More than two years after Mayor Greg Fischer moved city economic development efforts from the semi-public chamber of commerce into his administration, publicly funded incentives are being deployed in new ways — ostensibly to help spur growth.
Tax increment financing, or TIFs, allows developers to get a return on their total investment through the increased tax revenue their project yields. For instance, if a new apartment complex 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.
Once used as a tool to erase blight and revitalize pinpointed areas, TIFs are now being used for residential developments in neighborhoods such as the Highlands.
At present, there are 19 tax increment financing 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.
The map below shows the location and incentive amount of each TIF agreement in place in Louisville. Many of the agreements expire after two decades, yet some max out after 30 years; others terminate after 10 years.
It also includes a snapshot of key economic indicators in the neighborhood where the TIF is located, including unemployment, median income and poverty rate.
Some incentives, like the Mercy TIF site — on which a 200-unit apartment complex is planned — are based primarily on the boosted tax revenue that comes only from the project’s improvement to the site where it’s to be built. Others, like the Arena TIF, will yield incentives based on boosted tax revenue from an entire area, which is considered to benefit from the project’s existence. (Story continues below graphic)
The tax increment financing model is a popular tool among the city’s economic development officials for their “performance-based” efforts, said Mary Ellen Wiederwohl, the city’s chief economic development officer, in an interview earlier this month.
“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.
Despite the interest from administration officials, however, some local legislators have denounced the broadening use of such incentives. TIFs were once reserved for major projects like the KFC Yum Center, but now they’re being used to support residential developments such as Axis on Lexington, a new condo complex on Lexington Road.
Metro Councilman Brent Ackerson is one of those critics. Earlier this month, he lambasted two TIFs proposed — and eventually approved — for two apartment projects near the Highlands.
Ackerson said tax increment financing is meant for large-scale projects that benefit the entire city. An element of the state statute specifically mentions the pledging of tax revenue to support mixed-use development in “blighted areas.” Another calls for support of “major projects” that will bring significant impact to “such a magnitude” that public support is warranted.
Allowing developers to reap the awards of such incentives to build apartments is “bastardizing” the concept of TIFs, Ackerson said.
Fischer has said that while such incentives aren’t ideal, they’re necessary to remain competitive with other cities.
“They come at the expense of the taxpayer,” he said in a February interview with WFPL. “But if [the recipient is] required to keep in-grow or attract jobs here, it’s better to have those than not have them.”