The City of Frankfort has long been working toward a Tax Increment Financing (TIF) district to pay for a state-mandated parking garage on the vacant Parcel B, former site of the Frankfort Convention Center.
That garage dominated discussion after a presentation from developer Craig Turner, of CRM Companies, at a special city commission meeting Wednesday night. Turner is proposing to develop the former Capital Plaza land on behalf of eastern Kentucky businessman Marty Johnson, who purchased the property from the state.
Turner indicated that in order to develop the land as proposed — residential and commercial buildings, extra parking and more — he needs for the garage to be paid for by someone other than his company or Johnson. City officials say that a $5.5 million grant from the Federal Transit Administration will very likely be awarded, leaving costs to cover the garage at $3 million.
At least one commissioner on Wednesday wasn’t so sure committing that money would be best for Frankfort.
“I think it’s a lot of money to outlay for a whole lot of possibilities,” Thompson said. “That’s something I genuinely am worried about ... I think it’s gambling with our city dollars and I think that’s very dangerous. That’s where I am right now.”
Thompson questioned why the developer “shifted” the responsibility for building the garage to the city, since the land was purchased from the state with the deed requirement of building the garage.
Turner replied that the TIF assistance was the intent from the very beginning, and that such a garage would not be a wise business investment for any developer.
“Unless this was a community that had a business model where you paid for parking, having a non-revenue parking garage doesn’t work for any private developer whatsoever,” Turner said. “Not to mislead anybody: The idea is that we’re responsible for making sure the garage is achieved, but that doesn’t necessarily mean that we have to write that check for the parking garage.”
The city’s plan for nearly a year has been to seek assistance from other tax bases — the county, the state and special taxing districts, in addition to the city's own — in securing the funds to make the garage happen. For that effort, it has proposed using TIF.
TIF means that a percentage of increased tax revenues generated by development of the property would be committed to paying for the developer to build the garage and other public infrastructure such as streets and sidewalks — essentially a refund to CRM.
A state requirement for the land, as stated in the deed, is for the construction of a 300-space garage. Currently, 150 parking spots are planned to be dedicated for use by the Capital Plaza Hotel. The state demolished the hotel’s parking garage when it cleared the land of the former convention center and Fountain Place Shoppes.
The state has had a longstanding contractual obligation to provide parking for the Capital Plaza Hotel.
Turner presented to the commission a plan that remains largely unchanged from last year’s: CRM intends to build about 200 residential rental units, neither luxury nor low-income, and potential office, retail and restaurant space.
Consulting group Commonwealth Economics estimated CRM’s costs for private development, excluding previously projected costs for a hotel remodel and the YMCA building, to total around $50 million. The residential units would be the most expensive portion, with the latest estimate more than $37 million.
Turner suggested at one point that the private cost of the project would range from $70 million to $90 million.
Turner said that after the federal grant comes in to help with costs, the city's and other potential partners’ commitment to fund the garage will be a “waterfall” event that will allow his company to move forward with the development.
Thompson said that the fact that the city alone could be responsible for the garage’s construction gives him pause, questioning the developer’s level of “skin in the game.”
Turner said CRM has already spent “several hundred thousand dollars” preparing for the development, and has committed to giving a section of the land to the YMCA for it to build a new facility there. He added that CRM plans to pay for an extension of Washington Street two blocks to the north, all the way to Mero Street. Turner also pointed to his company’s record of large projects in Frankfort: at least three state office buildings and a planned dormitory at Kentucky State University.
Commissioner Katrisha Waldridge echoed some of Thompson’s points.
“We have to keep in mind that this is not a city problem,” Waldridge said. “We didn’t buy the property … . It’s not our $3 million problem.
“What I can say is that we can work with you and we can work with the state and the county and get them in on this. We just have to be very careful. I am concerned, but I’m also trying to look at it from both ways. The city needs to stop pulling out its checkbook just because there’s something to pay.”
Commissioner Kelly May expressed general support for the development and the TIF.
“I think right now we need to be looking progressively,” May said. “We have an individual that’s willing to come to our community and invest millions of dollars to a property. We need to think about where we could go, and not be afraid to make the investments that get us to where we know we can be.”
Mayor Layne Wilkerson cut off a back-and-forth between May and Thompson, directing them to ask questions to Turner and Casey Bolton, a consultant from Commonwealth Economics who helped draft the latest impact analysis for the project.
All four commissioners and Wilkerson expressed support for TIF during the 2020 campaign in The State Journal’s “Ask the Candidates” series, with Thompson expressing a similar level of doubt about the state’s commitment of funds to such projects.
On Wednesday, he criticized numbers from Commonwealth Economics as “pie in the sky,” particularly the potential for contribution from the state.
“The idea that we’re going to receive a significant amount of TIF money is just not going to happen,” Thompson said. “It’s just not. The reality is that we’re not going to get the funding from the state that we’re presented.”
He also highlighted Lexington’s difficulties with TIF projects of late as cause for concern. A recent local government task force in Lexington, which has nine TIF districts, recommended a moratorium on such projects last week.
Wilkerson noted that one benefit of using the TIF method is for the city to ask other entities to chip in so it wouldn’t have to cover the cost on its own.
“The benefit of doing the TIF is so we can ask other entities to participate,” Wilkerson said. “That’s potentially the state, special taxing districts and the county.”
Bolton emphasized that the TIF district would allow the city to share its potential financial burden.
“I’m trying to dispel the notion that this is all a big risk to the city and that nobody else is involved,” Bolton said. “I think the intent is for the county to participate and we have gone to the state in the past year … . I think they will come to the table at the appropriate time.”
Turner closed the presentation by advocating for the project itself.
“Even if there was no TIF right now, the city has an opportunity to get a parking garage built for $3 million that would typically cost $8.5 million for an opportunity to generate revenue, which they get none of now,” Turner said. “I don’t see the risk as that great for the reward.”
“You’re sitting here talking to someone who is willing to invest dollars in your community. If the answer is that you don’t think I should invest dollars in the community, then that’s another story.”