The Urban County Council is expected to vote Tuesday on whether to allow a tax increment financing district in the city's East End.
The district would include the eastern junction of Main and Vine streets and go up Midland Avenue to East Third Street. The proposed district also would include parts of East Third Street up to Race Street.
Tax increment financing allows a developer to be reimbursed for infrastructure costs through sales and other taxes generated from new development.
Phil Holoubek, a developer who is spearheading efforts to create the district, told the council during a workshop Thursday that the district would include about $50 million in proposed development with $17 million in public infrastructure costs. A portion of the TIF district would include a planned Holoubek development at Main and Vine streets. Plans for the mixed-use development include first-floor retail and three floors of apartments.
The LexPark board has agreed to build a 160-space, three-story parking garage on that site at a cost of $2.8 million. As part of the deal, the city would have to approve a land swap between Holoubek and the city.
The other end of the proposed TIF district includes land owned by the nonprofit Community Ventures Corp. It has a building at East Third Street and Midland Avenue and other property in that area. The other owners of land in the TIF district include Mike Scanlon, a former vice mayor, and Missy Scanlon.
Holoubek said the Community Ventures property would become a mix of housing, retail and business space.
"The retail that is most needed is food-based, financial-based and health-based," he said. "We are also missing affordable quality housing on the East End."
Council member Jennifer Mossotti, a real estate agent, pointed out that there were a lot of mixed-use developments in Lexington that have vacant retail space on the bottom floors. How was the development at Main and Vine streets going to be different?
Holoubek said the location itself would help. There will be access from both Main and Vine streets, which is rare downtown. And Community Ventures could give discounts to neighborhood-based retail on the other end of that development, he said.
The Urban County Planning Commission has certified that the tax increment financing district complies with the comprehensive plan and the East End small area plan. The planning commission voted unanimously Thursday afternoon to certify the TIF district.
Holoubek said developers have had two public meetings in the East End and 50 one-on-one meetings with stakeholders in the area. No one spoke against the TIF district during an Oct. 23 public hearing before the council. The TIF agreement got its first reading on Thursday. A final vote will be taken on Tuesday.
Kevin Atkins, the city's chief development officer, reminded the council during Thursday's workshop that the city would not be at risk if the project did not generate the amount of taxes it should.
"The developer is on the hook for the costs," he said.
If the council ultimately approves the TIF district, it would need final approval from the Kentucky Economic Development Finance Authority. Holoubek said the developers hoped to have the application to the state by January. The state economic development board would hire an independent consultant to estimate how much new tax money — from sales, property and occupational taxes — the proposed development would generate.
Most of the taxes that would be generated from the project and used to pay for infrastructure such as burying utility lines, improving the streetscape and adding pedestrian-friendly crossings would be state taxes. By law, school systems cannot participate in TIF districts.
The amount of money a developer may use for infrastructure improvements is capped by the state. For example, if the state approves $17 million in infrastructure improvements, and the TIF district generates more than $17 million, the additional revenue can go to other projects in the district.
For that reason, Holoubek said, the TIF district includes the Charles Young Community Center, Thoroughbred Park and the Isaac Murphy Memorial Art Garden.
Lexington has five TIF districts: CentrePointe and the 21c Museum Hotel, both in downtown; The Red Mile; the Summit, at Nicholasville Road and Man o' War Boulevard; and the former Turfland Mall site. Developers have to spend a minimum amount to "activate" a TIF district and start receiving the taxes generated from it. Lexington has never had an active TIF. Redevelopment of The Red Mile, Lexington's harness track, probably would be the first.
If the state approves creation of the East End TIF district, developers and the city would have to sign an agreement spelling out what is expected of the developer, Atkins has said.