A group of businessmen will pursue taxpayer financing for a $9 million road allowing them to build a $500 million mountaintop development in Chattanooga.
The 3,000-acre Black Creek Mountain development will sit on top of Aetna Mountain and developers want to secure a creative financing mechanism called a TIF, or tax increment financing, to pave their path to the top.
If approved by city and county officials, it would mark the first time that tax increment financing has been successfully used in Chattanooga.
"You've got a private buyer here who is simultaneously borrow and creditor," said Ric Ebersole, vice chairman of the Chattanooga Industrial Development Board.
Backers call the area "the last undeveloped mountain in Chattanooga," and the blueprint by development group MSBC Black Creek calls for a planned mountain community that could rival the communities on Lookout Mountain and Signal Mountain.
"When this piece of property became available, I said, 'How has this piece of land not been developed?,'" said developer Doug Stein, who owns a minority stake in the project with partner Gary Chazen.
Once the road is built, plans call for a 150,000-square-foot office park, an assisted living facility, a resort lodge, a 20,000-square foot corporate retreat, a 30,000-square-foot mixed-use town center, restaurants and even an ice cream parlor. That's in addition to more than 1,500 new homes, which developers expect to sell at a rate of about 60 per year.
The TIF, which hails from the same school of thought as the incentives that lured Volkswagen to Chattanooga, uses potential future gains in property tax revenue from the development to finance the means to get the development moving -- in this case, a road up the side of Aetna Mountain.
Majority stakeholder York Capital will front the initial $9 million for the road, and taxes over and above the current payments will go toward paying the developer back. Developers said they would turn the road over to the city and county within three years.
Brant Enderle, who will head up the project on behalf of York Capital, said the risk to taxpayers is minimal.
"We're essentially buying bonds for ourselves, and we will still pay the school portion of the [property] taxes," he said. "If the project fails, we're the ones that lose the bond. There's no recourse to the city, county or Industrial Development Board."
On Tuesday at a meeting of the Industrial Development Board, the project's backers pitched the road as a public good, much like the roads that climb Signal Mountain and Lookout Mountain. If the road is completed, they said, the resulting development could attract thousands of new Chattanooga residents paying millions in new property tax revenue.
"This is not a big subdivision, this is developing a small town," Stein told members of the board.
The city's Industrial Development Board gave the idea an initial thumbs-up, though the financing plan must also pass the City Council and Hamilton County Commission before taking effect, attorneys said.
The 3,000-acre project also includes about 1,200 acres of land donated to conservation, Enderle said. However, there is some confusion over the exact amount of land donated to that cause.
As he spoke to the board Tuesday, Enderle mentioned different numbers -- 1,200, then 1,300, then 1,400 acres -- when referring to the amount of land "given to conserve the area forever."
Stein said the exact acreage has yet to be worked out, as the agreement calls for the land to be contributed by December 2018 and the western boundaries for the land have not been confirmed.
Enderle made headlines in Louisiana after Carter Plantation, a development he helped oversee there, "failed to pay vendors, defaulted on loans and misappropriated funds," according to a 2011 Bloomberg article. He said at the time that he never misappropriated funds and blamed Hurricanes Katrina and Rita for damaging the project.
Developers of the Aetna Mountain project must also overcome challenges from other mountain landowners, who have expressed frustration that the current road up the mountain has been blocked off by current construction, preventing them from accessing their land until the new road is complete in three years.