After two months of screwball circumstances stalling a recommendation by the city's Health, Educational and Housing Facility Board, the Chattanooga Choo Choo finally got a thumbs up Tuesday morning from the advisory board for property tax breaks developers claim are needed to proceed with the $8 million renovation of the historic railroad depot.
Former Mayor and Choo Choo managing partner Jon Kinsey first appeared before the city board in December seeking a residential payment-in-lieu-of-taxes agreement for the conversion of 97 existing Choo Choo hotel rooms to small apartments.
The addition of apartments is part of a major, $8 million Choo Choo renovation announced last summer. The project includes adding two new restaurants, a 500-person music venue and bringing in the Comedy Catch from Brainerd.
Originally, the Choo Choo's owners planned to start leasing the new apartments in March and open them to tenants in early summer.
But in December, just enough member of the Health Education and Housing Facility Board showed up to form a voting quorum, and one of the members, Stephanie Crowe, had a connection to Capital Mark, the bank financing the Choo Choo's apartment project. So at that meeting, the board opted to wait for member Hicks Armor to arrive, but he wound up calling in sick.
The board decided to avoid any possible conflicts of interest and delayed the Choo Choo vote until a special-called early January meeting.
When early January rolled around, the special-called meeting was delayed.
Then questions arose about whether one of the board's members, Chairman William Bulls III, actually lived in the city, a requirement for him to serve on the Chattanooga board.
Amid council and media questioning, Bulls resigned his seat.
Then Crowe also resigned.
And it turned out that Hicks Armor's term had expired in April 2014, leaving his seat vacant.
The Chattanooga Choo Choo basks in the setting sun in Chattanooga, Tenn., in this file photo.City council members ultimately had to go in and reappoint more than half of the seats on the advisory body, which must recommend tax abatement or forgiveness agreements.
All the while, Kinsey and the Choo Choo apartment project waited.
"I couldn't believe it," Kinsey said Tuesday.
He said the delays in securing property tax breaks pushed back the start of construction for the apartments and their opening by up to eight weeks. The tax breaks still must navigate city council and county commission before landing back on Health, Education and Housing Facility Board for final action.
Kinsey said Choo Choo owners are pushing to get the proposed property tax breaks on county and city agendas as soon as possible and are hoping for no more delays. The commercial renovations are already well underway.
But Kinsey was afraid Tuesday's snow might actually lead to more waiting on the residential side.
"I was a little concerned today that the meeting might get canceled with the weather that we had this morning," he said.
Of the five members present Tuesday for the advisory board, all voted to recommend approval of the tax breaks for the Choo Choo. Under the agreement, property taxes on the Choo Choo will be frozen for 12 years at existing rates, with normal, adjusted school taxes for the duration of the agreement.
Kinsey said Tuesday that the Choo Choo pays about $280,000 in property taxes now and pulls in over $1 million in sales tax annually.
After the 12-year PILOT agreement expires, the Choo Choo will have a four-year property tax phase in, paying 20 percent of its new property value in taxes the first year, 40 percent the second, 60 percent the third and 80 percent the fourth year.
Five years out from the end of the 12-year tax agreement, the Choo Choo will start paying 100 percent of its new property tax.
Kinsey said the Choo Choo is adding affordable apartments in response to River City Co. studies and encouragement to do so downtown.
"We hope to have these open by summer, although I would think it would be July or August," he said. "Assuming all goes well."
Contact staff writer Alex Green at agreen@timesfreepress.com or 423-757-6480.