M.L. King extension tax break moves ahead as critics question last-minute changes

Homes are seen along the Tennessee River in the Cameron Harbor area on Monday, Feb. 12, 2018 in Chattanooga, Tenn.

A proposed tax break to extend M.L. King Boulevard all the way to the Tennessee Riverwalk moved forward Monday, but drew criticism when a new plan with new numbers was substituted at the last minute.

Chattanooga Mayor Andy Berke's administration wants to use tax-increment financing to achieve the long-held goal of extending the boulevard across Riverfront Parkway and creating a welcoming entry to the popular riverwalk.

The plan would allow the developer of upscale Cameron Harbor to build the roadway and turn it over to the city. A construction loan would be repaid from increased tax revenue generated by medical offices, mixed-use retail and a restaurant planned or underway in Cameron Harbor.

Berke says the project will straighten out sight lines and open up access to the river for the whole community. The project's critics agree, but say the city's own rules don't allow it to use tax increment financing (TIF) to do the work.

Mayor Andy Berke's statement

“Today’s affirmative vote by the Industrial Development Board is a strong statement that the Chattanooga region continues to be a vibrant and welcoming market for capital investment, great jobs, and smart, strategic real estate development.“The Blue Goose Hollow Trailhead on the Tennessee Riverwalk is one of this community’s most popular and pristine amenities. Extending ML King Boulevard across the Riverfront Parkway to this trailhead will make it more accessible to more families from all parts of Chattanooga. This piece of public infrastructure will also unlock more than $50 million of private-sector investment to create additional housing and retail options along our riverfront. This project is poised to become another iconic destination and a major long-term asset to our economy.“Our administration is glad to partner with developers that share our vision of helping Chattanooga and Hamilton County grow in ways that benefit all of our citizens. Tax increment financing allows us to do that transparently, equitably, and with maximum protections for taxpayers. We look forward to working with the Chattanooga City Council and Hamilton County Commission over the next few weeks to move this important project forward.”— Chattanooga Mayor Andy Berke

photo The framing structure of the new Medical Arts Building is seen near the Cameron Harbor area on Monday, Feb. 12, 2018 in Chattanooga, Tenn.

The city's Industrial Development Board must vote to submit a required economic impact plan to the Chattanooga City Council and Hamilton County Commission as part of the TIF process.

But when the board met Monday, the members were given a different plan than the one they had been working on since November.

The new plan drops the city's planned "investment" of $500,000 in rent subsidies for 36 apartments, which the mayor said would make them affordable for people in the workforce. That was part of a $4 million TIF that would have paid for the M.L. King extension and some work on Fulton Street in the development, as well as interest and other costs. The payback over the 15-year TIF would be about $6.8 million.

TIF 2.0 would be for $3.5 million, plus another $1.7 million in interest and expenses. It wasn't clear if that $1.7 million represented costs over the 15-year payback.

Attorney John Konvalinka, who represents the watchdog group Accountability for Taxpayer Money, questioned the need for $1.7 million in interest and fees when the $3.5 million TIF included money for interest, closing and legal costs. He also questioned whether the planned extension qualifies as a "project" that can be paid for by a TIF under city rules. And he asked which TIF version of the board was considering (City Attorney Wade Hinton said it was the new version), and whether the unannounced changes created a problem with the public notice for the meeting.

"You haven't been given the answers to those questions of how this money will be spent," Konvalinka told the board.

Accountability for Taxpayer Money founder Helen Burns Sharp and city resident Franklin McCallie renewed objections to using public taxpayer money to benefit a private developer or subsidize rents in the high-end neighborhood.

The TIF "would expend several millions of dollars over the period of 15 to 20 years in extra gifts to already wealthy citizens, and take away tax dollars that could be used to serve our less fortunate and underserved citizens," McCallie told the board Monday.

Sharp has recommended the city use funds from its Alstom settlement, and on Monday she suggested dipping into hotel-motel tax revenues to pay for the road extension at much lower cost.

Berke has said the city wants to keep its cash freed up for other needs, and that doing the road project through a TIF also shifts any risk from borrowing for the project from the city to the developer.

The administration consistently has used the economic analysis of the $150 million Cameron Harbor project to claim hundreds of millions in resulting economic benefits to the city and imply that it wouldn't happen but for the TIF, even though the development is well into its third phase of construction.

Jermaine Freeman, with the city's economic development department, said the project does qualify for TIF funding, but that the city took out the housing component to reduce costs. He said a previous objection by critics, that the process needed preapproval from the state economic development department and comptroller, proved unfounded, and asked the board not to delay its vote.

IDB member Jelena Butler said she likes the project because it makes the area more liveable and "serves a broad range of the public."

Board member Jimmy Rodgers, though, had qualms about the wording of the resolution, which would have forwarded the economic impact plan to the council and commission for "consideration and approval."

It's not the board's business to tell those governmental bodies what to do, Rodgers said. The members changed the wording and voted 7-0 to forward the plan for "consideration" only.

The city council's economic development committee will hear a presentation on the plan at 3 p.m. today.

In a statement Monday afternoon, Sharp decried the day's actions.

"This was not a good day for government transparency," she said. "The Economic Impact Plan approved by the IDB was a revised version that was posted on the city website only hours before the meeting. The numbers had changed and the project had changed. The Board was given no explanation of either."

However, Berke said in a statement the vote "is a strong statement that the Chattanooga region continues to be a vibrant and welcoming market for capital investment, great jobs, and smart, strategic real estate development."

He said the Blue Goose Hollow Trailhead on the Tennessee Riverwalk "is one of this community's most popular and pristine amenities" that will become more accessible with the M.L. King extension.

Earlier at Monday's meeting, local resident Cora Lanier asked the board to reject the proposed TIF and direct future such proposals to blighted neighborhoods, as called for by the city's rules. She said the planned TIF would primarily benefit the families that can afford to live in Cameron Harbor or other pricey downtown locations.

"I truly believe walking to the river is nowhere near the top of the list for people who live in the Westside," Lanier said.

Contact staff writer Judy Walton at jwalton@timesfreepress.com or 423-757-6416.