The Chattanooga City Council on Tuesday will consider a 41-year tax break for a developer to completely overhaul Jaycee Tower, an 18-story downtown apartment building for low-income elderly residents.
The proposed payment-in-lieu-of-taxes (PILOT) agreement calls for the Chattanooga Housing Authority to take the 46-year-old property from its current owners, the nonprofit Jaycee Future Corp. The housing authority, in turn, will lease the building to Wishrock Housing Partners & Investment Group of Portland, Maine, that will renovate the building.
The property does not now generate property tax revenues because it is owned by a nonprofit organization.
In a recent meeting, Wishrock developer Penn Lindsay told council members his company would make a "full and substantial renovation" of the structure, located at 500 W. M.L. King Blvd. The overhaul entails providing a new roof, improving common areas and extensively remodeling every residential unit.
"We aren't afraid to tackle the most challenging of properties," Lindsay said, citing examples of completed Wishrock projects, which involved removal of everything but the wall studs.
Jaycee Tower will shrink from 190 apartments to 175 as part of the makeover, he said. The remodel will combine some smaller existing units to create larger units. The revamped tower will offer 78 efficiencies, 67 one-bedroom units and 30 one-bedroom and den combos. Sixty existing units now remain vacant due to disrepair.
Studios and one-bedroom apartments will rent for $695 and $880, respectively, and include utilities, Lindsay said. The bedroom/den combos, not covered by U.S. Department of Housing and Urban Development rental assistance like the other units, will rent for $800 to be competitive.
Most current tenants put only 30 percent of their total income to rent, with governmental rental assistance making up the difference, he said. No current tenants will be displaced because of the overhaul, Lindsay said.
Councilman Chip Henderson questioned the need for the housing authority to get involved in the matter.
"We're basically being the vehicle by which Wishrock would be able to receive the PILOT [agreement]," Chattanooga Housing Authority Executive Director Betsy McCright said.
The housing authority involvement will allow Wishrock to seek a $11.3 million 40-year HUD loan to do the project, Lindsay said. Otherwise, Wishrock could obtain only a $7.5 million loan package.
"Without the PILOT agreement, what we're planning to do with the property simply won't be feasible," Lindsay said.
It will take $6 million in hard costs for the renovation and another $3.6 million to purchase the property from Jaycee Future Corp., he said. The purchase price only covers the current owner's remaining debt associated with the building.
"Fortunately for us, the housing authority's done its job of rescuing a facility in the appropriate time," Council Chairman Moses Freeman said. "They didn't kick it down the road."
If the council takes no action, the facility will continue to deteriorate and a crisis will occur, he said.
Franklin McCallie, a member of citizen watchdog group Accountability for Taxpayer Money, has asked the council to delay making a decision until members have researched it more.
"Why such a hurry on this most important decision?" McCallie asked.
Contact staff writer Paul Leach at 423-757-6481 or email@example.com. Follow on Twitter @pleach_tfp.