The Urban County Council will probably decide in the next two weeks whether to issue $28 million in bonds for the construction of the controversial CentrePointe parking garage.
CentrePointe developers sent the city an application to issue the bonds late Monday. Mason Miller, an attorney for the city, told the Urban County Council on Tuesday that he hopes to return to the council by the first or second week in September with his recommendation on whether to issue the bonds. Miller also will give the council a list of options and any potential risks.
CentrePointe has proposed using new tax revenue generated from the CentrePointe development — which is to include a hotel, apartment building, an office tower, and retail and restaurant space — to pay the debt on the $28 million in bonds for the parking garage. The city and the state have previously approved a tax increment financing district (TIF) that would allow for new taxes — on new sales, occupational and real estate taxes — to be used to help offset costs.
CentrePointe, which comprises an entire downtown city block, has been in the works since 2008.
The project, which has been stalled at times, has been controversial. That was, in part, because an entire block of historical buildings was razed. Later questions arose about financing.
Construction of the three-story underground parking garage began late last year. CentrePointe had originally asked that the state issue $30 million in bonds for the 700-space parking garage. Earlier this month, Larry Hayes, the secretary of the Kentucky Cabinet for Economic Development, sent Mayor Jim Gray a letter, saying that the city was the more appropriate entity to issue the bonds, not the state.
The application before the city was a request for $28 million in bonds. It's not clear why the developers asked for $2 million less.
The current proposal would not obligate the city to make those debt payments if the new taxes don't generate enough money to cover them. If the city issues the bonds, they would be tax-free and would lower the cost of the financing. That's why it's attractive to developers, lawyers for the city said Tuesday.
"It's tax-exempt financing that helps lower those financing costs," said Jim Parsons, a lawyer who has overseen the city's TIF districts.
Parsons gave the council a refresher Tuesday on TIF financing, how it works and how other cities and counties use TIF financing.
The city and the state have agreed to pledge new tax revenues for projects in the CentrePointe TIF district, which includes public spaces such as Phoenix Park and the old Fayette County courthouse, which is closed and in disrepair.
If the $28 million is paid off, additional taxes generated in that TIF district could be used for other projects, such as restoring the old courthouse, Parsons said.
Bowling Green, he said, decided to pledge general obligation bonds as part of the TIF bonds, Parsons said. That means the city would have to pay for part of the project if the taxes for that project — which involved a minor-league baseball park — did not materialize.
"It really depends on what the city wants to do," Parsons said.
Lawyers for CentrePointe said Tuesday that an independent economic analysis has estimated that the project would generate an additional $2.5 million in taxes annually.
Miller said that his office has hired an investment banking firm to analyze the economic assumptions used to estimate those tax revenues.
"We are still in the negotiation phase," Miller said. "We are not in a position where we can talk about commitments one way or the other."