COVINGTON, Ky. — The City of Covington has created a new incentive program to help “activate” vacant commercial buildings in neighborhood business districts and on corners throughout the city.
The new Vacant Property Incentive is designed to help create jobs since it is performance-based: Developers who turn vacant, historic buildings into move-in commercial space would be reimbursed a portion of payroll taxes created by future tenants.
Developers must submit an application before any work begins. Buildings must be at least 50 years old and have been at least 51% vacant for the last two years. Properties citywide are eligible. If the address sits outside Covington’s TIF (tax increment financing) district, the project might also be eligible for a separate incentive that freezes the city’s portion of property tax at the pre-rehab level for five years.
The incentive comes in the form of a reimbursement whose value depends upon the tenants that move in.
The city’s current payroll tax is 2.45 percent or 2.45 percentage points.
- If the property attracts a new business to Covington, the developer receives 1.25 percentage points of all taxable W2 payroll created by new tenants for five years (or slightly more than half of the new payroll tax revenue).
- If the property attracts an existing Covington business that relocates, the developer receives 0.625 percentage points of all taxable W2 payroll created by those new tenants for five years (or roughly one-fourth of the new payroll tax revenue).
For example, using industry standards for salaries and space per employee requirements, a developer who renovates a 6,000-s.f. mixed-use building (first-floor restaurant and second-floor office) could theoretically net about $60,000 over five years, while a developer who renovates a larger 15,000-s.f. office space could be reimbursed about $200,000 over five years.
Covington Economic Development Director Tom West noted that the new tool ties into key pieces of what’s commonly called the Garner Report, the citywide economic development strategy written for Covington by Atlanta-based consultant Garner Economics in 2019.
The report called access to move-in-ready space (and in particular office space) a “potential Achilles’ heel” for Covington’s continued development and suggested the city focus on creating a variety of commercial spaces to attract diverse commercial uses. As Garner quipped, “No product, no project.”
The report also noted the city’s “unique vibe” and in its “Experiencing Covington” target discussed the opportunity for creating the “quality of place” considered a key consideration when attracting talent.