Photo provided by Covcor
City incentive to help keep rent competitive in 146K square feet of space behind Latonia Commerce Center
COVINGTON, Ky. – A $17.6 million building with 146,000 square feet of space will be constructed on land zoned for industrial use behind the Latonia Commerce Center, the first new industrial space in Covington in decades.
The project is a spec build, meaning no tenants have been found or announced yet, but developers anticipate it could house four different users with the potential to create more than 100 jobs that City officials say could bring $79,000 to $145,000 a year in payroll tax revenue.
A group of investors led by Covcor real estate investments owns the land and is behind the project, which principal Josh Niederhelman said features flexibility: Inquiries have ranged from a basketball court and running track to a call center to assembly to light manufacturing.
“We’re building four walls and a roof … it literally could be anything,” Niederhelman said. “This will be a good option for manufacturing and assembly and other use types that want to be close to labor and a dense population base.”
To encourage the creation of as many jobs as possible, the Covington Board of Commissioners on Tuesday approved a staff recommendation for a bond incentive that, over its 15-year term, rises in value to the company as collective payroll generated by the building increases.
“This is a huge project for Covington and fills a gap in the type of space we’re able to offer potential businesses,” Economic Development Director Tom West said. “We don’t have a lot of industrial land that’s not already been developed.”
The payoff in new tax revenue that funds City services could be even more significant, West said.
Currently, the site generates about $15,000 a year in property taxes split among an array of local governments and agencies, with the City receiving a fraction of that. But under the terms of the 15-year, $18 million industrial revenue bond, or IRB, the City stands to receive many times that amount.
For a detailed explanation of IRBs and their advantages and disadvantages, see “City seeks more deliberate use of incentives.”
Taxpayers are not on the hook for the borrowing – its payback is the obligation of the developer, who nevertheless enjoys the benefit of a lower interest rate and a lower property tax payment. The IRB is needed to help keep lease rates competitive, West said.
In general, the bonds work by allowing the developer to pay only a percentage of the property tax they would otherwise owe for a certain number of years in exchange for creating a project that generates jobs and significant payroll tax. That’s critical in Covington, because payroll taxes fund more than 50 percent of the General Fund.
In the case of the Latonia project, the 15-year-old arrangement decreases the percentage of property tax owed – called a PILOT, or “payment in lieu of taxes” – from 60 percent to 20 percent as payroll in the building increases from $2 million to $5.5 million.
“It would have been real easy for this project to have turned into 3 or 4 jobs and, say, 50 robots,” West told the Commission. “But with this agreement, we believe this site has the potential to create 110 jobs, plus or minus. As with all incentivized projects, we encourage the businesses benefiting from the public investment to hire Covington residents and graduates of our schools.”
In this case, West said, the new jobs may be well suited to recent high school graduates who choose to enter the workforce right away.
The address will be 135 W. 38th St., and the building will sit on 8 acres owned by Covcor just west of what’s now named the Latonia Commerce Center and east of the railroad tracks. The land is zoned for industrial development. The building is being marketed by CURO BRKG.
West said the developer has financing in place and a contractor ready to go. Niederhelman said work could begin at month’s end and be completed by late November.
West said the project is particularly welcome because it will continue Economic Development’s focus and momentum in the Latonia neighborhood, a spread-out residential area with several commercial areas. Among the City’s efforts in Latonia since 2017:
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