Aug. 8--LACEY -- The city wants to increase the public investment in the proposed Lacey Gateway town center by up to another $14 million, courtesy of state legislation passed earlier this year.

Officials intend to designate 153 acres of property along Interstate 5 in Hawks Prairie as a revitalization area that would be subject to a form of tax increment financing.

A public hearing before the Lacey City Council is scheduled for Thursday. It intends to take action on the proposal Aug. 27.

The financing would allow the city to siphon off a portion of the new tax revenue generated by the development for up to 25 years to pay back bonds issued to build the roads and install the utilities needed to serve it.

The property is part of the first phase of Lacey Gateway, which would include more than 1.2 million square feet of commercial, retail and office space, and 500 dwellings. Retail blocks would be situated around a public plaza or open space with offices or housing on the upper floors, accessed by streets with on-street parking and lined with storefronts. The project is led by prominent South Sound developer Tri Vo.

The city secured $10 million in state grant funding to construct the main arterials to access the property. Outdoors retailer Cabela's opened a store there in December 2007, but the remaining property is undeveloped. A spokesperson for Triway Enterprises, Vo's company, could not be reached Friday.

City Manager Greg Cuoio said the developer plans to finance the internal road and utility improvements at an estimated cost of $40 million. The city would use the increased property and sales-tax revenue diverted through the financing tool to reimburse the developer up to $14 million if certain conditions are met. The amount includes state matching funds.

The city must apply by Sept. 1 to be considered for the financing, which includes the state matching funds.

The program is awarded on a first-come basis.

Cuoio said it's worth the investment for the city to contribute millions in additional public dollars to the project that otherwise would go to pay for public services.

"We are looking to the future to create a larger, more stable tax base for the city," he said. "This new program helps position us to get to the point where we have the revenue available to sustain services."

The city would not sell bonds to reimburse the developer until it's demonstrated that Lacey Gateway has brought in the revenue to meet its obligation under the financing tool, he said.