The Bluegrass and Beyond

If Tuesday’s public hearing had been at Keeneland instead of the Urban County Council chambers, here’s how I would have handicapped it:

The Lexington Distillery District project was the clear favorite. Everyone spoke of its good breeding and conformation, and they thought it was a great bet with the promise of a big payoff.

The CentrePointe development was a more complicated wager. Many speakers thought it was a beautiful horse, a sure thing. A few were skeptical, criticizing it as too big, ugly and lame to be a winner. Most, though, were willing to take the gamble, because the potential payoff seemed worth the risk.

Of course, horse races are over within two minutes. This one will last three decades.

What the Urban County Council and state officials must decide before the end of the year is whether Lexington can and should use tax-increment financing for these projects — two of the biggest developments proposed for downtown Lexington in a generation.

Tax-increment financing, or TIF, would allow Lexington to use 80 percent of new tax revenues generated by a huge private development in a blighted area over 30 years to pay for the infrastructure needed to make the development possible.

TIF will be a great deal for Lexington if the private developments succeed. Not only will the city get the developments, but it will get to keep tax revenues that would otherwise be shared statewide.

The Lexington Distillery District project is a textbook example of why the TIF law was created. The project would rehabilitate two former distillery complexes on Manchester Street and convert 28 of the most neglected acres in Fayette County into an entertainment, arts and multi-use neighborhood. Similar projects have worked wonders elsewhere.

The Distillery District’s developers are seeking $80 million in future tax revenues for such things as streets, sidewalks, utilities and parking. The developers plan $110 million in private investment.

The Webb Companies plans to spend more than $200 million in private financing to build Centre Pointe, a 35-story tower that would have a four-star Marriott hotel, 70 luxury condominiums, offices and restaurants.

Mayor Jim Newberry is working with the Webbs to use CentrePointe as the focus for a 14.25-acre, $48 million downtown redevelopment project that would include such popular amenities as improved streetscapes, a $16 million renovation of the old courthouse that houses the Lexington History Museum and a permanent home for the Lexington Farmers Market.

It also would include a lot of money for amenities that would directly benefit CentrePointe, such as an adjacent $10 million underground parking garage and two $1.5 million pedestrian walkways.

Architects have criticized CentrePointe’s design and size, preservationists opposed its destruction of historic buildings, and others have questioned its economic viability and secretive private financing. But most of the speakers at Tuesday’s hearing praised CentrePointe as a needed shot in the arm for downtown.

Unlike a horse race, these projects aren’t competing with each other so much as with global economic forces that have shifted dramatically since they were proposed.

As Lexington places its bets, we should keep this in mind: The payoff will come only if these projects can go the distance. There’s no such thing as a free ride, either in horse racing or in tax-increment financing.

I’m sure it’s because I’ve heard too much of the slop that has replaced intelligent discourse in our presidential campaign. But as I listened Thursday night to Urban County Council members and others discuss whether to go forward with a tax-increment financing project tied to the CentrePointe development, one phrase kept running through my mind: Lipstick on a pig.

Granted, some good lipstick was offered up:

Developer Dudley Webb agreed to pay the estimated $50,000 cost of a state-required TIF feasibility study for his proposed 35-story CentrePointe tower, which would house a four-star hotel, luxury condos, offices, restaurants and shops.

Mayor Jim Newberry indicated, and Webb’s attorney seemed to agree, that any decision about building a $10 million parking garage under Phoenix Park could wait a couple of years until we see if CentrePointe is built and the garage is needed.

Those two moves made it more attractive, and less risky, for council members to let the CentrePointe TIF process play out, and they voted 10-5 to do just that.

It won’t hurt to further scrutinize the downtown redevelopment projects city officials want to pay for with TIF money. And it certainly would be good to have a public hearing, so citizens could have their say. That hearing is scheduled for Tuesday, Oct. 14, at 6 p.m. in the council’s chambers.

I’m skeptical of asking the state to approve a CentrePointe TIF project, for several reasons, not the least of which is that state law must be bent like a pretzel for this project to qualify.

Plus, as Vice Mayor Jim Gray keeps pointing out, a TIF project makes sense only if the development it is tied to makes sense. That’s because CentrePointe must be a long-term financial success to provide the tax money needed to fund TIF public improvement projects.

CentrePointe makes no economic sense to a lot of people. The mystery surrounding its financing — whether it is real, and where the money is coming from — deepens public skepticism. Last week’s turmoil in the financial markets offered further reason for caution.

When Webb unveiled CentrePointe on March 4, he said he needed TIF financing to make it work. Faced with public opposition, he then said he didn’t need it. Now, while claiming he doesn’t need it, Webb and his brother, Don, and nephew, Woodford, are working hard to get it.

Some council members speculate that the Webbs need the city’s TIF stamp of approval to secure financing for CentrePointe. Or that they need the $10 million city-owned parking garage. Or that they need the city on board so they can seek loan guarantees or other support if CentrePointe runs into trouble.

Some council members who support the TIF project argue that if Lexington doesn’t partner with CentrePointe, it could lose an opportunity to fund some much-needed downtown improvements, such as renovation of the old Fayette County Courthouse that now houses the Lexington History Museum.

They think powerful rural legislators will gut the TIF law next year, so Lexington had better grab what it can now. They may be right, but a flawed CentrePointe TIF application would only give those legislators a fat target.

And who could blame them? Is it in Kentucky’s best interest to build Lexington a downtown parking garage that’s twice as expensive as it could be? Or to spend $3 million on pedways between CentrePointe and two public parking garages?

It would be short-sighted for the General Assembly to abolish TIF financing. Despite Kentucky’s historic urban-rural jealousy, it’s more true than ever that cities are the economic engines that drive the state. TIF is a great tool for keeping those engines chugging along.

The General Assembly must move beyond the old notion that investing in the Golden Triangle is bad for the rest of Kentucky. Burkesville or Grayson aren’t competing with Lexington — Kentucky is competing with Illinois, and they’re both competing with the rest of the world.

The old Kentucky way of thinking focuses on whether UK can compete with U of L on the football field and basketball court, rather than on whether they both can compete with North Carolina and MIT in the classroom and laboratory.

The game should no longer be about how to divide Kentucky’s pie, but how to make the pie bigger. Sound urban TIF projects that conform to the law will do that. Flawed ones like CentrePointe probably won’t.

If Lexington does send a CentrePointe TIF application to Frankfort, I think state officials will view it as pork. And rural legislators know how to butcher a hog.

We’ll never be the belle of the ball if everyone knows we’re easy.

That’s how I ended my first column about CentrePointe, soon after Dudley Webb unveiled plans for his $250 million luxury hotel, condo and retail complex.

I was likening Lexington to a debutante who fancies herself as someone special, yet rushes into the arms of any real estate developer with a hot proposition.

So here we are, nearly four months later. Where does the belle find herself?

She’s considering a shotgun marriage to the CentrePointe developer. Why? Because it could be an easy way to get some downtown goodies. Or maybe not.

When Webb announced CentrePointe in early March after two years of behind-the-scenes work, he said the financial plan included as much as $70 million in tax increment financing to pay for related “public” improvements. Those were described as such things as a parking garage under Phoenix Park and public art.

Kentucky’s tax increment financing program — known as TIF — is a great tool that allows a city and the developer of a “signature” project to work together to rehabilitate a blighted urban area. With TIF, some of the future taxes generated by the private project are used to pay for “public” improvements near the development.

Now, Webb says he doesn’t want any more public meddling in CentrePointe and he has enough private financing to build without TIF. But no TIF, no public improvements.

Webb’s attorney, Darby Turner, said the developer would only apply for TIF financing if the Urban County Council asks him to. The council will vote Thursday on whether to do that.

Council members were told for the first time Tuesday that representatives of Webb and Mayor Jim Newberry have discussed trying to use TIF money for a long list of downtown projects, including a much-needed renovation of the old courthouse. Also, Turner said that instead of $70 million, only $35 million or $40 million might really be available for public improvements.

So how would this all work? How much money could really be available to the city and what could it buy? Nobody seems to know.

In fact, Tuesday’s meeting was the first time council members had really ever discussed CentrePointe TIF. Several council members had some very basic questions about TIF, and the only knowledgeable person there to advise them was Webb’s consultant, John Farris.

Council members are being asked to make a quick decision with little information. Some of them are angry about it, and who can blame them?

“What this motion asks us to do is … ask if we could tag along with the CentrePointe project and maybe get some public amenities out of a deal that’s already done,” Councilman Tom Blues said. “What we see here is a failure of communication, of cooperation, of public involvement, of openness, and I’m disturbed that it has come to this, because it really indicates a significant civic failure.”

Councilman Don Blevins said more study is needed to see how CentrePointe fits with potential city redevelopment projects a couple of blocks down Main Street. Blevins noted that decisions the council is about to make could shape Lexington for a century or more and shouldn’t be rushed.

And he added: “It feels a little strange hitching our TIF wagon to a project some of us don’t like. My fear is that a large four-star hotel with huge condominums on top of it is going to fail. I hope I’m wrong. I hope they’re wildly successful and the downtown is vibrant and we sell all those condos and the hotel is full from here to eternity. But what if I’m right? What we’d have is essentially a vertical Lexington Mall right in the heart of downtown.”

Vice Mayor Jim Gray also questioned CentrePointe’s economic viability. And he wondered whether a CentrePointe TIF would even be legal because developers say it’s not essential to build their project.

Gray has been among the most outspoken critics of CentrePointe because of Webb’s refusal to allow public input on the project’s design — and Webb’s insistence on demolishing the block’s historic buildings rather than trying to incorporate some elements of them into the new building.

“I’ve learned over time that this business of building and developing is a whole lot more about process than about project,” said Gray, who is president of a large construction company.

On Tuesday, Gray read to his fellow council members from a “best practices” guide to Kentucky TIF projects. It recommended thorough study, public participation and community buy-in — none of which has happened with CentrePointe.

It might be too late for anyone but Dudley Webb to influence what happens on the CentrePointe block.

But the future of downtown shouldn’t rise or fall on one project, no matter now big it is. Council members should slow down, think things through and look at all of the options.

Two other TIF projects have been proposed for Lexington — an arena to replace Rupp and a large downtown entertainment district along Manchester Street. Given the redevelopment opportunities downtown, there could be the potential for several more big projects.

The best course of action might be to tell Webb to go ahead and build CentrePointe on his own.

City officials could then do what they should have done long ago: Engage the public in a discussion about what downtown Lexington needs and what it might get from a TIF partnership. Then the city could seek out a developer who is interested in a true partnership.

Blevins said it all: The decisions we are about to make will shape Lexington for a century or more and shouldn’t be rushed.

An intentional courtship would make a lot more sense than a shotgun marriage.