CATLETTSBURG New county tax dollars chiefly generated by a Marriott-brand hotel can officially be captured by the City of Ashland for 20 years and used to fund more development projects.
The Boyd Fiscal Court gave final approval to the establishment of a Tax Increment Financing, or TIF, district on Tuesday. The vote was unanimous.
The TIF district will be called the “Ashland Plaza Development Area” and exist between 14th Street, Bath Avenue, 16th Street and Greenup Avenue. Without its creation, investors planning to buy the Ashland Plaza Hotel, renovate it and turn it into a Marriott-brand Delta Hotel would likely back out of the purchase.
The city also plans to demolish the old Ashland Oil building at 1401 Winchester Avenue and build a new parking garage and convention center in its place.
The TIF district will allow the city to capture only the projected increases in local taxes, including property and payroll tax, within the Ashland Plaza Development Area through the lifespan of the TIF. The new money would be placed in a special TIF account managed by the city finance department.
The current flow of tax dollars coming out of the TIF district to the county, city and special taxing districts would remain the same. For instance, if a property inside the TIF district is valued at $500,000 now and its owner paid $8,000 in property tax, the tax recipients would not receive any less than their share of the $8,000 for the next 20 years.
But if the property’s value increases to $1 million and the bill increases to about $16,000, the additional $8,000 would be placed in the TIF account.
Local tax rates will not increase as a result of the TIF, according to City Economic and Community Development Director Chris Pullem.
School systems would not be impacted by the TIF program, and could potentially receive more tax-based revenue as a result, assuming the new money rolls in as projected.
The new local taxes generated by the hotel and parking structure would be about $4.7 million, based on estimates by Commonwealth Economics, a Lexington-based consulting firm working with the city.
Now that the local TIF district is established, the city will seek state TIF money. The state TIF, which can only be used for public infrastructure improvements, would generate about $11.8 million in TIF-eligible funds. It would also draw only from taxes inside the Ashland Plaza Development Area.
The city would collect that combined $16.5 million in new revenue and place it in a separate TIF account.
The hotel developers would receive $4 million in TIF money from the city and county through bonds. Pullem said the businessmen are investing about $16 million in the project.
The bulk of the state TIF funds would be allocated toward the new parking garage and convention center, which will cost an estimated $14 million. The city plans to demolish the old Ashland Oil headquarters at 1401 Winchester Avenue to make room for the facility. The garage would have four levels and 400 parking spaces. The convention center would be on the top floor. The public structure another key element in enticing the hotel investors.
The planned TIF program mirrors others created by government bodies throughout the country, and Tri-State region, including Huntington.
But it would not be implemented without some risk. If the projected increases in tax revenue do not flow in as projected, the city could be saddled with debt from construction costs on a parking garage and less funding to pay for it. City officials have said they’re confident in the estimates provided by Commonwealth Economics, which has conducted TIF-related studies for other government bodies throughout the state, including in Lexington, Louisville and Owensboro. They’ve also said the downtown revitalization project is worth the risk.
County Commissioner John Greer on Tuesday sought clarification that the county would not be responsible for helping pay for any downtown projects beyond the new county tax dollars devoted to the TIF fund over the next 20 years.
County Attorney Phil Hedrick confirmed Greer was correct before he read the ordinance and the fiscal court approved it.
The county’s approval gave Judge-Executive Steve Towler authority to sign an interlocal agreement.
Once that agreement is in place, a master development agreement would then be established, which binds the TIF funds to the projects.
The investors have not yet closed on the hotel purchase. They will likely push back their previously scheduled closing date of June 30 to next month.
Pullem said he wouldn’t consider the delay to be a “red flag,” but rather an effect of negotiating a large project that includes private parties and public funding.
“We think the hotel will most likely be ready to close on the property after pre-approval from the state,” Pullem said.
Delta Hotels are three-to-four star hotels based mostly in Canada. Ashland would join Chicago, Baltimore, Seattle, Orlando, Richmond, Va., Chesapeake, Va., Racine, WI., Grand Rapids, Mich. and Fargo, N.D on the list of American cities with a Delta Hotel.
The new hotel would create an estimated 85 to 100 jobs, and include a new restaurant.