Frankfort leaders respond to Parcels B and C questions, criticism

The main point of contention and questioning at that meeting was the city's planned funding of a parking garage required by the state, which has a longstanding contractual obligation to provide parking for the nearby Capital Plaza Hotel and transferred that obligation to eastern Kentucky businessman Marty Johnson when he purchased Parcels B and C.

Wilkerson said the plan is for the city to issue bonds to contribute $3 million toward the $8.5 million parking garage, with $5.5 million expected from a federal grant through the Kentucky Transportation Cabinet. The 300-space garage would also serve as the hub for the city's public transit system.

Instead of Tax Increment Financing (TIF) reimbursing the developer, CRM Companies, the bulk of TIF funds would go toward reimbursing the city for its $3 million bond issue. CRM CEO Craig Turner, working on behalf of Johnson, said this week that he planned to give the land for the garage to the city.

“It's not a perfect situation,” Wilkerson said. “The developer, when they took the option on that land, they were required to build the parking structure. It didn’t say they were required to finance it, and they always had the intent that they were going to try to find different avenues to finance the garage — and they did. When Frankfort applied for that transit grant, that basically committed us to build it out.”

Still, that plan remains tentative because the city has yet to get confirmation it will indeed receive the $5.5 million federal grant. Grants Manager Rebecca Hall has expressed strong optimism that the city will receive the funds.

City Commissioner Kyle Thompson, one of four new members of the City Commission, sharply questioned the city’s participation in the development both at Wednesday’s meeting and in a follow-up email to The State Journal. 

“The plan has changed and the building of this structure, one that will not be revenue-producing in any way, but will continue to cost the city in maintenance and security, has fallen solely upon the backs of the city,” Thompson said. “... This structure should never have been the liability of the City of Frankfort per the agreement between Mr. Johnson and the state. Yet, here we are possibly relieving his duty while also giving millions to him and CRM.”

He also lambasted the developer’s projections of the economic benefits of the project as “fools gold;” Commonwealth Economics, which works with CRM, most recently projected over $100 million in economic impact.

Commissioner Katrisha Waldridge, who echoed some of Thompson’s concerns on Wednesday, told The State Journal this week that she still generally supports the development as planned.

“It may have felt like I was leaning toward Kyle and asking a lot of questions, but it's not that I don't support it,” Waldridge said. “This project does need to go through for the survival of Frankfort, and for its economic push forward.”

Commissioner Kelly May, Wilkerson and former City Manager Keith Parker — who directed staff to apply for the $5.5 million grant during his tenure — all said that Frankfort should look at the project in a positive light.

Parker said that the city bonding $3 million and using TIF to reimburse itself would be a much better deal than what would have been required were the city unable to pursue the grant. Ultimately, the city’s planned contribution has drastically decreased since Johnson purchased the land for $1,000 two years ago. He was the only bidder when the state offered it for sale on the condition that a parking garage be built and that the rest of the property be developed in accordance with the Downtown Frankfort Master Plan.

Like Wilkerson, Parker said he hopes the city can use TIF to get stakeholders such as the Franklin County Fiscal Court, the state and special taxing districts to contribute. He also pointed out that the initial public infrastructure cost presented by CRM and Johnson as more than $10.5 million.

“I want to emphasize, and I’m biased because I did it, that in negotiating this we got them from almost $11 million to $3 million,” Parker said. “I’d love to focus on some of that because it’s good. I hope they’re keeping the county informed because they’re our partner on this.”

CRM's Turner on Wednesday also offered to fund the extension of Washington Street two blocks north, all the way to Mero Street, without TIF assistance.

Thompson pointed to other public infrastructure costs beyond the parking garage and Washington Street that have been unaccounted for — that includes demolition, "site prep," and public space. According to the developer's latest estimates, those three elements of public infrastructure will cost just over $3.6 million.

Neither Turner nor Johnson responded to a request for comment after the meeting.

May estimated that about “98%” of the work on the development has been done by previous city staff, the commission and CRM.

“I don’t think it’s a good move to hold the project up at this point," said May, whose father, Bill, preceded Wilkerson as mayor. "I think it’s in our best interest to move forward at this point based on the information I’ve been given. I trust our city staff and everyone that they’ve done the best they can to present a plan that both drives the development we want and helps showcase what’s possible. I can’t think of a more important development that I’ve seen come to Frankfort as far as overall impact.”

May also characterized Thompson's and Waldridge’s questioning of Turner as natural for an elected body curious about a pivotal downtown project. 

“To me there’s nothing there other than two individuals who just want to get more information,” May said. “We’re not feuding; we’re having a discussion. Sometimes you just need to talk it out. I hope we can make this work.”

Similarly, Kentucky Capital Development Corp. CEO/President Terri Bradshaw said that questions about such a unique process were natural but that the plan needs to move forward.

“TIFs are extremely complicated,” Bradshaw wrote in an email. “So there will likely always be questions and misunderstandings about how it benefits the community and this particular project. That is to be expected. But when we regularly have developers who are willing to spend millions of dollars, take all the risks and do all the work to make our community stronger by providing jobs, businesses, housing, tax revenue — all the things we need — we have got to be creative in finding ways to assure those projects are successful.  If we don’t, there are thousands of other communities who will.”

Thompson, for his part, doubled down on the concerns he raised on Wednesday night.

“The reality is that the state simply isn't going to promise funds anywhere near the estimated amounts presented in a state TIF project,” Thompson said “… So when the state doesn't promise funds to the proposed TIF, where will the money for the development come from? The answer is the city, specialty taxing districts, the county — if they even decide to commit to this project — and essentially the people of Frankfort.

“CRM and its partners will receive $8.5-$9 million to build an albatross (the parking garage) in downtown Frankfort," he said. "This structure should never have been the liability of the City of Frankfort per the agreement between Mr. Johnson and the state. It is simply a bad deal for everyone involved, except the very people that promised to build the parking structure in exchange for a sweetheart deal of $1,000 for the nearly 12 acres in downtown Frankfort.”

Wilkerson said he understands Thompson’s concerns but supports moving forward with the TIF and building the garage. He added that deciding not to build the garage would mean turning down the $5.5 million grant for a new transit center.

“We are taking a risk for $3 million,” Wilkerson said. “We're taking over the parking structure that the developer agreed to build. But in doing so we also make sure that the project moves forward and potentially gets in an extra $60 million in investment downtown — otherwise, that might take a few more years to happen.”

CRM plans mixed-use residential and commercial development on the property, which housed the Frankfort Convention Center before its demolition by the state.

He also made sure to emphasize that if need be the city could bond the $3 million necessary for the garage on its own without being reimbursed from TIF proceeds. Tax Increment Financing commits increases in tax revenue caused by a development to reimbursement for upfront construction expense.

“I want to clear up any confusion that the parking structure is contingent on TIF funding,” Wilkerson said. “It's not. We would have to do it anyway. Because we have to do it anyway, we would offer the TIF to help get participation from other places.”

Still, he thinks the risk is worth it.

“I am optimistic on Frankfort's future, and I think they're sitting on a potential goldmine over there,” Wilkerson said. “I think 20 years from now, property values are going to be much higher. I'm optimistic, but I see that concern because we don't have anything ironclad. We have some hopes, we have some dreams, and the developer has a good track record, but we just don't have any assurance. We will do our best that we can to make sure that we have some ways of making that development happen.”