A deal that would let a private developer build student housing at the University of Kentucky could be a boon to the coffers of Lexington and Fayette County Public Schools.

As a government entity, UK doesn't pay property taxes. But once the school enters into a ground lease with Education Realty Trust, any new dorms would probably be considered private property that is subject to taxation.

"I intend to put those buildings on the tax rolls," said David O'Neill, the Fayette County Property Valuation Administrator. "UK and other government-owned properties are tax-exempt but, since they are signing a ground lease to another company, my position is, the company would have to pay taxes."

UK officials said they hope EdR would not have to pay property taxes because the increased cost would probably be passed on to students.

Companies sometimes ask for property-tax waivers, but O'Neill said he believes such a request from EdR would require a change in state law.

UK spokesman Jay Blanton said he was not aware of UK asking lawmakers for such a change.

Property taxes are divided by school systems, city governments and state government, with the majority going to public schools.

Fayette County taxes about 1 percent of a property's assessed value. Approximately 68 percent of that goes to Fayette County Schools, 13 percent goes to the state, 9 percent goes to the city, 3 percent goes to the public health department, and 7 percent goes to LexTran. Less than 1 percent goes to UK extension services and soil- and water-conservation programs.

Mary Wright, chief operating officer for Fayette County Schools, said no one had approached the district about a property-tax waiver.

O'Neill estimated that a $26 million dorm could bring in about $283,000 a year in property taxes, depending on the taxing district and whether the entire building was assessed.

There is a precedent for taxing buildings that sit on property owned by UK, O'Neill said. At UK's Coldstream Research Park, several companies have ground leases with UK but pay property taxes on the buildings.

"We had a very positive discussion with the PVA as part of our efforts to keep everyone informed about this important issue," Blanton said. "As to property valuation and assessment, we're still studying what the potential impact would be. Ultimately, the university's desire is to be fair to everyone involved — local and state governments, the university and, most importantly, students."