Kentucky Adds the Transportation Improvement District Program to its Economic Development Arsenal

United States’ highways and roads move 72%, or nearly $17 trillion, of the nation’s goods.  Yet, the nation’s roadway infrastructure is struggling to meet the existing demand with nearly half of our existing roadways in poor or mediocre condition according to the American Society of Civil Engineers.  Many communities are looking for new tools to address this roadway infrastructure crisis. 

One such public infrastructure tool is the transportation improvement district (TID) or transportation development district (TDD) which operates as a special assessment district to improve the transportation system – road or transit-related – within a designated zone. According to the U.S. Department of Transportation, states such as Delaware, Kansas, Missouri, North Carolina, and Ohio all permit the operation of TIDs and TDDs. This type of special assessment district often adopts a larger, areawide approach that generally considers benefits on a programmatic basis rather than more targeted “special benefits” on a project-specific basis. The designated zone may cross jurisdictional boundaries among several local or regional government entities and, as with any special assessment district, requires a majority vote or petition by property owners to establish.

With more than one jurisdiction participating, a TID or TDD provides a forum for cooperation and the pooling and targeted management of transportation funding resources to carry out specific system improvements. These improvements must originate from an adopted land use or development plan. An entity such as a county commission can act as the district’s lead entity, and a board of directors from the district’s constituent members governs its operation. The district generally functions as a separate governmental entity with authority granted by state legislation to levy a special assessment on property owners (property tax levy) or consumers (sales tax levy) who benefit from the improvement in the district. The district may also have the power to issue debt against future special assessment revenues and enter into contracts related to the improvement.  A TID or TDD can help streamline the delivery of what otherwise would have been a challenging project to implement by only one local entity within the district. Districts may be in a better position to respond to projected growth in their regions and often promote selected transportation system improvements as drivers of economic development.

Kentucky recently became the news state in the union to permit the operation of TIDs with the passage of House Bill 274 in 2022 and the act was signed by Governor Andy Beshear on April 8, 2023.  Under the Kentucky TID law, a TID may be created by a city with a population of at least twenty thousand, a county, or a group of up to three (3) contiguous counties.  A Kentucky TID is governed by a board of trustees appointed by the legislative body of a city or county with specific powers such as to

  • adopt bylaws for the regulation of its affairs and the conduct of its business,
  • adopt an official seal,
  • sue and be sued in its own name,
  • purchase, construct, maintain, repair, sell, exchange, police, operate, or lease projects,
  • issue transportation improvement district revenue bonds for the purpose of providing funds to pay the costs of any project,
  • maintain such funds as it considers necessary,
  • make surveys and examinations preliminary to the location and construction of projects,
  • make and enter into all contracts and agreements to operate the TID,
  • employ, retain, or contract for the services of consulting engineers, superintendents, managers, and such other engineers, construction and accounting experts, financial advisers, trustees, marketing, remarketing, and administrative agents, attorneys, and other employees, independent contractors, or agents,
  • receive and accept from the federal or any state or local government loans, grants and contributions for or in aid of the construction, maintenance, or repair of any project, and
  • acquire, hold, and dispose of property in the exercise of its powers and the performance of its duties.

TIDs in Kentucky can address a wide range of transportation project costs such as construction, site acquisition, demolition, diverting highways, machinery and equipment, traffic studies, indemnification, surety bonds, insurance, guarantees, engineering studies, feasibility studies, legal expenses, plans, and other expenses.  These TIDs will operate as public finance entities that can collect funding from multiple sources and use those funds to create debt through bonds to finance transportation projects.  Kentucky TIDs can fund highways, parking, freight rail, bridges, tunnels, overpasses, underpasses, interchanges, and service facilities just to name a few transportation projects. Most importantly, Kentucky TIDs can coordinate regional transportation planning and jointly advocate for transportation project funding. Roadway infrastructure tied to economic development does not always stay within a city or a county- commerce by its nature succeeds when it travels. Also, the law allows TIDs to receive revenue from increment bonds as part of a local development area.

Kentucky TIDs do not operate with unlimited authority.  The Kentucky TID law retains substantial authority with the legislative body that creates the TID as the law requires approval of the establishing body of a TID before any project can be started.  Also, Kentucky TIDs are not authorized to disturb public utility and common carrier property without their permission. Also, debt incurred by a Kentucky TID must be paid by the TID and is not designed to be guaranteed by other governmental entities. Kentucky TIDs, unlike their counterparts in other states, are not expressly permitted to enact taxes or fees to fund transportation projects, do not expressly have the power of eminent domain, and do not appear to have the ability to utilize Tax Increment Financing to fund infrastructure.

Kentucky has joined states with TIDs that should enable cities and counties to work regionally to address local transportation needs.