The City of Covington is charging forward in their mission to help finance future development projects, specifically their marquee development, the Covington Central Riverfront project, located at the site of the former IRS building.
The Covington city commission next Tuesday is slated to authorize Mayor Joe Meyer to sign a tax incentive agreement that will then be considered for approval at a May 26 meeting of the Kentucky Economic Development Finance Authority.
A Tax Incentive Financing district, or TIF, is an economic development tool used by public agencies to finance needed infrastructure projects (sewers, streets, parking lots, etc.) by designating future tax gains resulting from the development for improvements.
“The public investment will increase the value of the property as well as in the surrounding area and may spur further development. This increased tax revenue is the increment which the TlF district dedicates toward public infrastructure improvements in distressed or underdeveloped areas where private development would not otherwise occur,” per the Kentucky Cabinet for Economic Development website on TIFs.
Essentially, the money generated from the TIF district will go toward financing important infrastructure surrounding the Covington Central Riverfront project.
On Dec. 10, 2020, the Kentucky Economic Development Finance Authority granted preliminary approval to Covington’s application for the development of a 30-year signature TIF district.
“Since the preliminary approval was granted, the Cabinet for Economic Development used a consultant to analyze the potential for development and the net new revenue to the Commonwealth,” Sarah Allan, Covington’s assistant director of economic development, said.
The TIF district would include the site of the former IRS building, the Northern Kentucky Convention Center, and its surrounding roadways.
The Kentucky Cabinet for Economic Development recommended an incentive for Covington which would result in up to $45.5 million to assist with costs for infrastructure development. A portion of three state revenue sources generated within the district, which includes sales tax, property tax and income tax, will go towards the financing.
“This is a very significant step forward for our Covington Central Riverfront, aka IRS project, because the value of the state TIF designation to us is $45 million dollars to offset the infrastructure costs associated with the project,” Meyer said.
The next step in the process is for the KEDFA Board to give final approval. Their next meeting is scheduled for May 26.
TIF Approval Process
Below is the exact process for approving a TIF district, per the Kentucky Cabinet for Economic Development website.
1. After establishing a local TIF development area by local ordinance, the local agency submits a TIF application for state increments to the Cabinet for Economic Development (CED).
2. CED staff reviews TIF application for completeness and evaluates whether, based solely on information submitted by the applicant, the project is likely to meet the minimum requirements for the program.
3. CED staff presented the TIF project to the Kentucky Economic Development Finance Authority (KEDFA) board for preliminary approval.
4. Upon KEDFA preliminary approval, CED staff works with the Finance and Administration Cabinet and the Office of State Budget Director to develop criteria for the completion of a TIF consultant’s report (if required).
5. Consultant researches potential TIF projects and projections submitted by local agencies and determines if the projections are accurate and if the project results in a net positive impact for the Commonwealth.
6. If the consultant’s report reflects a net positive impact to the Commonwealth, the report is presented to KEDFA during closed session.
7. CED staff negotiates the TIF incentive available to the project and drafts a TIF incentive agreement detailing the footprint, the specific taxes, amounts of increments available and infrastructure expenditures along with reporting requirements.
8. CED staff presents the TIF project to KEDFA Board for final approval.
9. Upon final approval, the TIF project can activate and increments can begin to accrue.
