Chattanooga developers Hiren Desai and Jimmy White want to repurpose a multi-story storage building at 1208 King St. and let new businesses, including a new microbrewery, lease space on the first floor. The upper floors of the building, which is six stories near King Street and four stories in back, may be redeveloped into apartments.
The 105-year-old, brick storage building is right next to another property Desai owns at the corner of King and Market streets, where he plans to build the Moxy Hotel, a four-story, 102-room hotel that's a hip, new brand of Mariott International that caters to youthful travelers.
But the developers will only repurpose the storage building, Desai said, if the city agrees to let him use a roughly half-acre, city-owned parking lot at 1200 King St. just north of the storage building property - basically free of charge.
"For us to make it work, it'd have to be a lease for a nominal fee," Desai said Friday by phone from Atlanta. He said he told city officials, "If you don't give it to us, we'll just keep it as a storage building."
The parking lot is owned by the Chattanooga Downtown Redevelopment Corp. (CDRC). City Council voted in April to hand the parking lot over to the CDRC as surplus property that had the potential for higher and better use.
The news caught the eye of local government watchdog Helen Burns Sharp, founder of Accountability for Taxpayer Money (ATM), who questioned the CDRC Board about the parking lot at its meeting Thursday.
"Is it your intent to allow a for-profit developer to build a hotel or parking lot on public property you own, and thus be exempt from property taxes, since you are tax-exempt?" Burns asked.
She said Friday she feared a repeat of CDRC's deal with Walnut Commons, under which the 100-unit apartment complex that opened in 2013 near the popular Walnut Street pedestrian bridge was built on land leased from the CDRC - and therefore never paid any local property taxes.
"I thought it was going to be another Walnut Commons," Sharp said. "They did build [Walnut Commons] on CDRC property, and it's still sitting there not paying any taxes, including to schools. That's what got me going."
Moxy Hotel will pay taxes
But Desai's hotel will pay property taxes, since it's slated to go on a triangular-shaped parcel he owns on the corner of King and Market streets.
It will be up to the CDRC's five-member board to decide how to handle the 0.66-acre city parking lot at 1200 King St. that Desai wants to lease for a nominal amount as parking for the storage building redevelopment.
City staff will prepare a request for proposals to develop parking infrastructure on the site that will be presented at a CDRC meeting before it's issued, said CDRC Board Member Stacy Richardson, who is chief of staff for Mayor Andy Berke.
"That RFP will be competitively bid. Once responses are received, it will be independently scored by city staff," Richardson said via email. "The CDRC will have to vote on the final terms of any agreement - whether it be a lease or a sale."
If the city leases the parking lot to Desai, city officials would like to be able to continue parking city vehicles there. The parking lot, which is valued at $134,700 by the Hamilton County Property Assessor, isn't on the tax rolls now, since it's publicly owned.
The CDRC held a special meeting in August to consider a resolution to initiate a request for proposals to build a parking structure on the parking lot to facilitate economic growth in the area. If the CDRC leases the parking lot to Desai and White, Desai said they'd look at either paving the parking lot, which is now mainly gravel, or building a parking structure there.
"If it required a structure, and it made sense, we could do a structure," Desai said.
The CDRC's mission is to promote economic development downtown, Richardson said. The CDRC owns The Chattanoogan hotel and the "Chattanooga Green," a lawn in front of the Blue Plate restaurant downtown near the Tennessee River riverfront.
Contact staff writer Tim Omarzu at tomarzu@timesfreepress.com or www.facebook.com/MeetsForBusiness or twitter.com/meetforbusiness or 423-757-6651.