Fayette School Board Approves Rose Tower Tax Deal

A June 22 vote made FCPS part of Lexington’s Kentucky-enabled housing-finance path, replacing ordinary school property taxes with negotiated payments for one private redevelopment project.

Jun 23, 2026

Downtown Lexington, where local taxing districts and city officials are weighing how public-finance tools should support housing redevelopment. Photo by Runner1928 via Wikimedia Commons, CC BY-SA 4.0. Cropped for article use.

On June 22, the Fayette County Board of Education voted 3-2 to approve a payment in lieu of taxes agreement for Rose Tower, a 168-unit affordable apartment building at 137 Rose Street in downtown Lexington.

The developer is Related Affordable, a New York-based company that has an option to purchase the 1960s-era property and plans a $9.4 million renovation. The vote gives the developer one piece of the public-finance package it needs before seeking industrial revenue bonds through Lexington-Fayette Urban County Government.

The board approved Rose Tower only. A separate PILOT proposal for Midland Station, a planned workforce-housing project on Midland Avenue, did not pass at the same meeting.

The Fayette County school board approved the school district tax payment agreement that Related needs before the project can go to the next set of local decision-makers.

What happened

The Rose Tower item appeared on the Fayette County Board of Education’s June 22 regular-meeting agenda as “Rose Tower PILOT Agreement.” The agenda listed Tracy Bruno, FCPS chief of staff, as the person responsible for the item.

The FCPS executive summary recommended approval of a School Payment in Lieu of Taxes Agreement among Lexington-Fayette Urban County Government, Fayette County School District, and Related Affordable. The document says Related would make payments directly to the district for the benefit of Fayette County Public Schools after the first January 1 assessment date following issuance of the industrial revenue bonds.

The official FCPS fiscal-impact figure is $1,403,929.40. Related’s March 23 letter proposes a $195,000 upfront impact fee, followed by 15 years of payments beginning at $65,000 and increasing by 3% each year.

The Herald-Leader reported that Board Chair Tyler Murphy, Amy Green, and Penny Christian voted for the Rose Tower PILOT. Amanda Ferguson and Monica Mundy voted against it. According to that reporting, Ferguson said the board had not had enough time to review all the financial information, and Mundy pointed to uncertainty around the district’s finances.

The vote changed one part of the project’s path. Related now has FCPS approval for the school-tax portion of the PILOT. The developer still needs agreements with other taxing districts before applying to Lexington for the industrial revenue bond.

How a housing bond changes the school-tax path

An industrial revenue bond is a financing tool local governments can use for projects that qualify under Kentucky law. In 2025, the Kentucky General Assembly amended KRS 103.200, allowing certain multifamily housing projects with 48 or more units to qualify under the industrial revenue bond statute.

Lexington then updated its local industrial revenue bond policy to allow the use of the tool for qualifying housing developments within the Urban Service Boundary. Mayor Linda Gorton announced the local policy change in October 2025 after Urban County Council approval.

The tax issue comes from the leaseback arrangement. Under Kentucky law, property acquired by a city or county under the industrial revenue bond statute is exempt from taxation while the city or county owns it. In a leaseback arrangement, the local government holds the property and leases it back to the developer.

For Rose Tower, that means the property would be removed from the normal property tax rolls during the agreement period. A negotiated PILOT payment would replace ordinary property-tax collection for FCPS.

LFUCG’s industrial revenue bond policy says leaseback applicants must execute PILOT agreements with LFUCG and affected taxing districts before the application goes to the Economic Development Investment Board. The policy lists the School Board, Lextran, the Health Department, and the Lexington Public Library among taxing districts that may be involved.

That is why FCPS had a vote. Fayette County Public Schools is one of the local taxing bodies whose ordinary revenue could be affected by the financing arrangement.

What FCPS is promised, and what must be checked later

Related’s proposal gives FCPS $195,000 at closing. After that, Related would pay $65,000 in year one, then increase the payment by 3% each year for 15 years. The year 15 payment would be $98,318.33.

The safeguard is the true-up language in Related’s proposal. At the end of the 15-year term, FCPS would compare the total impact fee and PILOT payments with the school taxes that would have been due without the PILOT agreement.

If the PILOT payments and upfront fee are less than the taxes that would otherwise be owed, Related would pay the difference. If the PILOT payments and upfront fee are higher, no money would be exchanged.

That calculation depends on annual Fayette County PVA fair-market values and the FCPS ad valorem tax rate. Related’s letter says it would prepare an annual statement showing that year’s ad valorem tax calculation and the cumulative amount over the life of the PILOT.

The agreement, therefore, depends on more than the first vote. FCPS will need the annual statements, the PVA valuations, the district tax rates, and a clear enforcement path if a shortfall appears later.

Why a state housing-finance tool now affects local school revenue

Kentucky’s housing shortage has prompted local governments to seek financing tools to preserve or create housing without relying solely on direct public spending. Lexington has chosen to use industrial revenue bonds as one of those tools.

The Rose Tower vote shows how that state law change filters into a local school board decision. A statute amended in Frankfort now gives Lexington a housing-finance option. That option then requires local taxing districts to decide whether negotiated payments are acceptable substitutes for ordinary property taxes.

KRS 103.200 defines which projects can qualify for industrial revenue bonds. KRS 103.285 explains why property held by the city or county becomes exempt from taxation. KRS 160.460 gives local boards of education tax-levying authority for school districts.

For Fayette County residents, the local question is immediate.

A school board already dealing with financial uncertainty, audits, budget reductions, and short-term borrowing has agreed to replace normal tax collection for one property with a 15-year negotiated payment schedule.

That does not make the Rose Tower deal automatically wrong. Affordable housing preservation has public value, and Rose Tower residents may benefit from safer, better-maintained housing if the renovation proceeds. The public-finance question is whether the tax agreement provides FCPS with sufficient revenue, documentation, and enforcement protections over the full term.

Share this with someone watching Lexington schools, housing, or local tax decisions.

Documents and meetings you can track next

Ask FCPS for the executed Rose Tower PILOT agreement once it is final. The public should see the full legal terms, including default language, assignment rights, remedies, reporting duties, and true-up enforcement.

Track the agendas for Lextran, Lexington Public Library, the Health Department, and LFUCG. Related needs other taxing-district agreements before it can apply to the city for the industrial revenue bond.

Read the LFUCG Economic Development Investment Board agenda when the application appears. The board packet should show the project terms, the financing request, the public benefit claimed, and any staff analysis.

Watch the Urban County Council agenda for the bond ordinance or resolution. Under Kentucky law, the city or county legislative body must authorize the bond.

Compare the annual PILOT statement with the Fayette County PVA value and the FCPS tax rate. That is how residents can check whether the promised true-up has a documented basis.

Ask direct questions before the final city vote: What rents will be preserved? How long will the affordability restrictions last? What tenant protections exist during renovation? What happens if Related sells the property or transfers the lease? Which public body enforces the true-up? Where will annual statements be posted?

The Rose Tower decision is now bigger than a single school board vote.

It has become a test of whether Lexington can use housing-finance tools without weakening public visibility into school, library, transit, and other local tax streams.

Dispatches from Kentucky

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