Covington has a long tradition of adaptive reuse, bringing new uses to vacant historic structures. One example is the rehab of the long-vacant building at 801 Madison Ave. to make way for Zapata Cantina.
City incentivizes rehab of historic neighborhood buildings
COVINGTON, Ky. – The City of Covington has created a new incentive program to help “activate” vacant commercial buildings in neighborhood business districts and on corners throughout the city.
The new Vacant Property Incentive – whose unveiling coincides this week with National Economic Development Week – is designed to help create jobs, since it is performance-based: Developers who turn vacant, historic buildings into move-in commercial space would be reimbursed a portion of payroll taxes created by future tenants.
“We think this tool will help sweeten challenging rehab projects and add vibrancy and momentum to Covington’s neighborhoods by helping us attract new restaurants, bars, entertainment, boutiques, and new office users,” said Ross Patten, assistant director of Economic Development in Covington.
Eligibility
Developers must submit an application – (available
HERE) – before any work begins.
Buildings must be at least 50 years old and have been at least 51 percent vacant for the last two years. Properties citywide are eligible. (If the address sits outside Covington’s TIF District [tax increment financing] district, the project might also be eligible for a separate incentive that freezes the City’s portion of property tax at the pre-rehab level for five years.)
Reimbursement
The incentive comes in the form of a reimbursement whose value depends upon the tenants that move in.
The City’s current payroll tax is 2.45 percent, or 2.45 percentage points.
- If the property attracts a new business to Covington, the developer receives 1.25 percentage points of all taxable W2 payroll created by new tenants for five years (or slightly more than half of the new payroll tax revenue).
- If the property attracts an existing Covington business that relocates, the developer receives 0.625 percentage points of all taxable W2 payroll created by those new tenants for five years (or roughly one-fourth of the new payroll tax revenue).
For example, using industry standards for salaries and space per employee requirements, a developer who renovates a 6,000-square-foot mixed-use building (first-floor restaurant and second-floor office) could theoretically net about $60,000 over five years, while a developer who renovates a larger 15,000-square-foot office space could be reimbursed about $200,000 over five years.
“That’s real money, but it doesn’t kick in until the new tenants have moved in and are operating,” Patten said.
The program is an outgrowth of an ordinance approved by the Covington Board of Commissioners last year that updated the City’s jobs development incentives.
Long-term strategy
Covington Economic Development Director Tom West noted that the new tool ties into key pieces of what’s commonly called the Garner Report, the citywide economic development strategy written for Covington by Atlanta-based consultant Garner Economics in 2019.
The report called access to move-in-ready space (and in particular office space) a “potential Achilles’ heel” for Covington’s continued development and suggested the City focus on creating a variety of commercial spaces to attract diverse commercial uses. As Garner quipped, “No product, no project.”
The report also noted the City’s “unique vibe” and in its “Experiencing Covington” target discussed the opportunity for creating the “quality of place” considered a key consideration when attracting talent.
“Despite COVID, economic development in The Cov surged forward in 2020 with almost $86 million in private capital investment and the announcement of 2,100 new jobs,” West said. “But a lot of work remains. We won’t rest until all areas of Covington feel that energy and until every person who needs and wants a good job has one. This new incentive will strengthen our ability to spread that momentum throughout the city.”
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