Funding tool for IRS site work leaps first hurdle

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TIF district designation in works would use
future state tax revenue to repay City’s debt
 
COVINGTON, Ky. – The City of Covington received preliminary approval today to study the possible use of future state tax revenues to pay for new roads, sidewalks and other improvements to the 23-acre IRS site and surrounding areas to prepare it for private development.
 
The arrangement kicks in through the formal designation of the site as a Signature Tax Increment Finance Project, or “TIF,” which could happen following the completion of an economic and fiscal impact study to be overseen by the Kentucky Cabinet for Economic Development.
 
The Kentucky Economic Development Finance Authority, or KEDFA, voted unanimously today to give preliminary approval for the TIF to proceed, although many more legal steps have to be taken.
 
“This is incredible news and a very significant step forward in the development of the IRS site,” Mayor Joe Meyer said.
 
The City bought the site from the federal government earlier this year after it was vacated in fall 2019 by the Internal Revenue Service, which operated a tax-processing center there for more than 50 years.
 
City officials are in the process putting together a request for qualifications (RFQ) to secure a firm to demolish the sprawling IRS building and salvage the site. After the demolition, the City will restore the street grid, extend utilities to the site, install sidewalks, and build fiber and WiFi infrastructure. The estimated costs of that work – plus the costs of public elements like parking garages – could top $80 million.
 
Under the TIF designation, the City could pay for that upfront infrastructure work using future revenue generated at the site by state sales taxes, state property taxes, and withholding tax.
 
In a presentation to the Covington Board of Commissioners this past Tuesday, Economic Development Director Tom West estimated that that state revenue could reach $83.3 million over 20 years.
 
A conceptual plan created by Atlanta-based consultant Cooper Carry calls for a restored street grid; a levee park; a community plaza for festivals; a mixture of buildings containing offices, retail shops, hotels, and residential units; and expansion of the adjacent Northern Kentucky Convention Center.
 
The “Signature” TIF district – so-named because the value of private investment is expected to top the $200 million threshold – would encompass 31.6 acres. It consists of the IRS site – the bulk of which sits just north of Fourth Street between Madison Avenue and Johnson Street – the IRS parking lot to the west, the convention center, and the roads that run along the borders of the site.
 
The City of Covington already has a TIF district throughout much of its downtown, but that uses only local tax revenues.
 
The Covington Board of Commissioners is expected to vote Tuesday night on whether to approve a memorandum of agreement with the state to study the potential impacts of the Signature TIF district.
 
After that, the City will work with the state Economic Development Cabinet to hire a consultant to formally estimate the anticipated net new state revenue to be produced at the site.
 
City Manager David Johnston said the vote today lets the City proceed in arranging demolition and other site work with confidence.
 
“We’ve said all along that we have no intention of letting this piece of property sit idle,” Johnston said. “It’s an exciting project and an exciting site, and we want to see it developed and contributing to Covington’s vibrancy.”
 
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