The Covington Commission unanimously voted to issue an industrial revenue bond to Latonia Bulk LLC, a subsidiary of local developer CovCor Real Estate Investments, at Tuesday’s legislative meeting.
Located on West 38th Street in Latonia, the development will be the city’s first new industrial build in decades. The city will issue up to $18 million in industrial revenue bonds to fund the project.
“As you all are very well aware, we don’t have a lot of industrial land that hasn’t already been developed,” said the city’s Economic Developer Tom West on April 4, during a caucus meeting.
CovCor acquired the property in June 2021. The industrial space is located close to two other novel developments: Keller Logistics and a commercial area that CovCor has also acquired.
In his presentation, West said that the developer hopes to convert about 146,000 square feet of the property into speculative industrial space, which will be split into four units to be leased out to industrial occupants.
“Now, it’d be really easy for that to turn into, you know, three or four jobs and, you know, 50 robots out there,” West said. “But we believe that this site has potential for about 110–plus or minus–jobs.”
The development is the brainchild of Josh Niederhelman, a Cincinnati native, who both resides in and operates his business out of Covington.
Speaking with LINK nky just after the vote, Niederhelman said, “The intent is to satisfy a demand for industrial and flex product that’s in the marketplace. There’s not enough space available right now for users that want to locate to the Covington area. So, our intent was to supply that space and create a building that was in high demand from the users in the market and then create an opportunity for Covington to bring more jobs.”
Niederhelman also stated that he’s been in conversations with potential renters, but he was unwilling to disclose with whom he’d spoken.
The construction of an industrial center will generate new payroll taxes for the city. The property already generates about $15,000 in property tax, but that money is spread out between the city, Covington Independent Schools, Kenton County and other localized taxing bodies. It currently does not generate a payroll tax.
Although the city is funding the project, it’s not doing so with tax dollars. Instead, the city will issue industrial revenue bonds or IRBs. Industrial revenue bonds are common measures cities use to attract developers and businesses. Upon agreeing to issue bond funding, a city, usually with the help of some underwriting financial institution like a bank, solicits bonds from investors. Then, the city loans the money to the developer, injecting a quick sum of cash into the project to offset expenses related to construction and other early development costs.
Developers like industrial bonds because they’re an easy way to ensure cash flow at the beginning of a project. Properties funded by industrial revenue bonds often carry relatively low interest rates compared to other forms of commercial lending. Plus, IRB agreements are typically accompanied by reduced property tax rates, which also serves to curb investment costs.
The developer must then pay the city back over a period of time. In this case, the life cycle of the bond is 15 years. If the company fails to make a payment on the loan, tax payers would not be responsible for paying the money back.
Rather than pay normal property tax rates, Latonia Bulk agreed to issue a payment in lieu of taxes, or PILOT, to the city based on the amount of payroll generated on the property.
The payment amount would decrease as the amount of payroll increases. This, West contended, would incentivize Latonia Bulk to look for occupants that would bring in jobs, which would, in turn, generate more payroll instead of the unpaid “robots” he mentioned in his presentation.
Payroll Generated PILOT % City Payroll Tax Payment in lieu of property tax Total City Revenue $2 million 60% $49,000 $30,411 $79,411 $3 million 50% $73,500 $25,343 $98,843 $4 million 40% $98,000 $20,274 $118,274 $5.5 million 20% (floor) $134,750 $10,137 $144,887
Although not required by law, Niederhelman has also gone to Covington Independent Schools to solicit their approval for the project and the payment agreement. West and a representative from CovCor spoke at the board of education meeting on March 23 to pitch the project. West said that if the development were successful, the school board would stand to bring in $33,000 a year over the 15 life cycle of the bond.
The school board will vote on whether to approve the IRB at their meeting on April 13.
After some brief discussion from commissioners at Tuesday’s meeting, Commissioner Ron Washington spoke about the project. He started by saying that the commission had been focusing on Latonia for a while.
Then he added, “We will be employing people right in the area that hasn’t had access to this. So, we’re planning on many jobs going there, and with many jobs, that means that we’ll be able to support other businesses in the area: restaurants, etc.”
“I think it’s a good thing for our city,” Washington concluded.
Niederhelman said that they should complete construction of the facility by late November with tenants being able to move in shortly thereafter.
The next Covington Commission meeting will take place at City Hall on Pike Street on Tuesday, April 18 at 6 p.m.