Assistant City Manager and City Attorney Ed Ray gave an explanation of what a TIF is to the Greater Owensboro Realtor Association Tuesday. His presentation included prepared slides and photos to describe how both the downtown TIF and Gateway Commons TIF will be beneficial to Owensboro over the next 20 years despite the current condition of the City’s budget.
“What we’ve done downtown over the last decade has made Owensboro a destination, and it’s a destination we should be proud of, but it’s also an investment that is going to mature over time,” he explained. “Like any investment, it needs to have the longevity to mature and that’s what we’re going through right now.”
Ray says the initial consultants of the downtown redevelopment project predicted it would take about 15 years to have the private sector match the public sector’s investment in the downtown revitalization. “As of today, which is about seven years into that process, we’re four times past where they thought we would be in terms of private development – and that’s just the beginning,” Ray said.
To explain what a TIF is, Ray first explained what a TIF is not.
It’s not a grant. It’s not free money. It is also not borrowed money.
A TIF is basically the state telling a community that “if you build what you say you’re going to build, we will allow you to keep all the new taxes (on that new development) in your community to pay for the infrastructure.”
The new tax dollars generated from that development is called “TIF eligible revenues.”
Therefore, Tax Increment Financing enables city governments to self-finance redevelopment programs using the increased property tax revenue those improvements generate over time.
What qualifies for “Public Infrastructure”?
- land development and demolition
- public buildings
- parking/roads/street lighting
- easements and right of ways
- environmental remediation
- walkways, sidewalks, green space
- amenities such as fountains, benches, art, etc
- related soft costs (design and legal fees etc)
Ray says the Hayden Road expansion off 54, which will be part of the Gateway Commons TIF because it will connect 54 to Pleasant Valley, is a great example. “That would be a $21 million road if any individual developed it. That land would be so expensive to buy to develop for an individual that it would likely be farmland forever.” But since roads qualify as public infrastructure, it can be included in the TIF.
To help the City plan for the Downtown and 54 TIF, city officials studied how other cities have approached TIFs in their town so see what how Owensboro could better manage ours.
For instance, the Gateway Commons TIF is a $25 million TIF. But the estimated value of the project when it’s completely finished is $357million. According to Ray, the City’s financial contribution to the project is $650,000, which is the Greenbelt east trail expansion where the Greenbelt crosses 54 at Ragu Drive/Byers Avenue. That money is not planned to be spent until TIF revenues generate enough to pay cash for the project.
Gulfstream Commercial Services is incurring all phase one construction costs for Gateway Commons.
Under those same guidelines listed above, the Downtown TIF project includes:
- a new parking garage with 400 proposed parking spots
- a third hotel with 140-165 residential units
- the City Of Owesnboror’s portion of the International Bluegrass Music Museum
- a five-story building with retail space and condos (Veterans & St. Ann)
- 4-story “Enclave” building with restaurant and condos (Veterans & Frederica)
- Alorica Building (230 Frederica)
- re-lighting the Blue Bridge
[Editor’s note: Ray also made the announcement that the bankruptcy trustee has declared Peyronnin (the contractor for the Bluegrass Museum project) to be in default this week, which means that a new contractor can now be found and work can continue.]
The third hotel is significant because adding another 350 hotel rooms would qualify the Convention Center for hosting the next level of conventions. The hotel building will also include 140-165 residential units.