A Chattanooga panel agreed to sell its interest in the Walnut Commons apartments project in downtown Chattanooga to a Nebraska real estate business.

What's next?

The city’s Health, Educational and Housing Facility Board is expected to take up issues surrounding tax breaks for the Walnut Commons apartments at its planned Feb. 24th meeting at noon in the City Council Assembly Room.

A Chattanooga panel on Wednesday agreed to sell its interest in the Walnut Commons apartments project to a Nebraska real estate business for at least $761,000.

The move by the Chattanooga Downtown Redevelopment Corp. sets up a potentially thorny meeting later this month involving another city panel that earlier granted tax breaks to the development.

A taxpayer watchdog group has called for an end to the city's payment-in-lieu-of-taxes (PILOT) agreement for Walnut Commons, located at Walnut Street and Aquarium Way, and for the property to be put back on the tax rolls.

"Why should this building pay zero [taxes]?" asked Helen Burns Sharp of the Accountability for Taxpayer Money. "Not only does it raise tax equity issues, it also takes money away from important community priorities."

The Redevelopment Corp. at a meeting agreed to accept the proceeds of a possible sale of the real property as well as to executing a limited warranty deed for the transfer of the title and interest in the site.

Valerie Malueg, an attorney for the Redevelopment Corp., said a lease-hold interest and option to purchase was transferred to the city's Health, Educational and Housing Facility Board in 2012 in connection with the tax breaks.

Malueg said Walnut Commons LLC, held by the Nebraska company, would be providing the money for the exercise of that option. She said if the CDRC voted no, it potentially could be in breach of a lease agreement.

But after the meeting, Sharp said she was "disappointed, disillusioned, but, sadly, not surprised" at the Redevelopment Corp.'s action.

"The train was on the track," she said, adding that it didn't appear the board's members understood the resolutions for which they voted.

Sharp said she wanted the panel to table one resolution until questions were answered about ownership, the lease, how much low- and moderate-income housing Walnut Commons offers and what happened to a planned parking garage that wasn't built.

She said the Health, Educational Board can terminate future tax breaks for Walnut Commons.

One member of that panel last month raised that issue. Lloyd Longnion said the PILOT agreement with Walnut Commons over 10 years was negotiated with the original developers and not the current Nebraska owners. Also, he said, the terms were more generous than those tax breaks the city now provides for downtown housing projects.

Walnut Commons, a 100-unit apartment building, was the biggest such complex erected downtown in decades when it opened in 2013 at a cost of about $11 million. The CDRC in 2007 had been trying to spur new apartment units downtown and owned the property as it worked on deal with the eventual developer.

In 2014, a local development group led by John Clark sold the stock in Walnut Commons LLC to an Omaha, Neb., real estate company for some $15 million.

Sharp, who had prepared a 5-page position paper on Walnut Commons, said she had asked CDRC President Daisy Madison to distribute it to the panel's members.

"I also asked for the opportunity to make brief remarks. I had hoped some members might ask questions about what I had written. The president, City Finance Director Daisy Madison, did not ask if anyone from the public wanted to speak," she said.

Contact Mike Pare at or 423-757-6318.