Ashland Alliance

TIF would help fund downtown Ashland development

The Ashland Plaza Hotel in downtown Ashland. ASHLAND The City of Ashland plans to create a Tax Increment Financing, or TIF, district in downtown Ashland to help two investors turn the Ashland Plaza Hotel into a Marriott-brand hotel, and to fund major public projects downtown, including a new convention center and parking garage.

TIF programs are used by government bodies to capture future, anticipated increases in tax revenues inside a specific district. The captured revenue can be used only for development projects in said district. They are created based on the concept that without the new developments, such as the opening of a new hotel that will likely boost property, sales, payroll and income tax revenues, there would be no jump in tax dollars generated in the TIF district.

The local TIF district in downtown Ashland would be called the “Ashland Plaza Development Area” and exist inside the borders of 14th Street, Bath Avenue, 16th Street and Greenup Avenue. It would draw from increases in city and county tax revenue for a lifespan of 20 years.

Only the new revenue can be captured and placed in the TIF account, meaning the current annual tax revenues would stay devoted to current purposes. The local funds generated inside the TIF district can only be used to redevelop blighted areas, improve infrastructure or help private companies with vertical construction.

The city — and potentially the county if the fiscal court approves the local TIF on Tuesday — are also pursuing a state TIF that would allow them to capture future state tax rev7enues generated inside the Ashland Plaza Development Area. A local TIF must be established before the state will consider approving a state TIF.

An OK from the state essentially means the city and county could keep all the new state taxes on the new development in the community, but could only use the revenue to fund infrastructure projects inside the Ashland Plaza Development Area.

Ashland Community and Economic Development Director Chris Pullem said tax rates will not increase as a result of the TIF.

The Daily Independent obtained a copy of the TIF plan for the Ashland Plaza Development Area. The city hired Commonwealth Economics, a Lexington-based consulting firm to analyze and estimate how much revenue the TIF district could create. The firm has consulted other government bodies, such as Owensboro, Lexington and Louisville in establishing TIF programs.

The plan for the TIF district in Ashland will be presented to the state after a local TIF is created.

Revenues

The firm estimates the Ashland Plaza Development Area would generate about $19.4 million in TIF-eligible, future tax revenue over the 20-year lifespan. The state, according to state TIF requirements, would retain 20 percent of the $19.4 million, leaving the local government with $16.5 million for debt service.

According to the study, the majority of TIF funding — $11.8 million — would come from state participation. The remaining $4.7 million would come from city and county participation.

The estimates are based on several factors, including more jobs, and more downtown shoppers, that would contribute to more tax revenue.

For instance, the planned transformation of the Ashland Plaza Hotel into a Delta Hotel by Marriott will create about 85 to 100 jobs, including jobs for a restaurant inside the hotel.

TIF funds for hotel

The developers who plan to buy the Ashland Plaza Hotel and open a Delta Hotel plan to invest about $16 million in the renovation project, including purchase price. The hotel will include meeting spaces and a lobby bar in addition to a restaurant and about 150 rooms. The buy is set to close on June 30.

The city would provide about $4 million in bonds to the developers to help with renovation costs. Those funds would come only from the local TIF. City officials said the deal hinged on the incentives, in addition to the city building a public parking garage and convention center.

TIF funds for parking, convention center

The city acquired the old Ashland Oil headquarters at 1401 Winchester Avenue in February. By tapping into some state TIF program funding, the city plans to demolish the old building and construct a $14-million, four-level, 400-space above ground parking structure.

An estimated 12,000 square feet of conference space will be on the top level of the building.

The hotel and parking garage projects are the only two the city has committed to either fund or help fund. But the study also lists other projects the city would consider assisting in or undertaking as part of the overall revitalization of downtown.

Streetscape and utility improvements

The plan states that the city would resurface streets, expand sidewalks, repair curbs and improve utility connectivity. The downtown streetscape and utility improvements would cost about $4 million in renovation and improvement costs.

Renovation of old junior college building

The city may consider pitching in up to about $250,000 for work on the old, condemned college building at 1420 Central Avenue, including site prep and some demolition. Developers are considering spending about $5.24 million to renovate the building and turn it into an apartment complex, according to the study.

Renovation of four-story building at 15th and Winchester

The owner of the four-story building adjacent to the Ashland Plaza Hotel is already renovating it into a spec, or speculative building. The first floor would include a restaurant, while the upper floors would consist of 12 residential units marketed toward young professionals.  

The property is in need of streetscaping and storm water improvements in the amount of $500,000.

Where state TIF funds can go

The mixed-use, state TIF the city is seeking can only be used for certain public infrastructure purposes. Those purposes include: land preparation and demolition, public buildings, parking, sewers, storm drainage, curbs and sidewalks, roads and street lighting, environmental remediation, floodwalls and river bank modifications.

The risk of TIF

Government bodies throughout the country establish TIF programs, or comparable tax-based programs, as part of redevelopment efforts. But not without risk. If TIF-eligible funds don’t roll in as well as the study projects over 20 years — $16.5 million — the city could have trouble paying off the debt for projects, and may have to tap into general or utility funds to cover the debt.

Pullem said his department “is confident in our consultants and their figures.”

Commonwealth Economics has created reports for TIF projects for Lexington-Fayette Urban County Government, and Louisville Metro to help pay for multi-million-dollar projects in recent years.

Owensboro, Huntington TIFs

The City of Owensboro was approved for a state TIF six months ago to help fund a wide-scale project, that, like the Ashland-based TIF, would involve working with private investors. According to Owensboro Living magazine, the TIF is designed to help pay for two new, 150-room hotels, a new movie theater and bowling alley and about 900,000 square feet of retail and restaurant space.

The city is working to establish a separate TIF program to help fund a new, 400-spot parking garage and a third hotel. That TIF is estimated at $25 million in TIF eligible revenues, according to Owensboro Living.

The City of Huntington is in year 10 of a downtown TIF district that helped improve traffic flow and streetscaping. Last year, Barboursville established a TIF district based on a 200,000-square-foot retail development project.

TIF public hearing in Catlettsburg

The Ashland Board of City Commissioners and Boyd Fiscal Court will meet Tuesday at 9 a.m. for a public hearing at the old courthouse to discuss the planned TIF district.

Judge-executive Steve Towler said he’s in favor of working with the city to establish the TIF, and hopefully the fiscal court will vote to approve it. The public hearing will be held in the Compton Conference room.

The fiscal court will hold its regular meeting at 10 a.m. in the fiscal court chambers.

THIS STORY WAS ORIGINALLY POSTED AT DAILYINDEPENDENT.COM

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