Covington has a similar problem with the Fidelity Campus. From what I've seen in the past in Ohio, if a company gets a real estate tax abatement, they are usually required to make an annual "donation" the the school district that is equal to the amount of taxes the school district would have received. I don't know if that's the case in Northern Kentucky.

 

Required, no. Add to the list downtown highrise projects, enterprise zones, etc. Not saying good or bad but I know one case where company made a big deal with a $5,000 donation. 20 years later, on the tax rolls for the first time at 125K! per year. Donation stops. You tell me which is the better deal.

 

Most recent Newport shopping center where the developer agreed to pay a certain amount but does not have to until center is developed. By the way, this was the 14 million in property the city bought and taking off the tax rolls for the past 4 years.

 

Again, not saying right or wrong but there is a cost. The cost is to the rest of the taxpaying public.

Do you think the tax abatements of Covington and Newport may have played a part in the lower total valuation. Newport on the Levy tax bill = ZERO.

 

I have to be careful what I post here SS to clarify your post, due to ethical rules. I think I can state that there are a lot of extenuating circumstances as to that situation.

 

Generally speaking and for the benefit of those who may not know, to bring jobs and industry into their jurisdiction, counties and cities will agree to issue bonds and place the subject real estate in the govt unit's name (or a public properties corporation) thus taking the real estate off the tax rolls. Depending on the leverage, most cities and counties in N. Ky require the business to make a payment in lieu of taxes ("PILOT") to the school district equal to the amount that the business would have had to pay in school taxes had the real estate stayed on the tax rolls. Early on, the City of Newport was not as adamant about requiring the business to make a PILOT, as the City had little negotiation leverage. It was simply happy to get economic development started and if that meant foregoing a PILOT because the business refused to pay it and it was a deal breaker, the City would do the deal without the PILOT (which makes sense to me). A little of something, beats a lot of nothing. Also keep in mind that even in those deals without PILOTS, the schools do get tangible property taxes off the project don't they SS?. Furthermore, projects like Newport on the Levy ("NOL") dramatically increase the value of adjacent real estate and vicinity real estate which is still on the tax rolls. Thus even in deals with no PILOTS, the school tax receipts are almost always increased, because they don't lose much when the run down real estate (and it was primarily run down property in the case of NOL) goes off the tax rolls, but the adjacent and vicinity real estate dramatically increases. Folks need to concentrate more on the total situation and less on a specific property. Clearly the Newport school district does not get as much tax revenue as it would if NOL was on the tax rolls, but its getting more than it would have if the NOL project had not happened at all. However, I will add, as SS correctly pointed out, that House Bill 44 as its called, limits the amount of total taxes received by a city, county or school district from increasing more than 4% per year (although I don't think that 4% limitation includes new development or significantly renovated properties) so even if the adjacent and vicinity real estate increases in value the school district does not dollar for dollar benefit from that increase. But to the extent NOL precipitates other new development that stays on the tax rolls or results in PILOT payments to the school district, then the school district has benefitted by NOL (and unless the state changed to rules, the big benefit of PILOT payments is that they don't count against the 4% limitation). I represent another client in the nearby vicinity that would definitely not located in Newport without NOL being there, that was new development and the school district is handsomely benefiting. And I can think of a couple of other similar new developments already there and more on the way.

 

And since its a matter of public record, I can state that there is a PILOT for NOL. However certain perameters must be met on the project before the developer is required to make the PILOT payment to the school district. Those perameters have not yet been met. Some could argue that the City was too lenient in those perameters but that's unfair criticism. NOL's financing structure is a very, very complicated one (probably the most complicated bond financing structure that I have seen in my 20 years of doing this stuff), made so by the very speculative nature of NOL. It was a huge gamble by the developer to build NOL and it was a gamble that the developer was not willing to make with out the city and the school (which were likely to handsomely benefit if the project was successful) putting a little skin in the game. I can say with some certainty that without that skin, NOL would not have happened because the developer would not have gotten conventional financing.

 

As economic development momentum in a city or county grows and it becomes a more desirable place to locate businesses, the city or county has more leverage to demand a PILOT and the City of Newport now has much more leverage to demand PILOTS or even to refuse to take the property off the tax rolls. In Boone County for example, a client of mine bringing about 100 jobs to the County was not able to convince the County to take the property off the tax rolls because in the Fiscal Court's opinion, the benefits of the new jobs did not outweigh the disadvantages of taking the property off the tax rolls. 15 years ago, however, it would have been a no brainer to get the Fiscal Court to do so. But the leverage has flowed to the County. I expect that as Campbell County starts getting real economic development traction, the cities and county will be forced to do these types of deals. However, once economic development really gets strong, the cities and county will gain the leverage to say no. But for now, it will probably be necessary to induce businesses with high paying jobs to locate in Campbell County. With Boone and Kenton being less and less willing to do so, the ability or willingness of Campbell County to do so will provide it a huge advantage. And with high paying jobs comes increased payroll taxes. The middle, upper middle and upper class employees will want to reside in the area also. Those are the type of people that generally support and get involved in the schools, thus providing that benefit to the schools. They also are the type of people that are willing to support tax levys by the schools which is an additional benefit to the schools. It quickly can turn into an all ships rise on an incoming tide situation.

 

A fair question to ask me then is why, with all of the economic growth in Boone County, is the Boone County school district in such financial problems? Part of the problem will be rectified in the next 5-10 years when a lot of the bonds issued in the past mature and the property goes back on the tax rolls. A lot of the bonds were issued with 30 year maturities. Part of the problem is that Boone County has simply had ridiculous growth. Growth that I don't think Campbell County will ever experience due to road and topographic limitations. Furthermore, I can't recall the Boone County school district recently asking for a tax levy increase. SS, have they done so? Does Boone County had a utility/insurance tax? I'd be really surprised if they asked for one and it was turned down as the people I know in Boone County have tended to be very supportive of the public school system there. Although as pointed out by others on here, there is a detrimental effect on the funds paid by the state under SEEK when the locals pay more (as Highlands well knows).

 

You also need to keep in mind when talking about situations where the cities and counties take property off the tax rolls, that since July of 04, a state law now requires local govt units to get the approval of the state govt to do these deals. The state govt does an investigation to determine if the economic benefits of a project justify taking the real estate off the tax rolls. Prior to 04, the city or county pretty much had free reign to do what it wanted. No longer the case at all.

 

At the end of the day (and it will take a day to get through this post), the situation is not as simple as saying the school districts get ripped off when a county or city agrees to take a project off of the tax rolls. If a project can bring jobs into the city, can bring new residents into the school district (and the Newport District desperately needs more students), if it an increase other tax revenues for the school district, and if it can stimulate other economic development that generates revenues for the school district, then the city or county should consider doing these types of deals.

LN, you may have been careful on WHAT you said but not the LENGTH of what you said.

LN, you may have been careful on WHAT you said but not the LENGTH of what you said.

 

 

I hear you brother! But this issue is hard to explain in 3 line posts:laugh:

I don't pretend to know the particulars of anything that you all are saying but, it is sad to have that many temp. buildings for kids to have set up in for learning. get the schools built. We all know that there is money in Boone co. but waiting for the state to bail you out is the wrong answer. Take care of your own responsibilities, Montgomery Co. does.

TAX

I don't pretend to know the particulars of anything that you all are saying but, it is sad to have that many temp. buildings for kids to have set up in for learning. get the schools built. We all know that there is money in Boone co. but waiting for the state to bail you out is the wrong answer. Take care of your own responsibilities, Montgomery Co. does.

I find it extremely hard to believe that Montgomery County did not use state funds to build their latest string of construction projects.

Oh, they surely did use some state dollars. I talked to a buddy of mine who is very wise in his young age. Go ahead and build whatever you need. Pay for it later. You ever seen anybody repossess a school?:lol: It is just sad that those kids have to learn in an environment like that. Somebody needs to step up with some cash.

Oh, they surely did use some state dollars. I talked to a buddy of mine who is very wise in his young age. Go ahead and build whatever you need. Pay for it later. You ever seen anybody repossess a school?:lol: It is just sad that those kids have to learn in an environment like that. Somebody needs to step up with some cash.

But a school district has to receive approval from the state with the blueprints before they can break ground. They limit for example the number of storage rooms you can put in the building. Local school districts CANNOT just do what they want without state approval.

 

I agree they won't repossess a school building but I have seen superintendents removed from their position for mishandling of funds.

You may be missing the fact that you and I are on the same page with this one. I think it is horrible that this is going on and I am glad somebody decided to go straight to the horses mouth about it seeing the gov. himself.

Boone County yes on utility and insurance and the only NorKY district to have a payroll tax. Also, yes they were denied a tax rate increase above the percent allowed not too long ago. Who led the charge against that? Why none other than Gex the answer man Williams and his cohorts.

 

LN your posts are good but missed my point. If tax is abated on part of a tax base and growth is allowed to occur, the remainder of the tax base picks up the difference, the net is not out the school district but all the future amount under the abatement is. What I believe is most fair in all these packages is the current tax amount in place, remain through the development or bond issue. What is really not fair is for Newport to abdicate the tax and the school system not have a say about it. The 04 law gives some balance to it, but one must ask why did the law come into play? Because there was consequence local bodies did not take responsibility ownership of. Kinda the same with eminent domain legislation.

 

However, you are failing to mention that NOL is way behind in its agreed upon obligations and has never met the payment schedule. Again, who picks up the cash difference?

 

Yes to your tangible property question, but outside of sheltered lease hold improvements vs. cost of inventory, it is probably hard to figure out the tax basis of a fish, shark or squid. Same as Secretariat never being taxed when it was worth 100's of millions.

 

And I am quite sure you are not implying I am suggesting schools are getting ripped off by these deals. Sounds like the end turned from testimony to advocacy. Something your profession is restrained to do, I think.

Boone County yes on utility and insurance and the only NorKY district to have a payroll tax. Also, yes they were denied a tax rate increase above the percent allowed not too long ago. Who led the charge against that? Why none other than Gex the answer man Williams and his cohorts.

 

Thanks for the info on the util and insur taxes. Do you know how long ago it was the tax levy was defeated and if there have been any talks about trying again? Given the current situation with the schools, there may be a better chance it would pass if they tried again (although I do admit the Boone County Repub party is filled/dominated with anti tax folks who may be able to defeat it). I would hope however that if the school board made a compelling case for it, it would pass. I fervently believe (as you and I have discussed0 that if the CC school admin. had made a better case for its increase ,it would have passed. I felt the needs were there, but the campaign didn't get the message out as well as they should have. I hope they try again and it passes this time. While I agree with the general point that throwing money blindly at education is not the answer, I also agree that in certain situations, more money is needed. There can be no doubt that the secondary education system in Ky is not doing as well as it needs to. I recently read in the Business Courier that a DC economic development think tank, as part of its annual survey of economic development of all states, "dinged" Ky pretty hard. In some areas that it examined we did well. But the report had grave concerns about Ky's ability to provide a qualified work force in the future. We need to dramatically improve the number of students that graduate from high school and the number of students that go to college and earn 4 year degrees (we are below the national average on both measures) or it will severely constrict our ability to attract new industry or for existing industry to expand or even stay in Ky. N. Ky. does better than the national averages (as I'm sure some other pockets of the state do), but unless we want economic development to remain concentrated in only those areas, the other areas must improve or our state will further polarize into the "haves" and "have nots", which is not healthy for any of us.

LN your posts are good but missed my point. If tax is abated on part of a tax base and growth is allowed to occur, the remainder of the tax base picks up the difference, the net is not out the school district but all the future amount under the abatement is. What I believe is most fair in all these packages is the current tax amount in place, remain through the development or bond issue. What is really not fair is for Newport to abdicate the tax and the school system not have a say about it. The 04 law gives some balance to it, but one must ask why did the law come into play? Because there was consequence local bodies did not take responsibility ownership of. Kinda the same with eminent domain legislation.

 

There is no doubt that when property goes off the tax rolls, the properties remaining on the tax rolls pick up the tab. I do understand that, but don't really have a problem with that as long as the elected officials do so judiciously and prudently. The incentives provided by the state to lure Toyota to Ky were subsidized by the businesses and people required to pay for those incentives. Nonetheless, the decision to pay those incentives and bring Toyota to Ky, while criticized by many using some of the same logic you are using, has turned out to be a very wise one and paid much bigger dividends to the state than the incentives provided to Toyota. Martha Lane made a very smart decision. I do understand your concern about the school folks not having a say. The check and balance on the elected officials using this incentive is the fear that if they do so irresponsibly it will end up with them not getting re-elected. And we all know that politicians like getting re-elected. The 04 law really came about because, other than the school district, it was the state that was the real big loser when property was taken off the tax rolls (as you know the state gets a huge part of the real property taxes). Folks in Frankfort eventually woke up and figured out how much money was not going into the state coffers because of this practice and said "whoa". I'm sure the supers were also behind the law.

However, you are failing to mention that NOL is way behind in its agreed upon obligations and has never met the payment schedule. Again, who picks up the cash difference?

 

I thought I mentioned that NOL has not made its PILOT payments and thought I mentioned that the reason for it was due to the fact that certain perameters in the PILOT agreement had not been met. Again, this part is public record so I can discuss it. Under the many agreements between NOL and the City, in the event that certain revenue streams were insufficient to satisfy the bond debt service charges, the PILOT payments would be applied to the bond debt service charges, rather than being paid to the school district. Even with that happening, the developers are still putting more of their own money in to the deal under a guaranty to satisfy the bond debt service charges. As to the lost revenue because of the property not being on the tax rolls, the other tax payers are picking up the tab. Is that unfair? Probably not, at least in my mind, using the same logic that I used with Toyota. A whole lot of businesses, property owners and residents are benefitting from NOL. There are a whole lot of businesses nearby that have benefitted from the volume of people going to NOL. New businesses have started because of the popularity of NOL. Many residents have been able to find jobs because of NOL. And people have been able to sell nearby real estate for higher prices because of NOL. Has every taxpayer in Newport directly benefitted. Probably not, but I think an economic study would conclusively show that they have indirectly benefitted by the flow of dollars created by NOL into the Newport economy.

Yes to your tangible property question, but outside of sheltered lease hold improvements vs. cost of inventory, it is probably hard to figure out the tax basis of a fish, shark or squid. Same as Secretariat never being taxed when it was worth 100's of millions.

I don't understand your point.

And I am quite sure you are not implying I am suggesting schools are getting ripped off by these deals. Sounds like the end turned from testimony to advocacy. Something your profession is restrained to do, I think.

 

I thought you were saying these deals were unfair to the schools. If I misunderstood you, I apologize. I'm fighting a head cold these days, so maybe I'm not thinking clearly. And there's no doubt that my post was advocating or supporting this type of economic development incentive, as I believe it is absolutely necessary at times. The key is for the elected officials to be smart enough (and yes I have more confidence in elected officials, including school board members, mayors, city council members, fiscal court members and judge/executives than perhaps a lot of people on here, having been a former city council member, having pretty close personal relationships with a lot of them and having a working relationship with a lot of them) to know when to use them and when not to use them.

If any mod wants to edit my prior post to make it clear what portion of that was mine and what portion was SS's please do so, as I don't want to mislead or confuse anyone or have someone think that my portion was attributable to SS in fairness to SS. I obviously don't know how to do it.

If any mod wants to edit my prior post to make it clear what portion of that was mine and what portion was SS's please do so, as I don't want to mislead or confuse anyone or have someone think that my portion was attributable to SS in fairness to SS. I obviously don't know how to do it.

 

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Thanks Mom:laugh:. What's for dinner and do you have my laundry finished?