City officials said Owensboro will experience a major impact on their two Tax Increment Financing (TIF) areas — the riverfront and Gateway Commons — due to the state legislature passing House Bill 8 earlier this year.
Casey Bolton, partner at Commonwealth Economics, told City Commissioners on Tuesday that HB 8 utilizes a formula-driven phase-out of state individual income tax (IIT) while expanding the state sales tax to several new service areas.
Owensboro’s Riverfront and Gateway Commons TIF operate very differently in the revenue and cost structures with them, he said.
Bolton noted that the riverfront TIF is more dependent on income tax withholding with a higher baseline, while Gateway Commons relies more on sales tax with a lower baseline.
With a rebate history of $1.36 million from the Riverfront TIF and $1.7 million from the Gateway Commons in state taxes rebated for the last three years — HB 8 will hit the Riverfront TIF harder than Gateway Commons.
Bolton said that in 2020 the Riverfront TIF made $411,349 in income tax withholding, while it lost $14,090 in sales income.
“The fact that you all had a downturn in 2020 — really you’re not you’re not the exception, you’re right in line with everybody else — it was just an economic shock,” Bolton said.
Using data from 2020, Bolton said that the Riverfront TIF would bring in a Total Paid Increment of $421,401 and the IIT would make up $411,349 (roughly 98% of the TPI). Further, with the HB 8 introduction, the City would see $303,439 IIT, which cuts 26% of the TPI from the TIF.
Bolton said that while it does change things going forward, should there be new projects that come into play at either TIF area, city officials know what to expect now. Nonetheless, it does put them in a position of less negotiation, according to Bolton.
Angela Waninger, the city’s Director of Finance and Support Services, noted that for every .5% that is dropped to reach the phase-out of the IIT, the Riverfront TIF is seeing about a $100,000 decline in TPI.
“We’re already not where we thought we would be due to the delay in the third hotel, which I believe was the single biggest tax producer projected to be in the [Riverfront] TIF, and then we had the unfortunate departure of Alorica. So our downtown TIF is getting hit hard,” Waninger said.
Mayor Tom Watson said this issue is something that has been on their agenda for some time since they’ve been lobbying representatives to get a more fair approach, as he feels this is very unfair.
“TIFs that have already be planned and invested in and done things in an appropriate way … to change in the middle of it, it’s just didn’t seem very fair and that’s what we’re trying to just find a fair way for everybody to come out,” Watson said.
