Paducah's Tax Increment Finance district requires $20 million in capital investment to activate, and the city is halfway to reaching that initial sum.
"Part of the TIF process is that we had to come up with what they call, like a program of projects, and we've spent the last probably two years talking about: 'How could we be most competitive to get approval of a TIF district?'" Mayor Brandi Harless told The Sun.
"There has to be a really good mix of possible projects that get you to that $20 million threshold, but also realistic projects, because we can't just go to the state and say, 'We have a big dream,' and not have some kind of realism behind it."
The TIF district is billed as a method to promote development and includes a segment of the Paducah riverfront and parts of the downtown business corridor. Downtown is currently a mix of successful and struggling businesses, vacant properties, and familiar locations such as the former Kresge building site, historic Columbia Theatre, former Showroom Lounge, the former Whaler's Catch building and City Block at Second and Broadway.
It's a roughly 315-acre area slated for potential developments, including additional hotel rooms, surface lot parking, public infrastructure improvements, residential housing and more. Over 20 years, the Paducah redevelopment is estimated to generate around $123 million in state and local TIF-eligible tax revenues, according to an impact analysis submitted by Commonwealth Economics.
"The threshold is just the first step," Harless said. "The next piece of that is to make sure that we're continuing to see investment and continuing to see growth happen to get to that larger goal."
A significant private investment already in the works is the City Block project, although financial arrangements between the city and Louisville-based Weyland Ventures have not been determined. Those would be detailed in a future agreement and need approval from the Paducah City Commission.
Weyland proposes putting an independently-operated boutique hotel, mixed-use residential and commercial space, public parking and a town square-type area on the 3-acre city-owned parking lot at Second and Broadway.
Harless sees the City Block project as one piece of a larger vision.
"I can't wait until we get to the point of being able to put out (Request for Proposals) for the Kresge building for local and other developers to be thinking about how we can reuse that space," she said. "I'm equally as excited to do something for the Showroom Lounge and how that could be developed through this TIF district process as well. Then, the City Block is part of that bigger picture."
The most exciting part of the City Block project for Harless is the town square, or public gathering space.
"I really am looking forward to seeing some of those details get fleshed out as we move into negotiations with Weyland," she said. ''What are we going to sell that property for? What is that public space going to look like? How many parking spots are we going to hold them accountable to maintaining?' All those details are going to be worked out over the next couple of months."
The proposed boutique hotel on City Block is intended to target a different audience than the Paducah-McCracken County Convention & Expo Center, downtown development specialist Katie Axt said. The hotel's exact size, number of rooms and design have not been finalized, but the conceptual plan estimates 120 rooms.
"There is a market for a particular type of hotel," Axt said, citing a January hotel market study. "It is a boutique hotel that serves arts and culture and hospitality in downtown. … What that means is that it is a destination hotel, an independently-operated hotel, that creates and generates new activity that doesn't exist right now."
Harless said that, in recent conversations she's had with the developer, the potential hotel plan has been scaled back on the number of rooms, but noted, it's not final until the final development plan is approved.
"They have scaled back quite a bit," she added. "They are definitely looking at an independently-owned boutique hotel."
Aside from private investments like the City Block project, the TIF district's $20 million requirement can include public investment, meaning a recent $10.4 million Better Utilizing Investments to Leverage Development (BUILD) grant award counts toward that figure, City Manager Jim Arndt said.
The city has four years to reach the threshold once the TIF district reaches final approval.
The federal BUILD grant helps the city with its riverfront project that features many enhancements, such as a riverboat excursion pier and plaza, increased bike and pedestrian accessibility, broadband capabilities, increased safety, and improvements to the landing near the transient boat dock.
Arndt said public investment helps get the city to the $20 million mark and that's "great," but the city also needs tax increment generating investments.
"We're getting those smaller projects, which is what we want and that's going to make up the bulk of it," he said. "Those smaller projects are going to add up."
Arndt cited a new restaurant in the Whaler's Catch building as an investment located in the TIF district. Centurion Development, based in Missouri, acquired the well-known building near the Second and Broadway lot for $425,000 in November.
A complete renovation is planned for the Cajun restaurant Broussard's, which is projected to open in summer 2020.
An exact investment amount is not known at this time. Pam Ogles, director of strategic development for J.S. Coalter & Associates, parent company of Centurion Development, told The Sun the company doesn't have the estimated figure yet.
"We hope that, once again, all of this activity that we're generating downtown on the riverfront is just going to attract more people to want to do more investing and be a part of that kind of vibrant downtown that we all know is possible," Harless said.
Overall, the TIF district received preliminary state approval in August and undergoes a vetting process with a third-party consultant, as required by state regulations. The consultant reviews the application, economic analysis and the city's request for state increment.
It won't raise taxes or change how it's collected, but rather serves as a financing mechanism that captures certain tax dollars that go to the state and allow them to be used in local development.
The third-party consultant will make its recommendation to the state and that informs what revenue cap is given as part of final approval from the Kentucky Economic Development Finance Authority. The city is requesting approval of up to $56 million in state tax increment generated in the district over the next 20 years.
Final approval could occur in early 2020.
"It takes a couple of months and then there are a couple of months to get the final approved TIF district, which will be a huge milestone for us when that occurs," Axt said.