay for the costs of public infrastructure in the development.

Table from Commonwealth Economics report
Lexington developer Dennis Anderson, who has an option to buy the largely vacant industrial park and has been paying the taxes and interest on the city and county debt for its creation, plans to use tax-increment financing to recoup the $30.7 million he plans to spend regrading the site; reworking its streets, sidewalks, utilities and drainage; and creating parking, the largest single cost.

The specific figures, and a forecast that the development would more than repay the TIF costs, were included in a report to the city by Commonwealth Economics, a consulting firm Anderson has hired.

John Harris of Commonwealth told the council that his firm has worked with more that 12 cities to get TIF projects approved by the state. He said it was founded in 2007, after he was finance secretary for Gov. Ernie Fletcher, when the current TIF law was written.

"If the developer takes the risk to put in the local public infrastructure, the state allows the local government . . . to reimburse the developer for the cost of the public infrastructure," using up to 80 percent of the incremental tax revenue generated by the project (except school and special-district taxes), Harris explained.

"You have to spend the money to actually received the funds back from the state, and they only come back as the taxes are created," Harris said. "As soon as the set infrastructure amount is paid for, the program ends. . . . The maximum it can take is 20 years." Anderson has said full development of Midway Station may take that long.

Anderson appears to have secured financing for the project, pending state approval of the TIF for it. "From the time the state approves your application you do have four years to start," Harris said.

He said the report presumes that Woodford County will participated in the Midway project, just as it participated with Versailles in TIF that is being used for the new Kroger and associated development. He said the state will want to see some support from the county, thought it is not required, and both governments would pass a local participation agreement saying they will participate at a certain level before applying for state approval.

Anderson's plan calls for 221 singe-family homes and 139 "townhome units." Council Member Grayson Vandegrift, a candidate for mayor, asked Harris, "What if we didn't want that many homes built in that amount of time?"

Harris said a specific number can be part of the agreement with developer, but his associate, Casey Bolton, said "This is a 20-year build-out, so you're only talking about 11 homes a year."

The plan calls for 100,000 square feet of space for retail shops and restaurants, 183,000 square feet of leasable office space and 400,000 square feet of industrial space. For a PDF of the Commonwealth Economics report, click here.

Among other business at the meeting, the council approved a bid for replacing the firehouse roof and enacted a revised ordinance dealing with encroachments onto city property.

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