Taxpayer-funded incentives packages help fuel the construction of high-profile developments in Louisville.
City and state officials forgo millions of new tax revenues — from property and occupational taxes — to help developers foot the bill for hotels, arenas, apartment complexes and more. The packages, called tax increment financing, or TIF, have become routine parts of major development projects, such as the Omni Hotel downtown.
But the latest project up for such a deal isn’t downtown.
The TIF would support the construction of a heralded development on a long-blighted site at the corner of 18th Street and Dixie Highway.
Passport Health Plan is planning a $130 million mixed-use development at the site that formerly housed a Philip Morris cigarette factory. The plans call for the construction of a corporate headquarters, parking garage and a “health campus” that could include retail and office spaces, according to a development plan submitted to the Metro Council.
The council is considering a TIF incentive for the development.
Such incentive programs rebate a portion of the taxes raised by projects back to their developers, who say they help subsidize a project’s cost.
Such incentives are considered instrumental in fueling development, said Mary Ellen Wiederwohl, head of the city’s economic development department, in an interview last year.
“We believe it is the best tool available to us today,” she said.
In the Passport case, the tax revenue being rebated is limited to increased property taxes, per the agreement submitted to the council.
Passport Health Plan officials are seeking nearly $10.5 million in rebates to help offset the cost of the project. Without the incentives, they contend the project cannot be built with private investment alone, according to the development plan.
Metro Councilwoman Barbara Sexton-Smith, who is sponsoring the proposed incentives package, said the deal serves as proof that city officials are willing to invest in projects that bring economic development in to West Louisville.
She said Passport is looking to bring some 1,000 employees to the headquarters and open a full-service cafeteria. And the so-called health campus could include job training facilities, supportive housing and social services providers.
“And we’re holding out for a grocery,” she said. The area is a notorious food desert.
TIFs Sail Through Council — But Not Without Criticism
While many tax increment financing options sail through the Metro Council, they often face criticism from at least one council member.
Metro Councilman Brent Ackerson often rails against TIF deals for boutique hotels and other projects in up-and-coming areas like NuLu or even downtown.
He didn’t respond to an interview request regarding this project. But his aide, Jeff Noble, said Ackerson usually opposes the incentives packages because “they’re being used for the wrong reasons in the wrong places.”
This project could be different, Noble said.
“He’s open to looking at it; he’s not made a decision on it,” Noble said. “Certainly, he feels better about this one — where it is and what it’s doing — than he has been about the others.”
A 2016 review of tax increment financing agreements by WFPL News found, at the time, 19 TIF agreements in place throughout Louisville, totaling nearly $2.5 billion in developer incentives — in many cases stretching over decades. That comes out to some $29 million in local tax revenues, with the rest falling to the state.
Since then, more agreements have been granted — adding millions of dollars to the total.
And of all the tax increment financing deals in the city, none are located in West Louisville.
Mayor Greg Fischer, in an hour-long live discussion on WFPL News earlier this year, said tax increment financing deals are instrumental in generating new taxes for the city — even if that means doling some of that revenue back out to developers.
And, he said, those added revenues from increased property or occupational taxes help fund public programming that can help reduce violence, addiction treatment or other city services like road paving and infrastructure repair.
“This notion or idea that we’re giving away money to people and they’re not creating more value than that in exchange is a misguided notion,” he said. “Take a look at these incentives as increasing the whole pie, but then helping these developers make financial sense out of their projects.”
The council’s Labor and Economic Development Committee will begin considering the incentives deal during their regular meeting next Tuesday.