Creative financing and proactive cooperation brings $1.35 billion building boom during recessionary times
By Debra Gibson Isaacs
Since 2008 and through the Great Recession, a time when the goal of many communities was just not to lose economic ground, Bowling Green and its 10-county region have experienced impressive growth – $1.375 billion in large-scale construction projects.
These dozens of ventures are the result of proactive local tag teaming, diversification, a winning chain of economic dominos falling, smart use of incentives, good strategy and perhaps “a combination of persistence and luck.” Perhaps it was all of the above, or more.
Whatever the impetus, signs of fresh Bowling Green growth are easy to find – a $25 million performing arts showcase; a $19.8 minor league baseball stadium; a $8.4 million five-story parking garage between them; the largest combination middle and high school in the state, located just blocks from downtown; the fastest growing university in Kentucky (with numerous new buildings); and a bustling industrial park.
The community now boasts 2,101 licensed contractors with 455 licensed general contractors, according to Warren County Judge-Executive Mike Buchanon.
Building permits for single-family residences in 2013 are up 42 percent thus far over last year. Single-family subdivisions with more than 2,500 new building lots are being developed.
Commercial, retail and Class A office space is even booming as well, Buchanon said. Two current developments total more than 150,000 s.f. A two-story office building with approximately 50,000 s.f. is under active construction in the Hartland area, and several small strip retail centers have been built.
More construction is in the works. The $15.6 million, 73,471-s.f. Medical Center-WKU Health Science Complex is nearing completion, a new hotel will be announced this year, and big-box stores such as Dick’s Sporting Goods, Bed Bath & Beyond and Meijer are opening their doors this year or early next year.
Other businesses are locating in TransPark, the city’s mecca for manufacturing, an important economic sector that now accounts for 17 percent of the city’s economy.
What is not as easy to find is a clear answer to how this phenomenon occurred – if you are looking for a single answer. Ditto for the leader behind the growth. Rather than one individual or organization, there are numerous heroes in this tale.
Ron Bunch, president of the Bowling Green Area Chamber of Commerce, said local growth is the result of the work done by multiple leaders each focusing on their area of expertise and then coming together in a kind of tag-team approach.
“It has not really been strategic and organized and coordinated,” Bunch said of the impressive results, “but individual leaders in each area doing their jobs exceptionally well. We have strong leadership in the private sector, in healthcare, business, tourism, arts, retail and education. Cooperation and collaboration happen on the fly.”
Diversification, Bunch said, is the other key.
“Our ‘special sauce’ is our diversified approach to growing the economy,” he said.
Persistence and luck
Explosive growth in downtown Bowling Green and on its fringes illustrates exactly how multiple leaders from disparate economic sectors worked together to implement a nearly $200 million transformation of what was a depressed zone just a few years ago.
Today, the area boasts Hot Rods Stadium, the Southern Kentucky Performing Arts Center (SKyPAC), a new parking garage, the $4 million Houchens Center for Business housing the Bowling Green Area Chamber of Commerce and the $19.6 million HitCents Park Plaza. The latter will be completed by September and include the successful technology enterprise HitCents.com, restaurants, businesses and Connected Nation, another thriving tech venture.
The state recently certified the area a Signature Tax Increment Financing district with the official name “WKU Gateway to Downtown Bowling Green.” Signature TIFs offer significant tax advantages for “blighted” areas to entice development. For instance, 80 percent of state sales tax collections above the starting-point base go back to the TIF for use in further development versus only 3 percent typically returning to the community normally.“We applied for the TIF District designation in 2008,” recalled Doug Gorman, president of Booth Fire and Safety and director of the TIF District.
“We had to have $150 million in investments before December 2014 to qualify. We have had $176 million in investments since 2008.”
One of those investments is SKyPAC, a 80,000-s.f. venue for Broadway productions, local and worldwide music acts, comedy shows and kid-friendly performances. SKyPAC opened in March 2012.
Buchanon said TIF financing was a big part of why SKyPAC was finally built after 12 years in the planning stages. In this case, the recession lent a hand also as the price of concrete and steel bottomed out and the cost of labor went down.
“One of the areas where we enjoyed the greatest savings was SKyPac,” Buchanon said. “We had been working on that for over 10 years, and costs were up to around $40 something million. Costs were getting out of control; there was no way we could afford to build it. When construction costs went down, we decided to get new estimates. They came down by $18 million.”
Local government managed to catch the bottom of the market on costs for concrete, steel and labor.
“We lucked out on hitting the low point in construction costs,” he said. “Since then costs have all bounced back up.
“We still had to be creative. We ended up with mixture of financing: a transient room tax for half the cost; the TIF District financing, which is what really made it possible to make up the difference; and a new (federal) market tax credit.” The latter is a U.S. government program that allows entities to sell tax credits and use the proceeds as equity for a project.
“It was a sequence of good fortune – good fortune that was the result of hard work,” Buchanon said. “We were pretty lucky – persistent and lucky.”
SKyPAC is now a three-legged stool, according to Tom Tomlinson, its executive director. “It has enhanced the arts in Bowling Green,” he said. “It is an economic development tool. And it is a part of downtown revitalization.”
SKyPAC has 201 employees and has attracted 90,000 visitors, Tomlinson said. Using an arts economic calculator from Americans for the Arts to compile estimates, patrons have spent $6.945 million for tickets and event-related expenses such as restaurants, baby sitters and new clothes, he said. SKyPAC expenditures have funneled $3.985 million into the community.
One street over is the Hot Rods Stadium. Art Solomon, a businessman from Boston, Mass., purchased a single-A minor league baseball team, brought them to Bowling Green and then spearheaded construction of the stadium.
The city of Bowling Green sold bonds to build the stadium, which has attracted 250,000 fans. Gorman said the TIF revenue being generated will help pay back the bonds.
“The community has embraced the Hot Rods,” Gorman said. “Because of the stadium, a lot of other dominos starting falling into place.”
‘Creative financing key to progress’
At the other end of the TIF District, WKU’s President Gary Ransdell has become known for his entrepreneurial approach to getting projects constructed. Two of the university’s latest – the Augenstein Alumni Center and the Medical Center-WKU Health Science Complex – are in the TIF District.
“We don’t own the alumni center,” Ransdell said. “It is leased through the TIF structure. This is how we do things in Bowling Green; we all work together. Each project has its own impact, and the community benefits from all of that.”
Since becoming Western’s president, Ransdell has overseen $490.9 million in construction, with another $94.5 million underway. Plans call for an additional $236.9 million in future construction that includes student housing, which will be started this summer. (See chart)
Campus construction the past five years has included a renovation of Van Meter Hall, which now gives music students a place to practice; an old College Heights building that is now home to the Math Department; plus the Preston Health and Activity Center, a student exercise facility that required expansion to keep up with demand. A few years prior to those projects, the state funded two other buildings: Gary Ransdell Hall, which houses the College of Education, and the Engineering-Manufacturing-Commercialization Center, which is home to WKU’s engineering program.
Renovation is under way on the 43-year-old Downing University Center, which will open in summer 2014 after a $50 million facelift accomplished with private money, $35 million in student activities fees and reusing bonding capacity available from the retired bonds originally used to build the structure.
“For most of the projects, we are able to use other people’s money or other organizations’ money and then take on leases or do other types of creative financing,” Ransdell said. “Creative financing is the key to progress.”
Another good example of creative financing is the Medical Center-WKU Health Science Complex.
“The Medical Center took on the debt to build the complex,” Ransdell said. “We will move our entire school of nursing and doctor of physical therapy program there. The Medical Center will own the building, and we will lease space from them. The net result is that we will be able to double the number of nursing students.”
Benefits from that collaboration extend into the community and the state.
“South Central Kentucky, like the rest of the nation, is facing a serious nursing shortage,” said Connie Smith, president and CEO of Commonwealth Health Corp., parent company of the Medical Center.
“Nursing is a critical component of a hospital’s delivery of care. Enabling Western Kentucky University to expand their program and ultimately their supply of nurses to the healthcare industry will have a significant impact on The Medical Center’s ability to maintain the quality care we provide in this region.”
Western’s impact, according to economic development studies done by its College of Business, show the university has $500 million a year in direct impact from its 2,300 faculty and staff and 21,000 students.
“That didn’t go up or down much during the recession, Ransdell said. “There was no big dropoff during the recession; our numbers did not decline. That is one reason Bowling Green was able to weather the recession so well. You can see the stabilizing effect on a community of our size.”
Western is not the only academic institution with an economic impact, either.
Southcentral Kentucky Community and Technical College (SKCTC), which has experienced a 33 percent enrollment growth the past five years, works directly with local industries.
“Our Kentucky Advanced Technology Institute (KATI) campus is home to the state Interactive Digital Center, which develops interactive, 3D training and assessment applications,” said Dr. Phil Neal, incoming president of SKCTC. “Our Workforce Solutions division provides customized industry training with opportunities for significant discounts on training costs using the Kentucky WINS (Workforce Investment Network System) program. Our Transpark Center now houses FANUC robots and provides all of the requisite training for General Motors employees working on the next model of the Corvette. Most importantly, though, we are providing educational opportunities for the potential workforce that these industries want to recruit.”
Building not limited to concrete and steel
Some of the construction in the Bowling Green area involves more grass and dirt than concrete and steel. Vicki Fitch, executive director of the Bowling Green Area Convention & Visitors Bureau, said the city’s ample ball fields and disc golf courses attract enthusiasts to tournaments.
“We have an excellent infrastructure for softball tournaments,” Fitch said. “We are able to attract big national tournaments. We also have several disc golf tournaments each year.”
The Corvette Museum is breaking ground June 28 on a $17 million motorsports facility that, according to its website, will have a track for high-performance driver training, corporate events, a training facility for emergency personnel as well as resources for engineering, math and science students at WKU.
Not going there
Interestingly, Bowling Green hasn’t chosen to grow with tax increases.
In a note distributed to community leaders at the end of May, Jeff Meisel, chief financial officer for Bowling Green, wrote:
“The city has kept its real estate property tax rate the same since 2008 and lowered the occupational tax rate from 2 percent to 1 percent in 2007 (right before the recession started). This occupational tax rate reduction equated to approximately $14 million or more given back to the taxpayers during the last five years…
“The city has not raised any tax rates (real estate, occupational, etc.) since 2003, which was the year the occupational tax went from 1.5 percent to 2 percent.”
City officials plan to grow but with a different mindset than many other communities.
“I don’t think, as far as (economic development) incentives, Warren County provides anything not available anywhere else,” concludes Bowling Green Mayor Bruce Wilkerson. “I hope the difference is our attitude. We don’t say you can’t do that here. We find a way to make it work.”
Debra Gibson Isaacs is a correspondent for The Lane Report. She can be reached at [email protected]
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