KRS 65.7047: Establishment of local development areas -- Conditions for

establishment -- Steps for establishment or modification -- Funding --

Execution of agreement -- Pledge of revenues -- Reporting requirements

-- Administrative regulations.

(1) Any city or county may establish a local development area pursuant to this

section, subject to the following conditions:

(a) A local development area shall be on previously undeveloped land;

(b) No more than one thousand (1,000) acres shall be approved for a local

development area in any twelve (12) month period in any county;

(c) The establishment or expansion of the local development area shall not

cause the assessed value of taxable real property within all local

development areas and development areas of the city or county

establishing the local development area to exceed twenty percent (20%)

of the assessed value of all taxable real property within its jurisdiction. For

the purpose of determining whether the twenty percent (20%) threshold

has been met, the assessed value of taxable real property within all of the

local development areas and development areas shall be valued as of the

establishment date; and

(d) Unless the ordinance establishing a local development area requires an

earlier termination date, a local development area shall cease to exist on

the termination date.

(2) A city or county shall take the following steps to establish or modify a local

development area:

(a) If the city or county pledges occupational license taxes or the

occupational license fee authorized by KRS 65.7056 as a part of the local

tax revenues to support the local development area, the city or county

may engage the services of a qualified independent outside consultant or

financial adviser to analyze the data related to the project and the

development area and prepare a report. If the city or county elects to

have the report prepared pursuant to this paragraph, the report may

include the following:

1. The estimated approved public infrastructure costs for the project;

2. The feasibility of the project, taking into account the scope and

location of the project;

3. The estimated amount of local tax revenues, as applicable, that

would be generated by the project over the period, which may be up

to forty (40) years, as applicable, from the development area's

established date;

4. The estimated amount of local tax revenues, as applicable, that

would be displaced within the city or county, for the purpose of

quantifying economic activity which is being shifted over the same

period as that set forth in subparagraph 3. of this paragraph. The

projections for displaced activity shall include economic activity that

is lost to the local jurisdiction as a result of the project, as well as

economic activity that is diverted to the project that formerly took

place at existing establishments within the local jurisdiction prior to

the commencement date of the project;

5. The estimated amount of old revenues that would have been

generated in the development area of the project in the absence of

the project, computed over the same time period as set forth in

subparagraph 3. of this paragraph;

6. In the process of estimating the revenues and impacts prescribed in

subparagraphs 3. and 4. of this paragraph, the independent outside

consultant shall not consider any of the following:

a. Local tax revenues or economic impacts associated with any

projects within the development area where the new project

will be located; or

b. Local tax revenues or economic impacts associated with

economic development projects and approved Kentucky

Tourism Development Act projects under KRS Chapter 148;

7. The relationship of the estimated incremental revenues to the

financing needs, including any increment bonds, of the project;

8. When estimating the fiscal impact of the project, the consultant shall

evaluate the amount of revenue estimated in subparagraph 3. of this

paragraph and shall deduct the amounts estimated in

subparagraphs 4. and 5. of this paragraph. The resulting difference

shall be compared to the estimated incremental revenues to

determine the presence or absence of a positive fiscal impact; and

9. A determination that the project will not occur if not for the

designation of the development area, the granting of incremental

revenues by the taxing district or districts, and the granting of the

local tax incremental revenues;

(b) The city or county shall hold a public hearing to solicit input from the

public regarding the local development area. The city or county shall

advertise the hearing by causing to be published, in accordance with KRS

424.130, notice of the time, place, and purpose of the hearing and a

general description of the boundaries of the proposed local development

area. The notice shall include a summary of the projects proposed for the

local development area;

(c) After the public hearing, the city or county shall adopt an ordinance which

shall include the following provisions:

1. A description of the boundaries of the local development area;

2. The establishment date and the termination date;

3. A name for the local development area for identification purposes;

4. Approval of any agreements relating to the local development area;

5. A provision establishing a special fund for the local development

area or any project within the local development area;

6. A requirement that any entity other than the governing body that

receives financial assistance under the local development area

ordinance, whether in the form of a grant, loan, or loan guarantee,

shall make periodic accounting to the governing body;

7. A provision for periodic analysis and review by the governing body

of the development activity in the local development area;

8. Designation of the agency or agencies responsible for oversight,

administration, and implementation of the local development

ordinance;

9. The estimated net positive fiscal impact as calculated in paragraph

(a)8. of this subsection if the city or county elects to have an

independent consultant report prepared; and

10. Any other provisions, findings, limitations, rules, or procedures

regarding the proposed local development area or a project within

the local development area and its establishment or maintenance

deemed necessary by the city or county;

(d) If incremental revenues or other resources are to be pledged from taxing

districts other than the city or county establishing the local development

area, a local development area agreement shall be executed in

accordance with the provisions of subsection (4) of this section; and

(e) If the city or county elects to use an independent consultant or financial

adviser as provided in paragraph (a) of this subsection, the independent

consultant or financial adviser shall:

1. Consult with the city's or county's budget office in the development

of the report; and

2. With the approval of the city's or county's budget office, create a

methodology to be used and assumptions to be made by the

independent consultant or financial adviser in preparing the report.

The developer requesting the city or county to establish the local

development area shall pay all costs associated with the independent

consultant or financial adviser preparation of the independent consultant

or financial adviser report, unless the city or county agrees to pay the

costs of preparation.

(3) Funding for projects in a local development area shall be provided in

accordance with KRS 65.7057.

(4) A local development area agreement shall be executed among the agencies

and taxing districts involved in administering, providing financing, or pledging

incremental revenues within the local development area. The local

development area agreement shall be adopted by a city or county by ordinance

and by any other taxing district or agency by resolution, and shall include but

not be limited to the following provisions:

(a) Identification of the parties to the local development area agreement and

the duties and responsibilities of each entity under the agreement;

(b) Specific identification of the tax increments released or pledged by type of

tax by each taxing district;

(c) The anticipated benefit to be received by each taxing district for the

release or pledge, including:

1. A detailed summary of old revenues collected and projected new

revenues for each taxing district on an annual basis for the term of

the local development area agreement; and

2. The maximum amount of incremental revenue to be paid by each

taxing district and the maximum number of years the payment will

be effective;

(d) A detailed description of the local development area;

(e) A description of each proposed project, including an estimate of the costs

of construction, acquisition, and development;

(f) A requirement that pledged incremental revenues will be deposited in a

special fund pursuant to KRS 65.7061, including the timing and procedure

for depositing incremental revenues and other pledged amounts into the

special fund;

(g) Terms of default and remedies, provided that no remedy shall permit the

withholding by any party to the local development area agreement of any

incremental revenues pledged to the special fund if increment bonds are

outstanding that are secured by a pledge of those incremental revenues;

(h) The commencement date, activation date, and termination date; and

(i) Any other provisions not inconsistent with KRS 65.7041 to 65.7083

deemed necessary or appropriate by the parties to the agreement.

(5) Any pledge of incremental revenues in a local development area agreement

shall be superior to any other pledge of revenues for any other purpose and

shall, from the activation date to the termination date set forth in the local area

development agreement, supersede any statute, ordinance, or resolution

regarding the application or use of incremental revenues. No ordinance in

conflict with a local development area agreement shall be adopted while any

increment bonds secured by that pledge remain outstanding. Ordinances or

resolutions pledging incremental revenues on a subordinate basis to any

existing pledges may be adopted.

(6) A city or county government acting pursuant to this section on or after March

25, 2022, shall file information regarding its local development area agreement

with the Cabinet for Economic Development on a form prescribed by the

cabinet. The Cabinet for Economic Development is authorized to promulgate

administrative regulations pursuant to KRS Chapter 13A to create any

necessary forms to meet the requirements of this subsection.