In January 2022, the Paducah Board of Commissioners approved an ordinance outlining annexation incentives to attract commercial, industrial and residential developments into the City of Paducah. These incentives are to “advance the conversation of voluntary annexations.” The consensual annexation of property will increase Paducah’s population and revenue tax base which will enhance Paducah’s economic well-being and aid in the maintenance of existing infrastructure and facilities. In preparing this ordinance, the Planning Department reviewed the annexation incentives for several Kentucky cities. The incentives, which would be outlined specifically in a Memorandum of Agreement with the property owner, could include the following:
Property Tax Rebate Incentive. This incentive would reimburse a property owner the City of Paducah real estate property tax revenues collected for five years with a defined beginning and ending date as approved by the Board.
Sanitation Incentive. This incentive would allow the City to provide free basic sanitation service for up to one year up to $10,000.
Closing Cost Incentive. This incentive would allow a one-time lump sum payment to a property owner equal to the amount of closing costs with a cap of $1000 with the explicit intent to sell the property once it is in the City limits.
In October 2002, the City Commission adopted an annexation incentive policy allowing the City to reimburse the developer for the actual costs incurred in connection with the construction of qualified “municipal facilities” (streets, gutters, and other public infrastructure) within the property annexed, in an amount not to exceed the total cost of facilities or the total sum of all ad valorem real property taxes collected by the City from the annexed property, whichever is less, over a six year period.
The incentive agreement requires the Director of Finance to collect and deposit all tax revenues in a separate dedicated account from which the developer will be reimbursed for the cost of the public facilities to be assumed and maintained by the City upon completion of the development. In essence, the tax revenues generated by the annexation of property are utilized to offset the cost of the public facilities that the City itself could otherwise invest in and construct. Reimbursements to the developer cease at the conclusion of the six-year period and thereafter, the City receives all tax revenues from the annexed property.
Annexations Over Time