New houses are being constructed in the Black Creek Mountain community.

Site of Black Creek Mountain Community.

A taxpayer-funded project that a judge struck down because of secret negotiations and a conflict of interest was re-approved Friday amid new accusations of impropriety.

The city's Industrial Development Board reapproved a controversial $9 million taxpayer financing agreement to subsidize a road up Aetna Mountain in a 4-1 vote that opponents criticized as "staged."

The resolution was presented by IDB attorney, and former city attorney, Mike McMahan, the same attorney who admittedly violated the state's open records law when he approved the tax increment financing, or TIF, agreement in 2012 without board approval or a public hearing.

Opponents of the Black Creek Mountain deal asked how McMahan could represent the IDB while he was simultaneously a witness in the lawsuit that retired city planner Helen Burns Sharp filed to halt the project.

Current City Attorney Wade Hinton acknowledged that McMahan's participation would likely be a conflict of interest in a courtroom setting, but argued such rules don't apply during a board meeting.

John Konvalinka, Sharp's attorney, disagreed.

"I would suggest to you that this is improper," Konvalinka told the board.

But no board members responded.

In fact, board members said little during the proceeding, the second of two in which members of the public pleaded with the board to stop the plan, while developers and attorneys from the Miller & Martin law firm pushed the board to reaffirm its voided decision.

Chancellor Frank Brown voided the agreement in July because of McMahan's apparent violations of Tennessee's open records laws and a conflict of interest by Nashville-based bond attorney George Masterson.

Under tax increment financing, developers spend the money for a project up front, then are paid back with interest over 20 years out of additional tax revenues generated by the development. Developers have argued that the road serves a public purpose, since it would could lead to Aetna Mountain becoming filled with homes, shops and amenities, similar to Lookout and Signal mountains.

At the first meeting Monday, some residents and previous and current City Council members blasted Miller & Martin attorneys, who represent the developers, and asked the board not to appeal Brown's decision.

At Friday's public hearing, it was revealed that Miller & Martin attorneys already had filed an appeal and the board could skip that agenda item.

More opponents then argued that taxpayer funds shouldn't be used for such a project and that the board should honor the judge's ruling. The first was the retired chairman of the IDB, Ric Ebersole.

"The Black Creek Mountain TIF project is not approved. It wasn't approved in 2012. It has never been approved," he said. "It has not been approved."

But Black Creek developer Doug Stein argued the only criteria the board should consider is whether the project meets state requirements for a TIF.

Board Chairman James Miller agreed. He said after the vote that he weighed whether the taxpayer agreement met state requirements, and he believed it did. Even though three current council members argued against approval, Miller said he didn't think that was a reason to reverse the vote.

"Everyone has their own agenda politically. Individuals like to represent their constituents in the area they were voted into and sometimes they have to be able to make comments," Miller said about the council members who spoke Monday.

Ray Adkins, the lone "no" vote, said the original approval process was "questionable" and that he agreed with opponents' argument on financing high-end projects with taxpayer funds.

"I hate to see taxpayer money used for a project like this," he said. "If the developers develop something, they should fund it."

As for the new road that will access 3,000 undeveloped acres atop Aetna Mountain, Stein said after the vote that contractors were laying dirt Friday for side roads that would eventually connect to the mountain route. He said he hopes to began work on the taxpayer-financed road by next spring.

Contact staff writer Joy Lukachick at jlukachick@timesfreepress.com or 423-757-6659.