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JCDA approves $4.6 million loan to buy Sevier Center

Nathan Baker • Updated Jun 14, 2019 at 5:37 PM

Johnson City Development Authority board members gave a relieved round of applause Friday morning after authorizing a $4.6 million bank loan to buy and rehabilitate the John Sevier Center, moving forward on the cornerstone downtown redevelopment project without the county’s approval of TIF funds.

The commercial real estate loan from HomeTrust Bank will allow the JCDA to buy the 10-story residential building and make needed repairs to meet the standards of the U.S. Department of Housing and Urban Development, which subsidizes the rents of the Sevier Center’s residents. With the source of funding secured, the development authority can now finalize a contract with HUD for receiving those Section 8 housing funds.

Authority board member Brent Long said two banks, HomeTrust and Bank of Tennessee, submitted written loan contracts in response to the JCDA’s request for proposals sent to six lenders.

The Bank of Tennessee offer extended a $2.6 million line of credit, short of what the development authority needed to close. Two other banks sent informal emails expressing interest in joining with other financial institutions to provide a group loan.

“Really, the one from HomeTrust is really the only option, and it’s a good option,” Long told the board. “The interest rate is fair and it has a 25-year amortization, which would help with cash flow.”

As collateral, the approved loan contract requires a lien on the John Sevier Building and the Downtown Center, formerly the Washington County Municipal Building now occupied by Northeast State Community College.

JCDA members said the downtown landmark’s redevelopment will be a transformative project for the city’s core. Their plan is to buy the building, move its residents to new, yet-to-be-built apartments, and then sell the building to a commercial developer who will bring in retail and commercial business.

Once the purchase is completed, board member Brent Long said the authority can send out a request for proposals to housing developers to build the new complex for the existing residents.

Under pressure from HUD to correct substandard living conditions or potentially lose its Section 8 contract, the owner of the Sevier Center agreed to sell to the JCDA, but was also entertaining other interest that would have kept the building as a residential center.

The development authority tried and failed to convince the Washington County Commission to increase the debt limit of the downtown tax increment financing district and to approve the use of tax increment financing for the Sevier Center project. The tie vote was split roughly along the divide between commissioners representing rural and urban districts, with those representing Johnson City districts voting for the proposals and those outside the city voting against.

JCDA board members said there still could be room in the project for the use of TIF funding, but action to secure funding to purchase the building was needed to meet a deadline set by HUD.

“We did discuss that at the Executive Committee,” JCDA Secretary Paul Williamson said. “Due to the timing with HUD and so forth, it’s just not an option to go back to the county at this juncture. It’s going to put the timeline way out for doing this.”

The development authority board members unanimously approved the HomeTrust proposal, save for member Freddie Malone, HomeTrust’s Commercial Relationship Manager. Malone abstained from the vote.

Previously reported:

Johnson City Development Authority board members gave a relieved round of applause Friday morning after authorizing a $4.6 million bank loan to purchase and rehabilitate the John Sevier Center, moving forward on the cornerstone downtown redevelopment project without the county’s approval of TIF funds.

The commercial real estate loan from HomeTrust Bank will allow the JCDA to purchase the 10-story residential building and make needed repairs to meet the standards of the U.S. Department of Housing and Urban Development, which subsidizes the rents of the Sevier Center’s residents. With the source of funding secured, the development authority can now finalize a contract with HUD for receiving those Section 8 housing funds.

JCDA members said the downtown landmark’s redevelopment will be a transformative project for the city’s core. Their plan is to purchase the building, move its residents to new, yet-to-be-built apartments, and then sell the building to a commercial developer who will bring in retail and commercial business.

Once the purchase is completed, board member Brent Long said the authority can send out a request for proposals to housing developers to build the new complex for the existing residents.

Under pressure from HUD to correct substandard living conditions or potentially lose its Section 8 contract, the owner of the Sevier Center agreed to sell to the JCDA, but was also entertaining other interest that would have kept the building as a residential center.

The development authority tried and failed to convince the Washington County Commission to increase the debt limit of the downtown tax increment financing district and to approve the use of tax increment financing for the Sevier Center project. The tie vote was split roughly along the divide between commissioners representing rural and urban districts, with those representing Johnson City districts voting for the proposals and those outside the city voting against.

JCDA board members said there still could be room in the project for the use of TIF funding, but action to secure funding to purchase the building was needed to meet a deadline set by HUD.

This story is still developing. Please check here later for updates to this article.

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