Lexington, KY – The Kentucky League of Cities (KLC) has entered into an agreement with the Lexington Urban-County Council to allow a KLC side-corporation to issue bonds of up to $30 million for the construction of the three-story underground parking garage that will act as the foundation for the CentrePointe project.
With a 15-0 vote, Lexington’s council agreed to enter an interlocal agreement facilitated by KLC to form a non-profit that will issue and administer bonds for the construction of the CentrePointe garage. As part of the agreement the Tax Increment Financing revenues generated by the CentrePointe block, Phoenix Park and the old courthouse will pass through the new KLC corporation to service the debt on the bonds.
In agreeing to create the new non-profit, which is allowed under Kentucky Revised Statutes, Lexington will not be obligated to the bonds, according to Dinsmore attorney Roger Peterman from the law firm’s Covington office.
In the scenario where tax increments would not be able to service the debt for the project, KLC’s COO and General Counsel Temple Juett said the purchasers of the bonds would be out of their money rather than the city being liable for making the bondholders whole.
In order for the new non-profit corporation to be created, KLC is asking the city of Midway to enter into the interlocal agreement with Lexington. In doing so, bonds would be able to be issued in Midway in the same way the CentrePointe bonds have been proposed in Lexington.
Midway’s council is meeting at 8 a.m. on Friday to consider the issue and if approved, the KLC board would have final approval on administering the non-profit corporation and issuing the bonds.
Other cities looking to take advantage of this financing option could sign onto the interlocal agreement at any time to issue bonds in the same way.
In return for their facilitation, KLC will collect administration fees. Juett said he was not sure how much the fees would be as this is still in the early stages of formation, though he said the KLC board could approve the issuance of bonds as early as next week. The actual bond sale, however, would take longer to go to market.
Under the agreement, all TIF money will be passed through the yet to be formed non-profit corporation and in instances where TIF money outpaces what is due in debt service, the excess money will be essentially escrowed for use at times where the increment doesn’t produce enough to meet the required debt service or to a point where the bond can be paid off, Peterman said.
Once the bond has been paid, which Juett and Peterman anticipate to take 15-20 years, the remaining TIF money will revert to the city to reimburse TIF eligible projects it decides to complete in the designated district.
Darby Turner, counsel for CentrePointe developers the Webb Companies said construction on the garage is ongoing and developer Dudley Webb has previously stated a failure to issue the bonds would not result in the death of the long discussed and planned CentrePointe project that includes two hotels, condos, apartments, an office building and Jeff Ruby Steakhouse.