A tax break that would let developers keep up to $32 million over 20 years for building on portions of the University of Kentucky’s Coldstream Research Park won approval Thursday from the Lexington council.
The Lexington-Fayette Urban County Council voted unanimously to approve the tax increment financing district, which lets developers use new taxes generated by the project to repay themselves for public infrastructure improvements associated with the project, such as roads, sidewalks, water and sewer lines, shared meeting spaces, and parks.
UK has said it plans to let several private developers build new apartments and office space on portions of the 735-acre research park that are included in the new district off Newtown Pike. Most of the land in the new district has not yet been developed.
Under the proposal approved Thursday, developers could receive up to $32 million over 20 years from the city and state for infrastructure improvements. That’s roughly $16 million in city tax refunds and $16 million in state tax refunds.
The proposal now goes to the Kentucky Economic Development Finance Authority, which oversees TIF projects involving the state, for its approval. The state has final say on the district and will do its own analysis to determine if the project is financially viable before granting the incentive.
The proposed TIF district does not include a 50-acre section of the research park that UK has agreed to sell to potential companies as part of a larger land swap with the city. In addition to selling the 50 acres, UK has agreed to give the city 200 acres between Interstates 75 and 64 and Georgetown Road in exchange for control of about 13 acres of city streets and alleys in and around campus.
The city will use the 200 acres off Georgetown Road for a new business or industrial park.
A memorandum of understanding between the university and the city about the land swap has not yet been finalized.
Kevin Atkins, chief development officer for the city, said UK was not given preferential treatment in its TIF application.
“We treated this like we would any other developer,” Atkins said. UK paid for its application and “all other fees, including our legal fees and our administration fees, which is an annual fee of 2 percent.”
Last year, the city also approved changes that would allow UK o use as much as 15 percent of its research park for retail developments, apartments or town houses. The changes also allow for more density by requiring less green space around buildings and increasing maximum building heights.
UK officials have said that adding residential units will allow it to attract more businesses to the research park, which still has vast empty spaces nearly 30 years after it was first proposed. Isolated industrial and research parks are outdated because people want to live, work and shop in the same area, UK officials have said.
“Everything we’ve been doing in the past couple of years is to accelerate the growth of Coldstream,” said George Ward, executive director of the research park.
Although TIF districts were originally created as a tool to entice developers to build in blighted urban areas, lawmakers have added numerous other allowable uses, including public university research parks.
Danny Mayer, a former mayoral candidate, questioned during Thursday night’s council meeting why a publicly-funded university qualifies for the incentive.
“The University of Kentucky is a $3 billion corporation,” Mayer said. “It’s a public land grant institution.”
The TIF district excludes existing buildings, such as the Embassy Suites hotel just off Newtown Pike. But Embassy Suites will be the developer of a new Hampton Inn hotel that’s inside the district, near an additional 250 residential apartments. UK has already issued a request for proposals to private developers to build the apartments.
“This will set up Coldstream as a live-work-play-and learn environment the high-tech workforce is desiring,” Ward said. “That’s the trend around the country. The number one reason a company relocates to a research campus is talent — both the students we’re training and our world class researchers.”
Most of the rest of the TIF area will be open to incubator and laboratory space for new businesses, and companies who want to expand, Ward said.
“That’s one of the missing pieces in Lexington,” he said. “We’ve done a good job bringing companies here and growing them, but then they need to find a bigger space as they continue to grow. That’s what we’re trying to do.”
Ward hopes to use some of the TIF proceeds to renovate the Carnahan House, a vacant Colonial Revival house built on the farm in 1918, into a shared meeting space, and to create a park area for passive recreation in front of the Coldstream Administrative Office.
While some TIF districts have been criticized for using tax dollars to support lucrative high-end developments, Ward thinks the government’s help will be the final boost in Coldstream’s long and slow development.
“We believe with the university as a partner to assist with infrastructure, that will be attractive to developers and help accelerate the development,” Ward said. “The TIF provides the university with the ability to give a developer a shovel-ready site with built-in amenities, as well as insuring that the cost of infrastructure is kept at a minimum. That enables a developer to build a more dense project than they would have otherwise. It’s all for job growth.”