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A passerby walks near the Market City Center apartment building in downtown Chattanooga. / Staff file photo by Doug Strickland

A city administrator says she's reviewing tax breaks given to a downtown apartment complex after it unveiled plans to turn 53 of its 125 units into overnight or longer-term travel apartments.

Donna Williams, administrator of Chattanooga's Department of Economic and Community Development, said she plans to talk with the city attorney and look at what can be done about the tax breaks within the context of the agreement with the developer of Market City Center.

Williams said she planned to learn if the developer is holding 25 units as "affordable" housing at the high-rise apartment building on the 700 block of Market Street as required in the tax incentive agreement.

"Can we say to them, 'We're not giving you a tax abatement on 125 units?'" she asked. "We're either going to do nothing, my preference, give you nothing and pull you out of the program or give you a subsidy on those 25 units."

But a senior vice president for the developer, The Simpson Organization of Atlanta, said it's abiding by the terms of the payment-in-lieu-of-tax (PILOT) agreement with the city.

"I don't understand us leasing those for hotel units has any impact on the agreement," said Gail Battle. "According to the PILOT, we have our 25 units. They've never not been available. The impact on the PILOT is neutral."

Market City Center is one of the biggest new apartment complexes in the central city. But the $30 million high-rise complex that opened in September 2017 was slow to fill its apartments and commercial space.

The Simpson Organization announced in May that it planned to convert 53 of its apartments into overnight or longer-term travel apartments under the Stay Alfred brand.

Williams, speaking at a meeting of the city's Health, Educational and Housing Facility Board on Wednesday, said the incentives would never have been brought forward if the city had known what it now knows.

"It's very disingenuous," she said.

Helen Burns Sharp, founder of the citizens group Accountability for Taxpayer Money in Chattanooga, brought up the tax break issue and sought answers from the city board about the status of the agreement awarded to the project by the city in 2015.

"My question is what impact does or would this conversion have on the PILOT, which was originally scheduled to run from 2017 to 2031?" she asked.

Sharp questioned if the PILOT should go away or be reduced if a large number of units are designated "for commercial use and their value goes back on the tax rolls?"

Battle said that work has begun on converting the overnight or longer-term travel apartments, which should be ready around Aug. 1.

She said the PILOT is on the residential portion of the building, which also offers commercial space on the first two floor, and that the conversion "has no affect whatsoever" on the agreement.

Battle said that with the Stay Alfred units included, Market City Center is about 92 percent leased. She said 18 of the 25 "affordable" apartments are occupied, one more lease is pending and there are four additional applications.

Battle said there is "good movement" on leasing the retail and office space.

Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318. Follow him on Twitter @MikePareTFP.

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