The developers of a proposed arts and entertainment corridor along Manchester Street have decided to separate their project from a possible new downtown arena initiative and instead intend to apply for their own Tax Increment Financing (TIF) designation.
In October of 2007, Mayor Jim Newberry announced plans to study the feasibility and appropriate boundaries for a TIF district focused primarily on the replacement of Rupp Arena, but including the proposed Lexington Distillery District (LDD) on Manchester Street. The blighted 22-acre industrial section of downtown Lexington, which leads directly into scenic Old Frankfort Pike, is anchored by two historic properties — the Old Tarr Distillery to the east, the James E. Pepper Distillery to the west.
It had become evident to the LDD developers that the Rupp study and likely subsequent community discussions would consume too much time, especially in light of the coming Alltech FEI World Equestrian Games in 2010. “We want to have something viable in place by 2010,” said Barry McNees, who leads a group that already has invested $7 million in the Manchester project. “We want to use our flexibility as private stakeholders in Lexington to take advantage of the current climate and move ahead with something that is cohesive and is really its own entity apart from anything else that’s going on. We certainly are supportive of our neighbors at the Lexington Center,” he added. “Their success will be our success and vice versa. But we feel we need to move forward now.”
With a baseline set according to the most recent economic data relating specifically to tax revenues produced by the designated development area, tax increment financing allows a city to apply any additional tax revenues generated by new economic acitivity in the defined area to fund new public infrastructure within the area. Under the state’s TIF law, such an area cannot exceed three square miles and generally must be in a deteriorated state.
“Because of the high-cost of public infrastructure, this project will not be feasible without TIF funding,” McNees said. He already has started the application process, engaging the real estate and hospitality consulting firm CH Johnson of Chicago to determine if the project will qualify for the state’s mixed-use TIF program. The firm’s focuses include entertainment/urban development districts, performing arts facilities, retail and tourism attractions.
McNees anticipates the firm’s full report by some time in May. The preliminary results from the study, however, indicate that CH Johnson believes the LDD project will meet the qualifications for a mixed-use TIF program: it must address the substantial loss of residential, commercial or industrial activity or use in an area where at least 40 percent of households are low-income; more than half of its residential, commercial or industrial structures are deteriorating or worse; there is substantial abandonment of such structures; there is a substantial presence of environmentally contaminated land; and there are inadequate public improvements or substantial deterioration in public infrastructure.
In addition, the proposed revitalization project meets such key statutory requirements as a minimum investment of $20 million and would feature at least two of the required uses: retail, office, residential, hospitality and restaurant.
Lexington Center Corporation president and CEO Bill Owen acknowledged that the proposed Rupp Arena project is more long term in nature. “We are at the beginning of a very long fact finding effort. It is entirely premature to speculate what specific properties might be ‘in or out’ with respect to appropriate use, benefit, potential, etc.,” he said. “Certainly, we wish Mr. McNees well in his effort to maximize the potential of his property and its contribution to a vibrant downtown.”
After three years of land assembly on Manchester Street and laying the framework for the proposed Distillery District, McNees has discovered that his vision cannot be realized without the city’s support, which he has sought. “I understand Barry’s predicament,” said Downtown Development Authority President Harold Tate. “He’s ready to move. And if that’s a situation where we do have to move on, I have no problem with it. What I would like to do is investigate to see if there is still some way that the whole area can be considered for a TIF, because I think that could work to Barry’s advantage as well. But whatever works best for Barry, we’ll totally support.”
Tate’s position was echoed by Mayor Newberry’s senior advisor, Joe Kelly. “I think the Manchester project has great potential and understand that if they are on a more aggressive timetable than we are on the Rupp Arena area plan, then we certainly understand their need to go ahead and move forward with a stand-alone TIF. The area is a good candidate for the TIF process, and so I understand and wish them well,” Kelly said.
Among issues confronting the Manchester Street developers is one that unless resolved could endanger plans to transform the corridor: the presence of the city’s contract vehicle towing company, Blue Grass Towing. The company’s current leased sites for its operational facilities and storage of towed and wrecked vehicles cover more than seven streetfront acres in the proposed Distillery District. Some are up for three-year renewal in May. The company’s lease of a parcel directly adjacent to the five-story Pepper bonded warehouse, which now belongs to the developers, already has competition from parties interested in leasing the space for uses more in line with the developer’s intentions.
“Those that service the city’s towing contracts provide a vital function,” McNees said. “With limited space in the infill and redevelopment zone, we have to work together to figure out the best uses of a finite urban core.”
Blue Grass Towing not only hauls illegally parked or wrecked cars and trucks but also provides secure storage for vehicles involved in pending legal cases. Owner Andy Alphin said he would consider relocating his business only under certain circumstances. “If somebody wants to provide me the same facilities at the same price, I’d certainly consider it. But the negative is, if those facilities were on, say, Athens-Boonesboro Road, what does it do to the police department? Instead of driving one mile to look at a vehicle involved in a fatality or whatever, they’re driving all the way to the other side of the county. And what about the people whose cars are in wrecks, or whose cars are impounded or whatever? Instead of coming a mile from the central business district, again it’s the other side of the county; I don’t think there’s a bus route on Athens-Boonesboro Road.” Alphin said there isn’t much alternative property available in Fayette County that is so conveniently located or large enough and appropriately zoned to accommodate his company’s needs.
Mayoral advisor Kelly, asked if its arrangement enabling a private sector company to monopolize the city’s towing responsibilities doesn’t provide the city with a voice in determining an outcome for such a situation, said, “If we can be of assistance we would want to try to help, just as we do in other instances. But I think at the end of the day it will come down to whether or not something can be worked out between the principals involved in the process. If there are other locations that are suitable I would think the developer and perhaps the operator have investigated those. But again, if we can be of help we certainly want to try to help.”
Also of concern to the LDD developers is the possibility that the Newtown Pike Extension could intersect with Manchester at as much as ten feet above grade. Robert Bayert, manager of the design section in the city’s division of engineering, said that issue is being taken into consideration but as yet there is no definite plan to address it.
In recent years, Louisville has used Tax Increment Financing to support some of that city’s most exciting developments including the Downtown Marriott, the new Louisville Arena, Museum Plaza and the expansion of Fourth Street Live. McNees envisions a similar outcome for Lexington in the Distillery District development. “Even more important than places for people to live or places for people to stay in downtown Lexington are the reasons for them to want to stay, which are the elements of tourism, and an active and interesting downtown that makes people want to get close to it,” he noted. “So I think the most important thing that we can do is to create and celebrate something authentic about our downtown, a combination of history and new development that looks to celebrating this place, who we are and what the Blue Grass is about. We’re looking at a number of regional elements such as a Bourbon Museum, a connection to the Bourbon Trail, really interesting restaurants, coffee shops in the old distillery buildings overlooking the Town Branch creek — the things that on a Wednesday night it would be interesting to get on your bike, ride down the Town Branch Trail and check out.”
Asked to describe in broad strokes what he hopes to create on Manchester Street, McNees cited a connection already embraced by Louisville but, given history, perhaps is even more appropriate for Lexington: “We want to create a bourbon nexus here in Lexington that does for our native spirit what Sonoma and Napa do for wine.”