Taxpayer group says Chattanooga doesn't have to keep giving tax breaks for Walnut Commons project

Staff Photo by Dan Henry / The Chattanooga Times Free Press- 10/27/14. Walnut Commons in downtown Chattanooga.
Staff Photo by Dan Henry / The Chattanooga Times Free Press- 10/27/14. Walnut Commons in downtown Chattanooga.

A Chattanooga taxpayers group said Wednesday a pair of city panels don't have to OK measures that could permit Walnut Commons apartments to keep its property tax break.

Helen Burns Sharp, founder of the Accountability for Taxpayer Money (ATM) watchdog group, said the two panels are not obligated to approve the measures, one of which is expected to come up at a meeting today.

"This is a choice and not an obligation," she said in a statement, adding that the opinion is backed by Chattanooga attorney John Konvalinka, who ATM hired to research the issue.

The Chattanooga Downtown Redevelopment Corp. is slated to meet today to discuss whether to approve a special warranty deed to convey the Walnut Commons property to the Chattanooga Health, Educational and Housing Facility Board. That panel earlier granted tax breaks to the development at Walnut Street and Aquarium Way.

However, Alfred Smith, an attorney for Walnut Commons' owner, said Wednesday the two groups are contractually obligated to approve the measures that would allow the company to keep the tax incentive.

"They cannot back out of it now, nor are they trying to back out of it," he said. "It's only the ATM group. Nobody agreed with what ATM is saying."

City Councilman Moses Freeman, a CDRC member, said while he's sympathetic to ATM related to Walnut Commons, the chore before the panel is "to sell some land that we're obligated to sell by contract."

"I think we need to honor that," he said. "There's a point in time when [ATM is] ill-advised and ill-informed. I'd rely more on attorneys for the city. That's why we have counsel."

A Nebraska company that in 2014 bought the 100-unit complex from a Chattanooga group now wants to buy the property on which the apartments were built and needs the CDRC to help facilitate the deal.

But Sharp said Wednesday that Walnut Commons' owner is requesting "another transaction."

"What [the Health, Housing board] and CDRC are being asked to do by Walnut Commons LLC is another transaction not contemplated by existing documents in order to prolong the [tax break]," she said. "... ATM is requesting the CDRC exercise the right choice and place the property on the tax rolls."

ATM said the owners of the downtown apartments don't pay city or Hamilton County taxes, including for schools. It said that $1 million in taxes have been abated so far, and government will lose another $1.4 million in tax revenues if the break is allowed to continue through 2025.

Walnut Commons was the biggest such complex to be erected downtown in decades when it opened in 2013. In 2014, a local development group that built the project led by developer John Clark sold the stock in the entity, Walnut Commons LLC, to an Omaha, Neb., real estate company for about $15 million.

Now, the new owner wants to exercise an option to buy the property it has been leasing from the CDRC.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.

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