A plan that would tax certain downtown properties and use the money to pump hundreds of thousands of dollars annually into improvements and services for the area is headed back to the City Council for consideration.
The Downtown Lexington Corporation (DLC) will present its plan for a downtown management district on April 14. The districts collect assessed fees from property owners within a designated zone to pay for enhanced services beyond those provided by the city.
“It’s a proven model,” said DLC President Renee Jackson. “It’s definitely an economic development tool, and because we have seen this work in so many cities, we want to take our downtown to the next level.”
Services provided by the districts can range from streetscape improvements and improved maintenance to focused marketing and promotional campaigns, as determined by each district’s governing board.
The current proposal would establish a district centered roughly along Main Street, from Oliver Lewis Way to just past Midland Avenue and from West Second Street to High Street, encompassing a total assessed property value of roughly $361 million.
Tax-paying property owners within the district would be required to contribute an assessment of one-tenth of 1 percent of their property value annually, which would equate to $200 for a property valued at $200,000, or a total of roughly $360,000 for the entire district.
Jackson said the district would provide the downtown community with a predictable and dependable funding source that would enable larger-scale, multiyear projects that wouldn’t otherwise be possible.
“We aren’t talking about money to renovate the old courthouse, but we are talking about money to do something decently significant,” Jackson said.
While such management districts have been around since at least the 1970s, the model has it critics and backers. Supporters see the districts as a way to collectively fund projects to enhance and promote the downtown area for everyone’s benefit, but critics identify them as simply more regulation and an unnecessary additional tax expense.
Louisville is currently the only Kentucky city with a downtown management district, but they also have been established in cities including Cincinnati; Memphis, Tennessee; Knoxville, Tennessee; Pittsburgh; and Ann Arbor, Michigan.
After years of discussion and debate on the topic, the DLC began a concerted effort on the subject in 2013, holding community meetings and collecting petitions from downtown property owners to build support.
The districts are regulated under Kentucky statute, and creating one requires the support of at least one-third of the area’s property owners, representing at least 51 percent of the area’s assessed value. The district must also be approved by the Lexington-Fayette Urban County Council.
In 2013, the DLC collected the required petitions, Jackson said, but at that point the council did not have adequate time for the consideration needed to meet the state requirements for establishment of a district. Based on feedback from council members, the DLC revisited the collection of petitions in 2014 to build more support, specifically among tax-paying property owners, and to ensure that those petition signatures would be valid through 2015.
The DLC currently has collected 175 signatures of tax-paying property owners in favor of establishing the district, according to Jackson, representing 51 percent of the proposed district’s tax-paying owners and 62 percent of the district’s property value.
The organization will be presenting its proposal to the council on April 14. If the proposal advances and eventually is approved, the earliest that the assessment could take effect would be January 2016, Jackson said.
The activities of the proposed district would be managed by a 15-member board, two-thirds of which would represent the interests of tax-paying property owners, Jackson said. The mayor, 3rd District council member and representatives of the DLC and DDA would serve on the board as ex-officio members. The DLC’s proposal also includes a five-year sunset clause, Jackson said, that would allow property owners to vote on whether the district should continue.
While tax-exempt entities within the district’s boundaries are not required to contribute, Jackson said these organizations can choose to provide fi nancial support voluntarily. While some growing areas, such as the Jefferson Street corridor and the Distillery District, have not been included within the proposed boundaries, Jackson said those areas could be added later or establish their own separate districts.
“It’s not unheard of that once a district is created the border would be expanded,” Jackson said. “All of the evidence from other districts suggests that you should start small and show some impact.”
Downtown Point of View: Woodford Webb
Woodford Webb said he doesn’t like taxes but that he doesn’t see the downtown management district assessment as a tax. He compares it to a homeowners’ association for a residential subdivision.
“It’s not that onerous on any individual property owner,” Webb said. “It is an effort to pool resources of a common group together and work to make downtown better.”
Webb is a past president of the Downtown Lexington Corporation as well as a downtown property owner, and he currently serves on the DLC’s board. He sees the use of management districts as a well-established technique for enhancing downtowns that has been proven many times over in communities across the country.
“In other cities, it’s been shown that it improves property values and enhances quality of life,” said Webb, who said that Lexington is the second largest city in the country without one. “They hardly ever get voted down.”
Webb also pointed to the sunset clause as a key provision, allowing the district to dissolve in the event enough members find that it doesn’t prove worthwhile.
“If it does flop, there is a mechanism to get rid of it,” Webb said.
Downtown Point of View: Farra Alford
Real estate agent and downtown property owner Farra Alford doesn’t see the need for Lexington to establish another tax in order to do what the city and its downtown property owners are already doing.
“I frankly know of no good that the district would do that a property owner isn’t doing himself already,” Alford said. “It’s just creating another tax and another taxing authority, and a whole new government entity controlled by the mayor.”
The added expense of the assessment automatically lowers the value of downtown property, Alford said. While some view it as a pass-through expense for property owners, there is a limited threshold for what property owners can charge for space per square foot, Alford said.
In addition, Alford said the proposed boundaries have been revised more to garner votes in support of the effort rather than to serve any shared purpose for the district.
“I don’t think we need it here in Lexington,” Alford said. “We’ve got a great downtown and great businesses here. We are doing just fine without it.”