The Alexandria Kroger development cleared another hurdle this week after the city council unanimously approved the industrial revenue bonds needed to finance the project.
The Kroger project, slated for a 31.65-acre site east of US 27, will feature a 122,912-square-foot Kroger Marketplace, a fuel center, and an 8,000-square-foot wine and spirits store. The project represents a $35 million investment. The city council approved the bonds at its meeting on Oct. 2.
The council approved the issuance of up to $45 million maximum aggregate principal amount taxable industrial building revenue bonds, also known as IRBs, (series 2025 A) and authorized the issuance of up to $5 million maximum aggregate principal amount taxable special obligation industrial building revenue bond (series 2025 B).
What is an IRB?
When a city, or another taxing entity like a school or a county, agrees to issue an IRB, it serves as a conduit of capital financing for a project. The developer will seek financing from an underwriting institution, such as a bank, to inject capital into the project.
The city then takes on an owning interest in the property, at least on paper, so the developer can use the city’s credit score as a way of obtaining private investment. In exchange, the city grants the developer a tax incentive, the details of which vary depending on the deal.
“We’re not on the hook for anything,” said Alexandria Councilmember Stacey Graus. “We’re a conduit to allow the bonds to go through. This was a negotiated process, the same thing that happens with Publix (development currently happening in Cold Spring) and probably any other Kroger development, or Publix development, or any large development today.”
The Alexandria Planning and Zoning Commission met on Sept. 16 to further discuss the Kroger Marketplace’s updated traffic patterns. The planning commission voted five to one to send the approved traffic plan to the Kentucky Department of Transportation for final approval. The city council’s approval of the bonds on Thursday enables Kroger to proceed with the development.
In addition to the Kroger site, two additional lots on the site are designated for future development, which city officials have said they would like to see a sit-down restaurant at one of the lots.
“We hope that one of them may produce what people have been asking for a long time, a place to sit down and have a steak and a beer, your buffalo wings and everything else, because we’re kind of short on that,” Graus said.
There is also a payment in lieu of taxes, known as a PILOT agreement, attached to the development. Instead of paying taxes, the developer often agrees to issue a PILOT to ensure the city still makes money on the property while reducing the developer’s early investment expenditures.
“That whole [IRB] structure, quite frankly, creates a real estate tax exemption on the property, but then that’s subject to a PILOT agreement where the city, county, school district, and fire district get PILOT payments in lieu of taxes,” Jim Parsons, bond counsel with Keating Muething & Klekamp, said. “This structure, quite frankly, allows a portion of the taxes that would otherwise be generated to be captured and then utilized into the project. That’s the whole purpose of this structure.”
Parsons said that Kroger is estimating a fall 2027 opening.
