"For years the Kentucky tax structure has mined revenue from the Golden Triangle, and in return, northern Kentucky and Louisville have been able to take advantage of tax incentives to create such economy-enhancing attractions as Newport on the Levee and Fourth Street Live.
But these types of deals have remained out of reach to Lexington, even as its gold is still strewn across the commonwealth in each budget with no like gratitude shown in return.
Newport and Louisville took advantage of the Kentucky Tourism Development Act in the construction of their large entertainment zones, which allow for a significant portion of tax revenue to be repaid to the developers who must, in turn, use the money for infrastructure and similar improvements to the immediate area.
When the Kentucky General Assembly convened for a special session last summer, there was a push for the legislature to consider adding "retail destinations" to the Kentucky Tourism Development Act to pave the way for construction of a Cabella's sporting goods mega-store in Franklin, just a few miles north of the Tennessee border. To the chagrin of members of Senate leadership, Gov. Ernie Fletcher - who controls what business the legislature is allowed to consider during special sessions - did not allow the Cabella's issue to be broached.
The only real caveat to eligibility for these types of tax incentives is that 25 percent of receipts to the stores or entertainment venues must come from out of state, which wouldn't have been a problem for Cabella's, sitting a stone's throw from Tennessee. Surpassing the threshold is easily achievable for Newport and Fourth Street, both situated just across the Ohio River from one of Kentucky's neighboring states. But nestled in the Bluegrass, Lexington, more than 70 miles from the closest border, would be hard pressed to have a quarter of sales from a regional development in town come from out of state, and therefore hasn't been able to take advantage of possible ways to improve.
"It does hinder projects that we're trying to do downtown," said Harold Tate, president and executive director of the Lexington Downtown Development Association. "But to be honest, it hasn't really hurt the developers. They're still willing to go ahead and make the commitment to doing something downtown because of the market being so strong here in Lexington. We've got $300 million worth of projects going on; it must make you feel that the developers feel what they're doing is going to work anyway."
Regardless of the stringent 25 percent out-of-state rule, Tate said a couple of developers are investigating ways for yet to be announced Lexington projects to take advantage of the tax break currently only afforded border areas.
"Oh yeah, that wouldn't be hard to do at allWhen you talk to the other cities who have used that program, it is not hard to prove," Tate said.
Tate's optimism that sales to out-of-state residents could amount to a quarter of all sales has not reached Frankfort as Greg Harkenrider, who oversees the Tourism Development Act in the Governor's Budget Office, struggled to answer how Lexington could take part under the current structure.
"Well, they can certainly apply," Harkenrider said after a few aborted attempts at an answer, none of which sounded positive for the area. "I think it's going to be a tough time for them to get approved... (Twenty-five percent is) easy to do in (Louisville), easy to do in Newport - hard to do in Lexington. If they can somehow make such a huge destination that they're going to get 25 percent of their cash register receipts from out of state, more power to them, but I think that's going to be tough to do in Lexington."
Of the 13 or 14 projects currently approved under the Tourism Development Act, Harkenrider said: "They're all in Northern Kentucky or Louisville, and it's a lot of money going out and none of it's benefiting Lexington, and I can see how they're sore about it."
One remedy for those who don't like the situation, according to Harkenrider, is to try to have the legislature change it.
That's exactly what Bob Quick, CEO of Commerce Lexington, said he and his staff have been trying to do for some time, not only with the Tourism Development Act, but with the commonwealth's policy for Tax Increment Financing.
"There are so many limitations on the current TIFs that - and again (the) TIF (is) one of those incentives that the project pays for it - we've got to find ways to make all of our toolbox items work and be conducive for the environment that we have today. And sadly they don't," Quick said.
Under current TIF law, there must be a mile of undeveloped land to allow new taxes generated by a development to be returned for more improvements. With the chamber among many calling for infill within the urban services boundary, there simply isn't an area in the 240-year-old city that has never seen development.
"We've been (going to the legislature with these types of ideas) for years," Quick said. When the legislature gavels in for its short session early next year, Commerce Lexington will once again tout the advantages softening the Tourism Development Act or TIF regulations would have on the area. "We all get the money (LFUCG and the state). After you take Tax Increment Financing and you make it work for the community, the winner is all of us, and we're always looking for win-wins. Here's a win-win."
It comes down to a question of fairness, according to Lexington Economic Development Director Julian Beard. For years Lexington and Louisville, along with Campbell and Boone counties, have been helping prop up the other 116 counties in the state. Now Campbell, Boone and Louisville are getting some of their money back; why not Lexington?
While Lexington has the ability to abate its own taxes to encourage development, Beard said there are too many other things the city needs to pay for, such as the sewer problem, but can't because the money that could have gone to it has been spread out across the state.
"It's the Golden Triangle that gets short changed," Beard said about the state's tax structure. And while two of the triangle's points have been able to take part in tax incentives, Lexington, he laments, remains left out. "You're helping them," he said. "Why don't you help us out here?"
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