HB 445: Welfare for the rich
Lexington, Kentucky’s Main Street development, probably like development in your cities, has proceeded mainly through public subsidies paid out to the already-well-off. Though they are local projects, the subsidies extend beyond local coffers; they also de-fund state and federal coffers. In effect, taxpayers in Paducah or Wichita are in some way working to support a good part of our urban Lexington developments. It’s one of many ways local decisions have real effects in making the world beyond Lexington.
In Frankfort last week, Kentucky Democrat Governor Steve Beshear passed HB 445, a series of tax breaks designed to reinforce the state’s already-booming urban, bourbon, and equine industries. The new bill, to take one nearby example, will allow the Louisville owners of the future 21C modern art hotel located on Main Street to recoup (and then apparently re-sell) up to $6 million in tax breaks from their $38 million investment.
HB 445 will also enable 21C Louisville developers Laura Lee Brown and Craig Greenberg to recoup another $6 million from a larger urban infill development called “Whiskey Row” in Louisville.
Brown, heiress to the Louisville Brown-Forman bourbon family, also stands to personally benefit from HB 445’s easing of bourbon taxes. This relaxation on the Kentucky Proud booze tax will ultimately cost the state $14 million in annual revenue.
HB 445 also gives Brown’s 21C development the green light to receive more of what are known as “New Market Tax Credits.” The bill raises the limit on these tax credits from $5 million to $10 million per project. Brown’s business partner, Greenberg, arrived at 21C within weeks after he helped issue the report for Lexington’s Rupp Arena Arts and Entertainment District Task Force, a collection of 47 area business leaders self-appointed by Mayor Jim Gray to study Rupp’s future. (No public representatives appeared on the Mayor’s committee.) According to the the 21C press release announcing his hire, Greenberg was hired on at the modern art hotel now going up 3 blocks down Main Street from Rupp in part because of his proven ability to exploit New Market Tax Credits.
All told, HB 445 sets up state residents to commit $16 million of their state tax revenue to the proposed $40 million dollar 21C project. And these funds are not all that 21C will receive. In addition to TIF funding ($500,000), state and local leaders greenlighted 21C to receive $ 6 million in lending capacity through the federal government’s Community Development Block Grants, which are designed to stimulate low income jobs in blighted areas.
Yup. That’s right. Our local and state leaders consider Main Street Lexington, a one-mile strip of asphalt bordered by such slum tenants as JP Morgan Chase Bank, City Hall, Park Plaza Apartments, 21C Modern Art Hotel, Fifth Third Bank, Central Bank, and Rupp Arena, is a blighted area in dire need of economic development.
Current leadership has embraced these rich public welfare recipients and their projects as evidence of positive, sustainable, and equitable downtown development. I don’t agree.