The East Ridge Industrial Development Board has approved development agreements with two retail operations in East Ridge's Border Region Development District.
The city now has more than a dozen development agreements with retail and hotel properties in the zone, which was approved by the Tennessee General Assembly in 2012.
Within the zone, which comprises most of East Ridge, developers approved for the program can recover the capital cost of improvements made on their site by receiving a portion of the state sales tax revenue increases generated by the improvements.
The board Thursday approved a development agreement with Kelley X-Ray, a business that sells and services X-ray equipment for hospitals, medical offices and veterinary clinics.
Kelley X-Ray President Colin Kelley relocated the business to property in the East Ridge Border Region District at 1500 Fruitland Drive, where he expanded the sales floor by 35% in accordance with the Border Region statute, City Attorney Mark Litchford said at the Industrial Development Board meeting Thursday.
"This one is a really good benefit for the city because it's not a, relatively speaking, huge investment, but the projected sales is large," Litchford said. "We have not seen one of this type where the revenue is going to exceed the investment."
Kelley invested $855,000 in the development, including $600,000 for the land and $255,000 for the build-out.
Projected sales are $2.3 million in the first year, with 2% growth over the next 24 years, Litchford said.
According to the agreement, the city will receive 70% of the Border Region sales tax revenue and the developer will receive 30%.
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Staff Photo by Emily Crisman / Kelley X-Ray is shown at 1500 Fruitland Drive in East Ridge on Tuesday. The East Ridge Industrial Development Board recently approved a Border Region development agreement with the business, which sells and services X-ray equipment for hospitals, medical offices and veterinary clinics.The project is expected to generate $2.4 million, or around $100,000 annually, in Border Region sales tax revenue that will come back to the city, Litchford said.
"It's a win-win for the city and Mr. Kelley," Litchford said.
The city has invested about $20 million in the Border Region District and has four more years to recoup that investment through state sales tax revenue, Litchford said.
The agreement with Kelley X-Ray will go before the East Ridge City Council for approval at 6 p.m. Thursday at City Hall.
The City Council on Jan. 26 approved an agreement with True Life, a limited liability company owned in part by Danny Lance, a member of the Industrial Development Board. Lance recused himself from the vote when the agreement was approved by his Industrial Development Board colleagues, Litchford said.
True Life operates a retail coffee shop that sells baked goods and other merchandise in the former Salvation Army building at 4104 Ringgold Road, where True Life Church also holds services.
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Lance, who is pastor of True Life Church, previously operated Local Coffee of East Ridge and True Life Church out of a building at 5330 Ringgold Road. That address is now home to Chattanooga Mayor Tim Kelly's Southern Honda Powersports dealership, another business with a Border Region development agreement.
The pastor's membership on the Industrial Development Board that approved the development agreement with his coffee shop is not considered a conflict of interest under city policy, Litchford said.
"Mr. Lance is not an employee of the city, he is not being compensated by the city," Litchford said. "This program is a creation of state statute, and it's one that the city receives revenue funding through state sales tax."
Each of the five Industrial Development Board members are volunteers appointed by different members of the East Ridge City Council.
Any revenue received as a result of being in the Border Region program is state sales tax and is not related to property tax, local option tax or any other city-imposed taxes, Litchford said.
The investment put into the True Life property was about $1 million, including the purchase price and the first five years of interest, Litchford said. The sale price was $650,000, according to Hamilton County Property Assessor's Office records.
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City staff estimated a total projected Border Region revenue of $188,000 over 24 years and recommended 70% of that revenue -- around $131,000-$132,000, or a 12.5% return on the investment if the development achieves the projected revenues -- go to the developer and 30% to the city, Litchford said.
"I think this particular business, in its previous iteration, was a focal point for a lot of people who would gather there," Councilman David Tyler said at the Jan. 26 City Council meeting. "Local Coffee has been generous to local civic organizations and is hosting the chamber and has been very involved. As Mr. Litchford mentioned, this is, in my opinion, the kind of business that we should be entering into this kind of agreement with."
Despite the fact that the church holds services in the building, the property does not have tax-exempt status at this time, according to the property assessor's office.
"This Border Region program is not simply for the large box retailers," Litchford said, adding that the coffee shop is also the second consecutive Border Region project application from a business in the middle to western portion of the city, along with the Food City. "You've got the growth organically growing west, and not just focused, centered on the interstate."
Contact Emily Crisman at ecrisman@timesfreepress.com or 423-757-6508.