Tax Increment Financing (TIF) District

View some more detailed reading on this subject here

Jump to:
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?

Kentucky’s TIF statute essentially captures the future value of an improved property to pay for the current costs of those improvements.

Developing a previously undeveloped piece of land will increase the value of the property, as well as in the surrounding area, and may spur further development. This increased tax revenue is the increment that TIF dedicates toward public infrastructure improvements in distressed or underdeveloped areas where private development would not otherwise occur.

How projects get approved for TDA

There are two main ways a project can qualify for a TDA: Local Only Development Areas and Blighted Urban Redevelopment Areas. The proposed RRED resort would qualify for the first.

Local Only Development Areas have the following requirements:

Land must be previously undeveloped tract of land
Maximum size cannot exceed 1,000 acres in any 12-month period in any county
Total amount of property within a city or county that may be in a TIF development area cannot exceed 20 percent of the total assessed value of taxable real property within the jurisdiction(s)

Local Only Development Areas can recover up to 100 percent of incremental property taxes and occupational license taxes or fees over a maximum term of 20 years. The percent which a development area can recoup is established when the TIF is established by local officials.

Application and approval process

Any TIF incentive granted for a project would be subject to approval of the county, which has the sole authority to decide whether to establish the local development area under the TIF Act.

First, the city or county shall hold a public hearing to solicit input from the public regarding the local development area at a hearing which advertises/publishes a notice of the time, place, and purpose of the hearing as well as a general description of the boundaries of the proposed local development area. The notice shall include a summary of the projects proposed for the local development area.
After the public hearing, the city or county shall adopt an ordinance which shall include full details such as boundaries, establishment and termination date, identification of project, any approvals or agreements, provisions for periodic analysis and review by governing body, and a variety of other limitations, rules and oversight information.
After establishing local TIF development area by local ordinance, local agency submits TIF application for state increments to the Cabinet for Economic Development (CED).
CED staff reviews TIF application for completeness and evaluates whether, based solely on information submitted by the applicant, the project is likely to meet the minimum requirements for the program.
CED staff presents TIF project to the Kentucky Economic Development Finance Authority (KEDFA) board for preliminary approval.*
Upon KEDFA preliminary approval, CED staff works with the Finance and Administration Cabinet and the Office of State Budget Director to develop criteria for the completion of a TIF consultant’s report (if required).*
Consultant researches potential TIF project and projections submitted by local agency and determines if the projections are accurate and if the project results in a net positive impact for the Commonwealth.*
If the consultant’s report reflects a net positive impact to the Commonwealth, the report is presented to KEDFA during closed session.*
CED staff negotiates the TIF incentive available to the project and drafts a TIF incentive agreement detailing the footprint, the specific taxes, amounts of increments available and infrastructure expenditures along with reporting requirements.
CED staff presents the TIF project to KEDFA Board for final approval.
Upon final approval, the TIF project can activate and increments can begin to accrue.

*Do not apply to Real Property Ad Valorem Tax Revenue TIF projects since a consultant report is not required.

What does this mean for the proposed resort project?

There are many variables with any project seeking this kind of tax incentive. Perhaps the most important to point out is that the local development area and local officials will ultimately decide what percentage of incremental property taxes and occupational license taxes or fees are redirected back into the project over a minimum of 20 years.

As Stantec points out in their Incentives Report, “It is unreasonable to suggest the County and special taxing districts, assuming they would be willing to pledge their incremental taxes to support the Project, would pledge 100 percent of their increment, but a 75 percent pledge would be reasonable…”

With an assumption of a 75 percent pledge from the county, as Stantec anticipates, the resort could collect $13,056,540 in recouped taxes generated during resort construction over a 30-year period.

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

Since the TIF district can solely be established by local or county officials RRED is speaking to local officials such as Powell County Judge Executive James Anderson. Our goal is to first discourage the establishment of such a district in Powell County.

However, if the district is established in spite of our efforts then RRGU will actively oppose its approval at the appropriate steps in the process. These efforts will include focusing advocacy efforts on the Kentucky Cabinet for Economic Development as well as the Kentucky Economic Development Finance Authority (KEDFA) board which is responsible for both preliminary and final approval for the TIF project.

To contact KEDFA board:

Old Capitol Annex, 300 West Broadway
Frankfort, KY 40601
(502) 564-7140

Cabinet of Economic Development
(800) 626-2930
(502) 564-7670
econdev@ky.gov

Cabinet of Economic Development
Partnership Board

Voting Members
Governor Andy Beshear, Chairman
Commonwealth of Kentucky

Elizabeth McCoy
1st District

Fred Sipes
2nd District

Keith Hamilton
3rd District

Candace McGraw
4th District

Terry Forcht
5th District

Melinda “Lindy” Karns
6th District

James Ed Harris
At-Large

James Lusk
At-Large

Secretary Rebecca Goodman
Energy & Environmental Cabinet

Secretary Holly M. Johnson
Finance & Administration Cabinet

Secretary Kerry B. Harvey
Public Protection Cabinet

Secretary Larry L. Roberts
Labor Cabinet

Non-Voting Members:
Secretary Mike Berry
Tourism, Arts & Heritage Cabinet

Interim Secretary Larry Hayes
Economic Development Cabinet

The Kentucky Economic Development Finance Authority

Jean R. Hale, Board Chair
Chairman, President & CEO
Community Trust Bancorp, Inc.

Don Goodin, Vice Chair
Owner and Managing Partner
Lebanon Oak Flooring Co. LLC

Chad Miller, Asst Secretary Treasurer
CEO
LockNet, LCC

Tucker Ballinger, Secretary Treasurer
President & CEO
Forcht Bank

Mike Cowles
Chevron Corporation – Retired