The problem is a simple one: A big patch of land in downtown Frankfort has sat vacant for nearly three years now.
The proposed solution isn’t so simple.
“There are many moving parts here,” interim City Manager Tom Russell said of the former Capital Plaza land that housed the Frankfort Convention Center and related infrastructure.
Those moving parts:
Figuring out the Tax Increment Financing (TIF) contributions of the city, county and other taxing districts to help fund construction of a state-mandated parking garage and other public infrastructure such as streets and sidewalks. The parking garage has a state-imposed deadline of April 2022 for completion.
Waiting to hear back on a $5.5 million federal grant that could greatly reduce the TIF revenue contribution toward construction of a parking garage.
How a new YMCA will figure into the property’s development.
What developer CRM Companies, in conjunction with businessman and landowner Marty Johnson, will actually build there.
The official next step for the city, per its TIF flow chart, is to draft a development agreement laying out payment terms and obligations for the project.
Several steps — including TIF revenue pledges as well as city and county ordinances — follow the development agreement, but Eric Cockley, Frankfort’s director of planning and community development, said the city hopes to get much of that work done soon. The final step would be submitting to the state to a request for incremental funds.
“We would love to say we're going to get all that done by the end of February, which would be very optimistic,” Cockley said. “The hope would be that by the time we get to March and April, this spring, we can be close to actually submitting to the state a TIF application. That puts the developer in a position by this spring to potentially start working on his actual design work to be submitted to my office for review.”
The TIF revenue would come from a percentage of money that taxing districts take in from increased property, sales and occupational tax revenues as a result of the property's development. That would be paid back to the developers in order to cover the cost of public infrastructure.
Assuming the $5.5 million grant funds come in, Russell estimated additional public infrastructure costs to total from $3.5 million to $4 million.
On Wednesday, founder and CEO of CRM Companies Craig Turner will update the new city commission on project plans. He said that the information presented won’t be much of a departure from his presentation to the last city commission about a year ago.
“Our presentation will be a review of the previous info since there are new commissioners,” Turner said. “Our plan remains as earlier stated. We will invest a significant amount of money in downtown Frankfort. All parties have continued to work together during the pandemic to create something special.”
The transit grant and the garage
At the forefront of Russell's and Cockley’s minds right now is the possible $5.5 million grant from the Federal Transit Authority.
The grant would provide funds to construct the required parking garage with a transit center attached for the city's public transportation system. It’s unclear how much of the $5.5 million would be spent on parking and how much would be spent on the transit center itself, or where exactly it would be located on Parcel B or Parcel C, which is currently occupied by the downtown YMCA.
The current deadline for completion of the parking garage is April 2022, but the city has requested a nine-month extension. That would give the developer until mid-January 2023 to build the required parking spaces.
“Originally it was two years from the time the developer got possession of the property to build that garage, otherwise it reverts to the state,” Cockley said. “We've had conversations with the state and have requested a nine-month extension. We haven't gotten an official word, but all indications are that they're supportive, that they see how we're working through the project, and we're going to get to the end that everybody wants. So we're optimistic. But that's one of the many moving parts.”
Russell said that the entire parking structure, one that would satisfy the state’s requirement for 350 spaces, would cost around $8 million.
“It’s $5.5 million on an $8 million parking structure,” Russell said. “We'll continue to wait. That would ease a lot of people's minds should that come to fruition.”
Russell said City Grants Manager Rebecca Hall has told him she feels good about the city’s odds of eventually receiving that $5.5 million.
Hall mentioned that the city didn’t send its application directly to the Federal Transit Authority but that the Kentucky Transportation Cabinet included Frankfort’s request in a state application that it sent to the FTA.
While City Hall waits to hear about the grant, Cockley said that TIGER Grant Project Manager Chuck Knowles has been working on preparing a “design-build” contract to be ready if and when the federal money gets to Frankfort.
“So the documents that you put out to bid are pretty thorough, because you're essentially hiring someone to design, build, furnish and finish the entire facility," Cockley said. "It's everything from how many parking spaces, how many floors, to what furniture are you putting in the office space for the transit center. We've been bouncing back and forth and revising it in hopes that we have it as ready to go as possible to get approved by the commission and send out once we hear final word on the FTA grant.”
Assuming the grant money is obtained, Russell said the parking structure would still cost about $2.5 million to finish. Add another $1 million for the proposed extension of Washington Street and expenses for other public infrastructure and that leaves anywhere from $3.5 million to $4 million in costs not covered by the grant.
Who covers what portion of that extra cost is the primary question facing the city, the developer, the county and other taxing districts.
The TIF Agreement
Another hold-up, per Cockley and Russell, has been getting the current city commission — of which only one member is returning from last year — versed on the ins and outs of the TIF agreement.
“We need to make sure everybody's up to speed and hopefully, as we discuss the actual moving parts,” Cockley said. “… Now we're to that part of asking ‘OK, here's the numbers, here's the percentages, who's OK with what, and how do we move forward?’”
“It's all about the dollar in the end,” Russell said.
Russell said that while communication with the county has mostly been limited to elected officials thus far, and that the numbers have yet to be worked out, the participation agreement is currently in draft form and could be finalized as early as next week.
He also presented the latest developments on the project to the Franklin County Fiscal Court last week.
“This project is a city project, but we are counting on the county to be good stewards of their money,” Russell said. “This is a $90 million project. They'll get some revenues off of it just like everybody will, and we're counting on them to be good partners on this thing.”
Russell said that if need be, the city could provide TIF revenues on its own, but “that's not what we're hoping for.”
When it comes to applying for TIF revenues from the state, one of the criteria to be considered is revenue and jobs that will be brought in from across state lines. Russell said that he thinks Frankfort has a strong case despite not being particularly close to any state border.
“I think the pitch for that is the fact that we're only one of 50 state capitals in the nation,” Russell said. “Between the bourbon industry, the Kentucky River and being the state capital, that’s a lot. We don't need to lose sight of the fact that this is the state capital of Kentucky and that the people that come to Louisville or Lexington also will come to Frankfort.”
One point that Cockley and Russell emphasized in making the pitch for this project, and local contributions toward it, was the financial benefit it would provide to Frankfort Independent Schools.
“It bears repeating as many times as we can: the school system, the school system, the school system,” Cockley said. “While the TIF may tie up future marginal tax revenue from these taxing districts, the school system will immediately benefit more so than everybody else. That’s good for everybody.”
The latest development plan states that the school district and transient room taxes over a 20-year period will “amount to over $15 million in additional local tax revenue that is not pledged as a TIF incentive.”
If the TIF is implemented, the city would establish a “special fund” for pledged incremental tax revenues caused by development of the properties. The plan says the city, county and special taxing districts — excluding school districts — may legally pledge up to 100% of their incremental tax revenues from real property taxes. The plan states that the city will request that the state pledge up to 80% of incremental state tax revenues.
YMCA latest, TIF plan
Very little in the way of new information has been shared regarding proposals for CRM’s proposed mixed-use commercial and residential development or a new YMCA building since they were first presented.
The YMCA’s future is still up in the air. Members of the current city commission have expressed varying levels of support for a gift of $2.5 million, to be paid out in annual increments, toward a proposed state-of-the-art YMCA building on Parcel B.
Russell said he has requested that YMCA of Central Kentucky President Paula Anderson meet with the new commission, but he has yet to hear back.
Though no commissioner has explicitly opposed the YMCA funding, several have voiced concerns about not getting the quality facility that was initially presented to the commission.
Russell and City Attorney Laura Ross have previously pointed to wording in the current draft agreement with the YMCA that should the YMCA of Central Kentucky choose to alter the proposed 30,000-square-foot size for the facility, the city would be able to reconsider its funding commitment.
Per the latest TIF plan, intentions for Parcels B and C include the “reimagining of” the Capital Plaza Hotel, a convention/meeting space, a new YMCA building, restaurant and retail space, residential units and a parking structure. Parcels B and C were purchased from the state by Johnson for $1,000 when no other developers submitted bids.
With the recent addition of the old Simon Warehouse property, the total size of the TIF Development District is now 22.2 acres. That includes a piece of land the city sold last week to a developer.
Frankfort businessman Frank Haydon is partnering with Louisville-based Weyland Ventures to develop the warehouse property into a “lifestyle boutique hotel,” with a bar, restaurant and meeting rooms.
Weyland Ventures is involved in a similar plan involving the use of a TIF district to finance a boutique hotel in Paducah.