A bill moving through the Kentucky General Assembly would allow Louisville to provide tax breaks to developers looking to locate projects downtown. Supporters say this would open up new avenues to improve underutilized parts of the city center.
Right now, the city can’t use the popular development incentives known as tax increment financing, or TIF, almost anywhere in the Central Business District. That’s because a TIF district that started in 2009 to fund the construction of the KFC Yum! Center already covers large swaths of downtown.
The existing TIF runs from the Ohio River south to East Kentucky Street. Its borders include South Clay Street in the east and 9th Street to the west.
House Bill 775 would allow the city officials and developers to carve out new TIF districts within the larger Yum! Center district, often called the arena district.
Mayor Craig Greenberg told LPM News the change could help the city meet some of its priorities, like redeveloping some of the many city-owned parking lots downtown.
“It’s challenging to spur large economic development projects in downtown Louisville because of [the Yum! Center TIF],” he said.
Those parking lots or vacant buildings downtown aren’t generating much revenue for the KFC Yum! Center, either. It uses new tax revenue and profits to pay back the $339 million in bonds that were taken out to fund the construction of the arena. New developments, even those subsidized by a TIF district, could mean more money for the arena, Greenberg said.
HB 775, sponsored by Republican Rep. Jason Nemes of Louisville, passed out of committee last week. It could receive a final vote in the House this week before moving to the state Senate.
How it would work
Tax increment financing is one of the most popular tools local governments across the United States use to motivate development.
Officials draw the boundaries of a TIF district, which could include just the project itself or some of the surrounding blocks. Any new tax revenue generated by the project is split: the majority goes back to the developer and the rest to local and state government.
Louisville officials typically design TIFs that rebate 80% of new taxes back to the developer, while the city and state split the remaining 20%. These tax incentives can last anywhere from 20 to 45 years.
Proponents of TIFs argue they’re a way for governments to help fund projects that wouldn’t otherwise be built. Opponents, meanwhile, see TIF districts as a handout for wealthy developers.
Under HB 775, the Louisville Arena Authority would have to approve the creation of any new TIF district within bounds of the existing one. In most other cases, the city or state manage TIFs.
The authority is responsible for managing the KFC Yum! Center and ensuring that it can repay its debt obligations, which have ballooned to nearly $1 billion over the past decade. The company that insures the authority’s bonds would also have a say in any new subsidies.
The authority faced defaulting on its debt in 2017, but has since found stability after refinancing its bonds. The state, Louisville Metro and the University of Louisville have also had to increase their contributions to the KFC Yum! Center in order to keep it afloat.
If the bill passes, the Authority would handle proposals for new TIF districts on a case-by-case basis, said Leslie Geoghegan, the board chair of the Louisville Arena Authority. For the authority, the biggest concern would be whether a new TIF would eat into the revenue it needs for debt repayment.
“We can’t just approve everything,” Geoghegan said. “It’s going to have to be meeting certain thresholds and be a significant project.”
To make sure the authority also benefits from new TIFs downtown, HB 775 would require 10% of any new tax revenue to go to the KFC Yum! Center.
Greenberg said he thinks the city will be able to identify projects where a TIF deal can benefit the community, the developer and the authority.
“With projects that are not currently generating support for [KFC Yum! Center] TIF, it’s easier to see,” he said. “We need more housing, we need more jobs in downtown Louisville and we need a new tool.”
Greenberg pointed to a recent proposal to redevelop a parking lot next to Slugger Field into apartments, shops and a boutique hotel. In announcing the $250 million project last December, the mayor noted that “there’s an opportunity for some TIF incentives.”
HB 775, which the Greenberg administration requested, would clear the way for a TIF district to support that proposal.
