Auditor to review sale of Chattanooga Mayor Tim Kelly's land for possible conflict after homeless encampment cleared

Staff photo by Logan Hullinger / The former Southern Honda Powersports location at 1394 Workman Road. After the company was moved to East Ridge, the area turned into a homeless encampment that was displaced earlier this year. The land was owned by Chattanooga Mayor Tim Kelly, who sold the property in November.
Staff photo by Logan Hullinger / The former Southern Honda Powersports location at 1394 Workman Road. After the company was moved to East Ridge, the area turned into a homeless encampment that was displaced earlier this year. The land was owned by Chattanooga Mayor Tim Kelly, who sold the property in November.

Chattanooga's internal audit office will review whether a conflict of interest took place when the city helped empty out a homeless encampment from property owned by Mayor Tim Kelly as he prepared to sell it.

The city told the Times Free Press about the audit on Friday, at the end of a week during which a reporter asked about the displacement of the homeless encampment this year on the former Southern Honda Powersports location on Workman Road. Kelly owned the property until selling it for more than $2.7 million on Nov. 29. After defending the cleanup effort most of the week, officials on Friday evening said the audit office would review the matter.

"To ensure public confidence and to further demonstrate the Kelly administration's commitment to transparency, the mayor has asked the Office of Internal Audit to review and affirm the independent request in question," said spokesperson Mary Beth Ikard in a statement.

The mayor's office did not make Kelly available for an interview despite a request from the Times Free Press.

The sale came three months after the city cleared the encampment in August, according to emails obtained by the Times Free Press.

The issue of the homeless camp goes back at least to the spring, the documents indicate. In a May 11 email, Donna Casteel, the city's chief code enforcement inspector, mentioned Kelly by name in discussing the property.

"There's a homeless camp on Tim Kelly's property at Workman Road," she wrote. "He has been nice enough to provide them with portable toilets and a dumpster, but we're receiving litter complaints."

(READ MORE: Chattanooga coalition says new vandalism ordinance could target city's homeless)

Casteel added that the city would try to satisfy the complainants "without disturbing the camp."

Cassie O'Neill, program manager at the city's homeless services division, in a June 24 email then asked city officials if citations had been issued.

"I would like to take this opportunity to ask that we have a bigger conversation about how Codes and Homeless Services can work together better in these situations," O'Neill said.

Later that day, Casteel responded, saying that citations had not been issued and the city had actively been working to make improvements at the encampment.

photo Staff Photo by Robin Rudd / Chattanooga Mayor Tim Kelly speaks at the event. U.S. Energy Secretary Jennifer Granholm and others attending an event marking the retrofitting of a former Alstom manufacturing plant for use by Novonix, which makes materials for lithium-ion batteries for electric vehicles.

During a string of emails that noted complaints about the property over the following months, officials had been actively discussing relocating the homeless population to a Super 8 motel.

On Aug. 24, O'Neill wrote to officials saying the encampment had been cleared, although some individuals may still be in the area.

(READ MORE: Chattanooga is considering a supervised homeless camp on 12th Street)

Kelly, known for his string of successful businesses such as Southern Honda Powersports and Kelly Subaru, was elected in April. During the campaign, Kelly said he would put all of his businesses in blind trusts to avoid conflicts of interest if he were to be elected.

"I plan to put them in a blind trust to prevent (or at least mitigate) conflicts of interests," Kelly wrote in a Reddit "ask me anything" post last year. "I hold myself to the highest ethical standards and I am NOT doing this as a way to enrich myself, but hopefully rather to enrich and empower more Chattanoogans."

City officials have said that property owners have the right to request homeless encampments to be displaced. Ikard and Sam Wolfe, the city's director of homelessness and supportive housing, said the process was the same as if any other property owner were to request an encampment be displaced.

"We like to encourage people to give them two weeks from the first notice they need to vacate the property to kind of move somewhere else that gives them time to get their belongings and refer them to services," Wolfe said.

Ikard specifically said that the mayor had nothing to do with his businesses during the time period and that the reason for clearing the property was that it was going to be sold.

"With Workman, the mayor has divested himself of his business ties - he has a firewall," she said during a Monday interview. "I think in that case, it was that the property was going to be sold."

The Times Free Press suggested in a follow-up question that the sale itself might present a conflict, as the city's removal of a homeless camp might increase the value of the mayor's personal property. Ikard responded by text on Friday: "If the TFP has any questions about any of those businesses with which he was previously involved, please feel free to contact those businesses."

Later that day, the Times Free Press asked Ikard for a direct interview with the mayor. No response was given, but later that evening, Joda Thongnopnua, the mayor's chief of staff, called a reporter and then declined to speak on the record.

The Hamilton County Register Of Deeds Office said there is no record of a blind trust, and the city did not provide proof of any such trust when asked.

David Carmody, who took over as CEO of Southern Honda Powersports and Kelly's other companies as the mayor distanced himself from business involvement, said that's because Kelly's businesses have not yet been put into a blind trust. Rather, he said, the marketing agency Chattanooga Workshop - which advertises his companies - is transforming into an "independent management company" to oversee the mayor's prior business dealings.

"We're working on that right now, on the blind trust," Carmody said, adding that executives hope to put the businesses into a trust by early 2022. "All of the entities will need to go into that trust."

(READ MORE: Chattanooga man saved from homelessness thanks to Neediest Cases Fund)

The register of deeds office supplied documentation that the land sale transaction for the Workman Road property was executed by Kelly's own signature on Nov. 29 to sell the property to a company called 1394 Workman LLC. The Times Free Press was unable to find contact information for the company.

Carmody said the request to remove the homeless encampment had nothing to do with Kelly, even though Kelly was the one who was selling the property and signed off on the deal.

"He had no idea we were even thinking of this," Carmody said, adding that the main issue was littering that had led to code enforcement citations.

Southern Honda Powersports is the largest Honda motorcycle dealership in the country with $35 million in sales in 2020 from the sale of more than 3,000 units. The dealership has moved to East Ridge, leaving the Workman Road property behind.

Wendy Winters, executive director of the Chattanooga Regional Homeless Coalition, said the process of working to vacate the encampment went smoothly.

In total, just shy of 20 residents were relocated. The remaining residents migrated elsewhere at their own discretion.

"We work very closely with the city's office of homelessness and supportive services," Winters said. "All the residents were notified in advance."

Staff writer Wyatt Massey contributed to this report.

Contact Logan Hullinger at or 814-319-5158. Follow him on Twitter @LoganHullinger.

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