103 KAR 50:040. General Administration.
RELATES TO: KRS 65.7045, 65.7073, 65.7075, 65.7077
STATUTORY AUTHORITY: KRS 65.7069(8)
NECESSITY, FUNCTION AND CONFORMITY: KRS 65.7069(8) authorizes the State Tax Increment Financing Commission to promulgate administrative regulations necessary for the administration of the statutes relating to tax increment financing, specifically KRS 65.7069 through 65.7081. These statutes establish various criteria that a project shall satisfy in order to obtain state participation through a project grant agreement. This administrative regulation establishes the criteria for determining a project footprint and land preparation, demolition, and clearance requirements.
Section 1. Definitions. (1) "Capital investment" is defined by KRS 65.7045(6).
(2) "Commission" is defined by KRS 65.7045(9).
(3) "Commonwealth" is defined by KRS 65.7045(10).
(4) "Commonwealth participation programs" means the programs established by KRS 65.7073, 65.7075, and 65.7077.
(5) "Footprint" is defined by KRS 65.7045(18).
(6) "Incremental revenues" is defined by KRS 65.7045(21).
(7) Minimum capital investment" means the capital investment requirement established for the Commonwealth participation programs in KRS 65.7073, 65.7075, and 65.7077.
(8) "Project" is defined by KRS 65.7045(33).
(9) "Project grant agreement" is defined by KRS 65.7045(34).
(10) "Purely private development" means a project that does not include either approved public infrastructure costs or approved signature project costs as an integral component of the project.
Section 2. Criteria for Determining A Project Footprint. (1) In accordance with KRS 65.7073(6), 65.7075(5), and 65.7077(8), for each project approved for incentives, the commission shall determine the footprint, including both:
(a) The area within which the minimum capital investment required for the Commonwealth participation programs shall be made; and
(b) The area within which incremental revenues may be recovered from the Commonwealth.
(2) Minimum capital investment.
(a) For an area to be included as part of the project footprint, actual capital investment shall be made in the area.
(b) Each proposed project shall meet minimum investment requirements to qualify for state participation.
(c) In determining the footprint of a proposed project, the commission shall consider the concentration and source of capital investment throughout the proposed footprint and the related nature of proposed capital investments to ensure that:
1. Unrelated projects are not combined into one footprint to meet minimum investment requirements; and
2. Purely private development is not combined with independent, purely public infrastructure development that would have likely occurred without incentives for the purpose of creating a source of recovery for the private development.
(d) In making this determination of a discrete footprint, the commission shall consider whether:
1. The proposed capital investments and areas included in the proposed footprint have a common thematic linkage, other than general economic development, between or among the discrete items of capital investment that has been centrally managed or coordinated to result in a unified economic impact; and
2. The project taken in its entirety would not be feasible or complete without any of the discrete items of capital investment that are aggregated as part of the proposed footprint.
(3) Incremental revenues.
(a) For revenues to be included as incremental revenues, the taxable activity shall occur within the footprint, and the new revenues shall be reasonably and directly related to the capital investments made.
(b) The purpose of tax increment financing shall be to allow for the pledge of revenues generated through capital improvements to support the development of those capital improvements.
(c) In pledging incremental revenues, the commission shall:
1. Consider whether proposed capital improvements will reasonably result in increased revenues; and
2. Pledge only those incremental revenues that it determines are reasonably generated as a result of the proposed capital investment.
(d) If determining whether a capital investment in an existing structure rises to the level of significance for the entire structure to be included in increment calculations, the Commission shall consider the following items:
1. If improvements to an existing structure fundamentally and profoundly rehabilitate or otherwise re-establish the existing structure as a viable source of economic activity, the so-affected portions of the existing structure where the capital investments occurred shall be considered;
2. If the improvements to an existing structure are isolated to a discrete floor, wing, room, or any other meaningful partition of an existing structure, only the affected or renovated partition or partitions shall be considered for purposes of inclusion in the incremental revenue calculations; and
3. If improvements to an existing structure are limited to sidewalks, street lights, parking expansions, landscaping, or any other improvements to the exterior of an existing structure, immediate proximity to these improvements shall not be sufficient to include taxable activity taking place within an existing structure in incremental revenue calculations for the project. These capital improvements shall be counted toward the capital investment of the project.
Section 3. Land Preparation. (1) "Land preparation, including demolition and clearance work," as that term is used in KRS 65.7045(3)(a), shall include the costs attributable to preparing the public infrastructure portion of the footprint for development, and shall not include land acquisition costs.
(2) "Land preparation, demolition and clearance," as that term is used in KRS 65.7077(2), shall include the costs attributable to preparing the footprint, other than the public infrastructure portion of the footprint, for development and shall not include land acquisition costs. (34 Ky.R. 678; Am. 1702; eff. 2-1-2008.)