On Monday, Chattanoogans will get their first — and perhaps only — opportunity to weigh in on a plan to funnel taxpayer dollars into the fast-growing Cameron Harbor development downtown on the Tennessee River.
City leaders say granting a tax break to developer Evergreen Realty is the only way to achieve a long-held goal: extending M.L. King Boulevard across Riverfront Parkway to create a dynamic entryway that improves connectivity and access to the Tennessee Riverwalk and the river beyond.
"It's an area we feel is important to acquire because we believe the public should have access to the riverfront," including visual sightlines, said Jermaine Freeman, manager of small business programs for the city's Office of Economic Development.
The proposed tax increment financing deal, known as a TIF, will be discussed in a public hearing Monday before the city's Industrial Development Board. The proposal also includes what the city calls "workforce" housing among the upscale mix of houses, townhomes and apartments.
› What: Public hearing on tax increment financing for M.L. King extension
› When: 11 a.m. Monday
› Where: City Council conference room, 1000 Lindsay St.
Freeman said TIF rules deliberately include "broad discretion" for local leaders on how to use the tool.
"We have an interest in seeing as much affordable housing as we can, especially downtown," Freeman said. "That is a piece of it because we thought that would be an added benefit to the community, so not only would people have the ability to go walk their dogs and ride their bikes but also afford to live there."
However, watchdog group Accountability for Taxpayer Money says the proposed tax increment financing agreement violates the city's own policies by using taxpayer money for improvements on privately owned land for general economic development, among other issues.
ATM founder Helen Burns Sharp wrote in an analysis that the policy deviation means the TIF must be pre-approved by the state before the Industrial Development Board, the Chattanooga City Council and the Hamilton County Commission can vote on it.
ATM "suggests that the City and County instead take the money from the recent $6 million Alstom settlement for a failed PILOT project or from hotel/motel tax revenues since the project relates to tourism downtown," Sharp wrote.
The city has said the Alstom settlement money is set aside for workforce development, but Mayor Andy Berke's office did not respond to a question last week whether the money was earmarked for any specific programs in the 2018 budget.
"If TIF should remain the funding mechanism," Sharp wrote, "ATM believes it should be pared back to reduce lost future revenue and to eliminate the 'slippery slope' policy issue of using public funds to invest in a private development (office building and apartments)."
Mayor Andy Berke said the plan to extend M.L. King Boulevard, which used to be called Ninth Street, all the way to the river dates from 1915 or so. It's mentioned in former mayor Bob Corker's 21st Century Waterfront Plan from 2002. Current plans call for an attractive road that showcases the Riverwalk's Blue Goose Hollow trailhead, named for the small African-American community where blues legend Bessie Smith sang for coins as a young girl.
Berke admits the developer has all the leverage here: The road extension would cut right through one of the planned buildings in Phase 3 of the development, already under construction with 180 apartments, a restaurant, a mixed-use building and a medical office building.
"What they said is, 'You're going to cost us money because this thing that was once going to be revenue-producing units for us is now going to be road. That doesn't do anything for us,'" Berke said.
A few years of negotiations went nowhere, but last year he tried again with Aaron White, co-founder and president of Nashville-based Evergreen Real Estate.
"I just said, 'This is something that is really important to the city. For the good of the city, we need to find a way to make this work," Berke said.
White was ready to listen.
"Evergreen has always tried to develop in ways that respect the communities in which we develop, and do things the right way," White said by email. "We saw the potential benefit to the city and neighborhood of incorporating a straightened MLK into our development, despite the fact that it created a considerable loss of value to the development."
After the city said it couldn't afford to buy the land, Evergreen proposed a tax-increment financing agreement. That would use increased property taxes generated by developing the residential and office buildings, the restaurant and the mixed-use building to pay for the road, plus other improvements in Cameroon Harbor.
Evergreen's analysis shows the M.L. King project would cost around $2.8 million, including $2 million for the land and the value of apartments not built. The proposed TIF agreement is $4 million.
The proposed TIF calls for Evergreen to build the M.L. King expansion and deed it to the city. The question is whether a road is a suitable project for tax increment financing.
Chattanooga's TIF rules call for projects that contribute to economic development and create jobs with above-average pay for the city.
By itself, a road wouldn't do that, although the city says building infrastructure helps open up the whole area for growth. Documents provided to the Industrial Development Board as part of the TIF application include a TIF project plan plus an economic impact analysis done by a city consultant for the Phase 3 development, already well under way.
Read together, the documents could be understood to say building the road would spur almost $248 million in economic development, 89 permanent jobs and $65 million in annual wages over 15 years.
ATM says that conflates the road project with private development that would have happened anyway, regardless whether a TIF is approved.
The city's rules also discourage TIFs for primarily residential projects, but Berke spoke about a housing piece in early November, when the project was first publicly discussed.
The proposed development agreement now before the Industrial Development Board says the city wants to provide "additional workforce housing in the downtown area" before it even mentions the M.L. King expansion.
The $4 million proposal includes a $500,000 "investment" in 36 apartments designated as workforce housing, for those earning 80 percent or less of average median income.
Those apartments would rent for $800-$850 a month, which Berke said is about $300 less than the market rate. The reduced rates would expire when the 15-year TIF ends.
Staff writer Emmett Gienapp contributed to this story.
Contact staff writer Judy Walton at email@example.com or 423-757-6416.