ASHLAND — A development district that could use new state tax increment financing legislation to fund projects is being considered by officials to jump start economic development downtown.

Tax Increment Financing, or TIF, is a development tool that allows local governments to capture future increases in property and other taxes generated by new development within a designated area. Local governments can borrow against the increase in tax revenues in order to finance public improvements aimed at attracting additional private investment.

Ashland Economic Development Director Chris Pullem, Ashland Alliance President Jim Purgerson and Main Street Director Danny Craig have all discussed the potential program recently.

Pullem said he is in the process of working with local and Louisville-based attorneys to create a proposal for approval by the Ashland Board of Commissioners. “It’s an opportunity to use development for more development,” he said.

Pullem said he expects to present the proposal to officials by the second January meeting. He said he wanted newly elected Mayor Tom Kelley and commissioner Marty Gute to have be seated before he asked for approval.

HB 549, passed during the 2007 session of the General Assembly, established a new statewide TIF program that makes the financing option with state participation available to all cities and counties. Previous legislation made state participation available only in Jefferson County.

Under the program a TIF Development Area of up to three square miles would be designated and a semi-autonomous Downtown Development Authority created.

To qualify for the TIF program the development area must meet two of seven conditions relating to deterioration and blight and city officials must be able to prove development would not occur without public investment and that the benefits outweigh the public costs of the project.

Purgerson said the new TIF legislation is one of few tools local officials in Kentucky have to use in their efforts to attract investment and spur development.

Kentucky constitutionally prohibits property tax abatement of any kind, which is a popular tool used in other states to spur development, he said.

The issue is tied to the fact that there are few ways for counties and municipalities to raise revenues in Kentucky, he said. In fact there is so much state control over revenue streams, Purgerson said, that cities often “have to go to Frankfort with their hat in their hand to beg for money.”

He said since the new TIF legislation was enacted cities including Lexington, Owensboro and Bowling Green are working to develop TIF programs.

Pullem was hesitant to discuss potential projects in Ashland before educating commissioners and the general public on TIF. He said additional details would be available soon, however.

Purgerson said the Ashland Community and Technical College’s $10 million plan to develop the upper floors of the Parson’s building to house its nursing program would be a good first TIF project.

“Once the development is completed, the resulting incremental taxes could be used to do Streetscape all around that block and area ... and do some additional things. I think it’s a very good use, a dedicated use of increased funds for the public good from a private project,” he said.