As Lexington's Urban Service Area expands, how should it pay for new roads, sewers and other expensive infrastructure? A new "privilege fee" paid by the developers who benefit could help answer that question.
Councilmembers will get an update this week on plans for a new downtown Government Center on Vine Street, including the public-private partnership it relies on.
The newly approved budget ups spending for the city's winter storm response, and directs nearly $300 million for Public Safety, including fire, police and other divisions.
As Lexington's Urban Service Area expands, how should it pay for new roads, sewers and other expensive infrastructure? A new "privilege fee" paid by the developers who benefit could help answer that question.
During its June 23rd meeting, members of Council's Budget, Finance and Economic Development Committee will weigh a new mechanism for funding expensive infrastructure build-outs in areas where Lexington is expanding.
Back in 2023, Council voted to expand Lexington's Urban Service Area in five zones around the city. It was the first time the Council had done so since 1996.
However, a major sticking point at the time was the cost of building key infrastructure – such as roads, sewers and similar projects – as those expansion areas are largely undeveloped.
During Tuesday's committee meeting, Councilmembers will consider advancing an ordinance establishing a new 'privilege fee' program for developers who benefit from expanding city infrastructure.
The program is designed to cover the upfront capital costs for these projects, which, according to meeting materials, could cost an estimated $569 million.
As outlined in a committee presentation included in meeting materials, privilege fees are a way for new development to bear the cost of shared infrastructure and to reimburse whoever shouldered the cost of building said infrastructure.
The new ordinance establishing the program states that privilege fees "shall be used to finance, defray, and/or reimburse all or a portion of the costs incurred by the government or a developer for the construction of sewers, roads, and other public infrastructure improvements identified hereunder that serve new development and redevelopment projects."
The process works something like this:
The local government would still be responsible for :
Even beyond their initial build outs, there are ongoing operations and maintenance costs for new infrastructure.
Roads have to be repaved. Trash has be to picked up. Community facilities – such as parks and fire stations – have to be maintained.
Once they're built-out, expanded city services are projected to have a negative General Fund impact and revenues aren't expected to keep up. While privilege fees have been pitched as a way to cover upfront infrastructure costs, the mechanism for funding ongoing operations and maintenance remains an open question.
Partners for Economic Solutions, the firm presenting to the Council committee, previously suggested these costs could be paid by:
If approved and constructed, the solar installation could produce enough electricity to power about 5,300 homes. Council has expressed concern about the bid in past meetings.
In its February 12th meeting, Council unanimously approved the Lexington Preservation and Growth Management Program, establishing a formal process for
In the Tuesday, January 27th Budget, Finance, and Economic Development Committee meeting, Council will hear a presentation about the potential costs for developing new infrastructure in the parts of the Urban Service Area that were expanded in 2023.
In its Tuesday, January 20th, meeting, the Urban County Council will review a draft of the ordinance that would revise the expansion process for the Urban Service Area (USA). The plan was unanimously approved by the General Government & Planning Committee in December 2025.