Tax Increment Financing (TIF) has long been a topic of discussion in Frankfort and Franklin County government.

The development reimbursement tool has never been used before in the county, and since it’s based entirely on future tax proceeds caused by a project, there is no way to know for sure the amount of tax dollars that will go toward paying back public infrastructure costs on downtown Frankfort's Parcels B and C.

Just this week, the city commission committed 50% of its future marginal tax revenues from the project to the TIF District, and city officials plan to ask the Franklin County Fiscal Court to contribute as well. 

The city also released a calculator tool to project what different percentages of local tax commitments would generate for the TIF District based on consulting group Commonwealth Economics’ latest projections of the project’s economic impact.

The amount of TIF funds available will depend on how much tax money the proposed development — an estimated $50 million investment from New Frankfort Development LLC and CRM Companies, anchored by a 300-space garage the city of Frankfort has agreed to build — will generate compared to how much the mostly vacant land generates now.

Estimates recently updated by Commonwealth Economics project that the city and county would bring in just over $9 million in property and ooccupational taxes generated by the development over the course of 20 years. The analysis projects the city would get $4.79 million while the county would gain $4.27 million in that period.

Commonwealth Economics tweaked its estimates earlier this year to include a scenario in which redevelopment of the Capital Plaza Hotel did not occur, per Frankfort Planning & Community Development Director Eric Cockley. The projections also do not calculate what impact state participation in Tax Increment Financing would have on the project.

The city’s tentative 50% commitment would mean giving up almost $2.4 million of the projected new tax revenue while keeping the same amount.

If the Franklin County Fiscal Court committed the same percentage, it would be contribute about $2.135 million over 20 years.

Intending to issue bonds to contribute more than $3 million toward a planned garage and transit center, the city projects interest on the bonds would push the city's cost for the garage to around $3.86 million. A $5.5 million  federal transit grant would cover the rest of the garage cost. 

In order to cover local taxpayers' cost for the garage, per Commonwealth Economics’ projections, the county would need to commit about 35% of its TIF revenues; that figure assumes the state does not participate in the TIF District.

Compared to earlier estimates, the projections of TIF revenue that would be generated by the city and county have gone down about $800,000, from $9.87 million to $9.06 million.

The development agreement between the city and New Frankfort Development lays out the priority order for TIF reimbursements: 

  • First, repayment of the bonds issued to finish the garage and transit center. 

  • Second, repayment of the expense incurred by CRM to extend Washington Street to Mero Street, currently projected to cost $1.5 million.

  • Then, other eligible public infrastructure costs — previously mentioned potentially eligible costs include public site improvements and demolition among others.

The “project vision,” which New Frankfort Development, owned by eastern Kentucky businessman Marty Johnson, committed to in its development agreement with the city, includes about 200 residential rental units, along with office, retail and restaurant space. 

State dollars available for a TIF, not included in the calculator, are estimated at $46.6 million. The bulk of that total comes from sales tax, which would only be made available through use of a mixed-use TIF. 

The property tax total is a much more modest figure at nearly $1.8 million. Project applications for a state property tax TIF are significantly less arduous.

City officials have said they hope to ask for the county's participation, and have a 60-day window from this past Wednesday to secure a commitment and adopt local ordinances.

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