Kentucky Tourism Development Incentive Program and the Tourism Development Act (TDA)

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What is this?
How projects get approved for TDA
Application and approval process
What does this mean for the proposed resort project?
What can be done about this? And what is RRGU doing about this?

What is this?

This is a state-level tax incentive which encourages the development of projects which will attract tourism to Kentucky through the reimbursement of state sales taxes generated from the project.

Eligible projects can recover up to 25 percent of the project’s eligible development and construction costs over a 10-year period. Meanwhile projects constructed on state park, federal park, or national forest lands are eligible to recover up to 50 percent of development costs over a 20-year period.

How projects get approved for TDA Eligibility for receiving TDA approval requires a project to meet specific predefined uses. The eligible uses are:

Cultural or historical sites

Recreation or entertainment facilities

Areas of scenic beauty or distinctive natural phenomena

Entertainment destination centers

Kentucky crafts and products centers

Theme restaurant destinations

Lodging, when:

Built in conjunction with a tourism attraction and the tourism attraction cost more than the lodging facility; or

Built on state or federal parks and recreational lands; or

Involves restoration or rehabilitation of a historic structure; or

Involves the restoration or renovation of a lodging facility having no less that 500 rooms with project costs exceeding $10,000,000; or

Involves the construction, restoration, or renovation of a full service lodging facility which is or will be a part of a major convention or sports facility with project cost exceeding $6,000,000; or

Involves the construction, restoration, or renovation of a facility which is or will be located:

In the Commonwealth within a 50-mile radius of a property located on the National Register of Historic Places with a current function of recreation and culture; and

Located within any of the 100 least populated counties in terms of population density.

Projects that do not qualify are strictly retail businesses and recreational facilities that are used primarily by local residents and are not a likely destination for out-of-state travelers.

Application and approval process

The company seeking the incentive submits an application to the Secretary of the Tourism, Arts and Heritage Cabinet. With the secretary’s recommendation, the project will go before the Kentucky Tourism Development Finance Authority for preliminary approval.

Upon preliminary approval, the cabinet’s independent consultant will do an in-depth study to make sure the project meets the requirement of the act which will be paid for by the applicant in advance. Using the consultant’s findings, the secretary will determine whether to request the approval be given by the Kentucky Tourism Development and Finance Authority.

Upon final approval from the authority, an agreement will be signed by the applicant and the commonwealth allowing the company to recover the sales tax. The applicant cannot begin construction until after final approval.

What does this mean for the proposed resort project?

If awarded the TDA incentive then the resort development would be eligible to recover up to 25% of their building costs by redirecting any sales tax money generated at the resort back into the resort to pay for building expenses. This means the tax money being directed into the resort via this TDA incentive is not tax money earned by a different business but instead is taxes generated by the resort, once opened.

Normally sales tax generated by a local business would go to the state and local/county government where it was charged. Instead those taxes are redirected back to the resort. This means the county will not receive any new tax money from the resort for at least 10 years or maybe more and any improvements to infrastructure needed due to increased visitors to the resort will need to be paid for by the county without any assistance from direct new taxes.

The Stantec report expects a total incentive of $17,436,180 over 10 years for the project from the TDA.
Stantec also states that if the project were to include a public private partnership with Natural Bridge State Park then the project could become eligible to increase their recovery period and percentage of costs eligible to be re-collected to 50 percent. This would bring the total taxes going back into the resort to $34,872,360 over 20 years – that’s $34 million not going to the local government for infrastructure repair and other costs.

What can be done about this? And what is RRGU doing about this?

The TDA, like the KEIA, is an act which basically just requires eligibility of a project to be awarded. If a project meets the prerequisite requirements of the TDA then a project is likely to be approved by the Secretary of the Tourism, Arts and Heritage Cabinet.

Because of this, it is RRGU’s position that we are not actively opposing the awarding of this incentive to a RRED resort development. Simply we don’t believe the is much that can be done to stop it. However, we should emphasize that we do oppose the resort being awarded any TDA incentive simply because development of the resort would add additional stress to already-strained local infrastructure such as roads, water, and water management without adding any new influx of direct taxes to compensate.

If you do want to actively oppose this incentive being awarded to a resort project near the Red River Gorge, letters and phone calls can be directed to the Secretary and different members of the Tourism, Arts and Heritage Cabinet.

Office of the Secretary
Kentucky Tourism, Arts and Heritage Cabinet
500 Mero Street, 5th Floor
Frankfort, KY 40601

Secretary Office:
Secretary –

Mike Berry

mike.berry@ky.gov

Executive Director – Office of Public Affairs and Constituent Services

Danielle Jones

daniellen.jones@ky.gov

Leadership:
Department of Parks
Commissioner, Russ Meyer
500 Mero Street
Frankfort, KY 40601
(502) 564-2172
russ.meyer@ky.gov

Department of Tourism
Commissioner, Mike Mangeot
500 Mero Street
Frankfort, KY 40601
(502) 564-4930
michael.mangeot@ky.gov

Kentucky Artisan Center
Executive Director, Todd Finley
200 Artisan Way
Berea, KY 40403(859) 985-5448
todd.finley@ky.gov

Kentucky Center for the Arts
President, Kim Baker
501 West Main Street
Louisville, KY 40202
(502) 562-0100

Kentucky Heritage Council
Executive Director/ State Historic Preservation Officer, Craig A. Potts,
300 Washington Street
Frankfort, KY 40601
(502) 564-7005
craig.potts@ky.gov

Kentucky Historical Society
Executive Director, Scott Alvey
100 West Broadway
Frankfort, KY 40601
(502) 564-1792
scott.alvey@ky.gov

Kentucky Horse Park
Interim Executive Director, John Crowell
4089 Iron Works Parkway
Lexington, KY 40511
(800) 678-8813
john.crowell@ky.gov

Kentucky Venues
President & CEO, David Beck
937 Phillips Lane
Louisville, KY 40209
(502) 367-5114
david.beck@ky.gov

Fish & Wildlife Resources
Deputy Commissioner, Rich Storm
1 Sportsman’s Lane
Frankfort, KY 40601
(502) 564-3400
rich.storm@ky.gov

Governor’s School for the Arts
Director, Nick Covault
501 W Main St.
Louisville, KY 40202
(502) 566-521
ncovault@kentuckyperformingarts.org

Kentucky Center for African American Heritage
Executive Director , Aukram Burton
1701 W. Muhammad Ali Blvd.
Louisville, KY 40203
(502) 583-4100
aukram@kcaah.org

Kentucky Arts Council
Executive Director , Christopher Cathers
1025 Capital Center Drive, Third Floor
Frankfort, KY 40601
(502) 892-3126
christopher.cathers@ky.gov

Kentucky Humanities Council
Executive Director, Bill Goodman
206 East Maxwell Street
Lexington, KY 40508
(859) 257-5932
bill.goodman@uky.edu