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Staff photo by Tim Barber/ Jermain Freeman, with the city's Department of Economic and Community Development, speaks to the Industrial Development Board Monday about the usage of the former Harriett Tubman 29-acres in East Chattanooga.

This story was updated at 5:02 p.m. on Monday, Oct. 7, 2019 with more information.

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City moves to create tax increment district to aid East Chattanooga

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The city of Chattanooga took the first step Monday toward using some of the money to be generated from a new automotive paint factory in East Chattanooga to help foster other new development in the area.

The Chattanooga Industrial Development Board voted to approve an application for a tax increment district on 20 acres on and near the site of the former Harriett Tubman housing facility to reinvest property taxes from a new $61 million factory into new retail, housing or commercial development next door.

If approved by local and state authorities, the proposed tax increment financing (TIF) district would be only the third such TIF created in Chattanooga and is projected to provide more than $3 million of financing to immediately help spur more development in East Chattanooga.

Nippon Paint, one of the world's biggest paint and coatings makers, is planning to build what will be the biggest new manufacturing investment in East Chattanooga in more than a century. Nippon plans to build a 270,000-square-foot manufacturing complex on about 29 acres of the 45-acre former Tubman site and hire 150 workers over the next five to seven years to supply paint for the Mazda/Toyota assembly plant planned in East Chattanooga.

The city is giving most of the vacant site between Sholar and Roanoke Avenues to Nippon for the project. But the Japanese-based paint company will pay full city and county property taxes on the new factory.

Steps to East Chattanooga development zone

To create a new tax increment financing district in East Chattanooga to use tax increases for redevelopment:

* The Chattanooga Industrial Development Board must approve the application, which it did Monday.

* The Chattanooga City Council must authorize the preparation of an economic impact plan and create an applications review committee.

* The Industrial Development Board will conduct a public hearing on the plan.

* The Chattanooga City Council and the Hamilton County Commisison must vote to aprove the creation of the tax increment district.

* The TIF plan and spending is reviewed by the Tennessee Office of the Comptroller and the state Building Commission.

The extra tax revenues generated by the paint factory are projected to produce more than $2.8 million over the next 20 years in additional taxes for Hamilton County public schools and more than $5 million in other payments to city and county governments, while still providing enough extra property taxes under the TIF plan to fund a 20-year bond issue of up to about $3.5 million. Those TIF funds could be used to build infrastructure and other investments to aid development of the other 15 acres or so of the Tubman site, plus five acres the city owns along Southern Street.

"This infusion of economic activity is important to the entire Chattanooga region and will provide direct and vital stimulus to a neighborhood marked by high unemployment rates," according to the resolution for the new taxing district approved by the development authority. "The economic development project will serve not only as the economic catalyst for this area, but also the fiscal stimulus needed to fund additional infrastructure on the remaining acreage of the site."

Before any tax increment financing district is implemented, however, the city and the Industrial Development Board plan a number of public hearings and the tax breaks for the redevelopment district must also be approved by the Chattanooga City Council, the Hamilton County Commission, the Tennessee Comptroller and the state Building Commission.

Jermaine Freeman, civic engagement coordinator for the city's Department of Economic and Community Development, said if city and county leaders agree to plow some of the property taxes over the next 20 years back into the 20-acre area, a community input hearing will be held in January and a master development plan could be selected by next March.

"Over the past several years, our city has seen a tremendous amount of growth and development," Freeman said. "With that said, we've seen throughout our city areas that have been rather slow to develop and East Chattanooga is one of those areas."

Labor and community leaders urged the city to work to make sure that the new investments in East Chattanooga employ local workers.

"We're fully supportive of the TIF proposal, but we hope the city will work to make sure that the work is done by local residents and contractors," said Austin Sauerbrei, an organizer of the Chattanooga Area Labor Council.

Eric Atkins, secretary of the Unity Group of Chattanooga, echoed the appeal for Nippon and other developers in the area benefiting by the city land donation and tax reinvestment money to employ local residents.

"We ask the city mayor, the City Council and the city IDB (Industrial Development Board) to include in the land donation agreement a commitment to work with workforce development organizations, including the Chattanooga Building Trades, to create pathways to employment for local workers for both construction and permanent jobs."

Atkins also urged that the city consider expanding the boundaries of the proposed tax increment district to broaden the tax advantages for investing in East Chattanooga and make sure that the new factory does not pollute the East Chattanooga area.

Nippon CEO Tetsuruo Fujita said the new Chattanooga plant will be the company's first LEED (Leadership in Energy and Environmental Design) certified factory.

Freeman said the city could expand the boundaries of the tax increment district in the future, but initially the city "would like to concentrate on the area where we have the most control and opportunity."

"This is the area of the site where we can have the most immediate impact," he said.

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340

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