A Louisville Metro Council committee will soon consider an ordinance that, if approved, would provide millions of dollars in incentives to a developer looking to construct a mixed-use project in downtown Louisville.
The project is slated for the block along Fourth Street between Guthrie and Chestnut streets. If approved, the project — at a site formerly occupied by KentuckyOne Health — would lead to the demolition of some existing buildings and the construction of a multi-level residential site with space for restaurants, retail and parking.
An ordinance sponsored by Councilman David Tandy, a District 4 Democrat, says the $30 million project is “not feasible” without assistance of public funding.
Tandy is seeking approval of a tax increment financing plan that would send up to $3.4 million in new tax revenue back to Cincinnati-based Capital Investment Group to help fund the project.
Tandy, who decided to not seek reelection and will surrender his seat at the end of the year, did not respond to a request for comment.
The proposed ordinance will be examined by the council’s five-member, bipartisan labor and economic development committee during its regular meeting Tuesday at 4 p.m.
The incentive plan being sought for the downtown development is similar to nearly two dozen other agreements helping private developers finance high-profile projects across the Louisville.
They’re called tax increment financing plans, or TIFs, and they allow developers to get a return on their total investment through the increased tax revenue their project yields.
For instance, if a new development raises the property tax value of the land parcel on which it is built, the developer may receive the increment between the initial value and the resulting value as a means to offset the total investment.
Collectively, the current tax increment financing agreements in place across the city divert about $2.5 billion in potential state and local tax revenue back to private developers.
The incentive plan is a popular tool for city officials looking to attract economic development. Earlier this year, Mary Ellen Wiederwohl, the city’s chief economic development officer, said TIFs are “the best tool available to us today.”
“Because it requires the developer to spend his or her money up front and then only get an incentive back if their promised increment occurs,” she said. “You only get the property [tax] back in a TIF if you actually raise the value of the property.”
Still, TIFs have been the subject of criticism in recent months for their use in helping finance the construction of residential developments.
Councilman Brent Ackerson, a District 26 Democrat, said recently that allowing developers to use TIF agreements for the construction of apartments can undermine the concept of the incentive.
He said tax increment financing is meant for large-scale projects that benefit the entire city. Allowing developers to use such incentives to build apartments or condos is “bastardizing” the concept of TIFs, he said in an interview earlier this year.
In fact, state law does dictate, to some degree, when and where TIFs can be implemented.
In the development plan submitted to the Metro Council, the proposed project along Fourth Street should qualify for a TIF agreement because the “aesthetic improvement” the project will bring will “have a positive effect on Louisville Metro and surrounding area, especially the impact on South Fourth Street.”
Additionally, the project will bring improvements to an existing parking garage and a tenant to a site that’s now vacant, according to the submitted plan.
According to the ordinance filed by Tandy, the area surrounding the proposed development is threatened with a “stagnation in development” if the project does not proceed.
A spokeswoman for the Louisville Downtown Partnership, which promotes economic growth in downtown, did not respond to multiple requests for comment.
In an interview with WFPL News in February, Mayor Greg Fischer said tax incentives in general are not ideal, but they are necessary to generate economic development — in part because of the competition they create among cities and states.
“They come at the expense of the taxpayer,” he said. “But if [the recipient is] required to keep and grow or attract jobs here, it’s better to have those than not have them.”