What fiscal impact will the newly expanded urban renewal area have on the rest of Louisville?

This is the $35 million question.

 

The Louisville Revitalization Commission’s consultants estimates that the urban renewal area, as expanded in the latest proposal, will generate a sales tax increment of $35 million over 25 years. (There is an additional ~$42 million in property tax increment over 25 years.) The LRC’s plan is that it will keep “all” of this increment for its operations. As a result, the City, which gets the vast majority of its operating budget from sales tax revenue, will not see any of the $35 million.

 

There are at least two important questions. First, what will be the fiscal impact of having any given urban renewal area on the City? Second, what will be the fiscal impact of expanding the urban renewal area boundaries from those discussed originally in the Hwy 42 Revitalization Framework Plan?

 

The answer is that no one knows. The City has never done a study on the fiscal impact of having an urban renewal area or of expanding the urban renewal area to include the King Soopers, Christopher Plaza and Safeway shopping centers and the Pow Wow grounds. Such a study—done professionally, competently and objectively, not by consultants who work for the City but have an eye open for developer-clients—is sorely needed.

 

Even without one, this much can be surmised: King Soopers and, to a lesser extent, Safeway are major contributors to the City’s sales tax revenues, and therefore to the City’s operating budget. Markel Homes is proposing to build 350 housing units directly behind and to the east of King Soopers. Markel’s fiscal analysis concluded that each housing unit in the development will result in a net operating loss to the City of $376 (weighted average)—$327 for each of the 53 single-family homes, and $385 for each of the 297 multi-family homes (Table 5). The annual net loss to the City from these 350 housing units would be $131,676. That is, after accounting for all sales tax revenue generated by the occupants of these homes and paid to the City, these homes will still cost the City $131,676 because of the many high-quality services the City provides to these and all homes in our community.

 

Markel Homes’ analysis concludes that its development will break even annually only because it proposes to build 65,550 square feet of retail (Table A1) that will generate sales tax revenue for the City, offsetting the costs of the housing units.

 

Because of their proximity to the King Soopers, Christopher Plaza and Safeway shopping centers, it’s easy to see that the occupants of these Markel homes would do much of their local shopping at those centers. Now the problem: All of these centers are in the urban renewal area. Accordingly, all the sales tax revenue generated by these 350 housing units would not go to the City to pay for operating costs—i.e., services provided to these housing units. Instead, the LRC would take all the revenue and plow it back into the urban renewal area. There are two effects: (1) The operating loss to the City—each year—from the Markel homes is significantly greater than $131,676; and (2) the other residents and businesses in Louisville are providing an enormous subsidy to those Markel homes.

 

The point is that any urban renewal area has a fiscal impact on the city it’s located in. Here, the expanded urban renewal area will have a marked fiscal impact. Yet, no one knows how bad it is and the Council members supporting the LRC and the LRC’s plan are doing so without knowing this very important fact.

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