In August 19th's Budget, Finance, and Economic Development (BFED) Committee meeting, Councilmembers will vote to change the City's Industrial Revenue Bond program to set affordable housing requirements for projects with housing, and to expand the scope of the program to support projects throughout the entire Urban Service Area.
Industrial Revenue Bonds (IRBs) are essentially loans given by LFUCG to developers for certain economic development projects. Developers applying for IRBs have to prove the project will lead to significant job creation or economic growth for Lexington, and the project must include an industrial use or industrial site.
LFUCG has two types of IRBs developers can apply for:
A Traditional IRB: these function similarly to any standard loan.
A Leaseback IRB: under this IRBs, the City assumes ownership of the building throughout the length of the loan, and the developer rents the building from LFUCG until the loan is repiad.
Under Leasebacks, developers do not pay property taxes. Instead, they enter into a specific payment agreement with LFUCG, Fayette County Public Schools, and other local entities that outline how much a developer will pay them each year in lieu of paying annual taxes.
Most of the amendments to the IRB program focus on the Leaseback IRB. Two amendments specifically regulate projects that have some kind of housing component.
If a developer is seeking a 15-year Leaseback IRB term – meaning they will have 15 years to repay LFUCG for the loan –, any housing in the project must be affordable for residents making 80% or lower of the Area Median Income.
For 10-year IRB terms, developments with housing must have rents set for residents making 120% AMI.
🙋‍♀️ What is Area Median Income?
AMI is calculated by the federal Department of Housing and Urban Development (HUD) every year, and serves as a middle point for overall income range across a specific area (in this case, Lexington).
In Affordable Housing units, rent and other costs are fixed using Lexington’s AMI. For example, some affordable housing units require households to make 60% or less of Lexington’s AMI to qualify. By limiting the income of the household, Affordable Housing developers can guarantee that the rent price will not cost more than 30% of the household’s income.
Another amendment would allow the IRB program to be utilized for projects throughout the entire Urban Service Area. Currently, only projects within the area of the map below are eligible for IRBs.
Watch the meeting: The Budget, Finance, and Economic Development Committee will meet on Tuesday, August 19th at 1pm in Council Chambers. You can attend in-person or watch live on LexTV.
UPDATE: In September 16th's Council Work Session, Council amended these proposed changes to make the definition of "workforce housing" be units prices for residents making 120% AMI. The original proposal defined workforce housing as anywhere from 80.1% to 100% AMI.
