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What TIF has meant to downtown Johnson City

Craig Torbett, Guest Commentary • Dec 16, 2018 at 12:00 AM

There has been a notable revitalization occurring in downtown Johnson City over the last decade. This revitalization is the result of the entrepreneurial spirit of our business owners, their employees and the residents who come to work and live in downtown Johnson City every day. While there are many factors that have contributed to this growth, there is one tool that that has had a significant impact and continues to garner attention. That tool is Tax Increment Financing or TIF.

TIF became a tool for revitalization when the Johnson City Development Authority (JCDA) established a Redevelopment Plan for the area and established a base year for measurement of 2008. TIF became the incentive tool of choice because it limits the amount of incentive that can be used to the amount of additional taxes that are generated within the redevelopment district. This was important in 2008 when many in city and county government, as well as a sizeable portion of the population, were concerned that downtown revitalization was an exercise in futility. Many of the past efforts for revitalization had not spurred the investment in the area that was needed.

Many are still mystified by the inner workings of this tool. TIF does not increase any property tax in any way. The amount of property taxes collected by the city and the county in 2008 continue to be paid and retained by them in exactly the same way today as it was ten years ago. The difference is that by implementing TIF, the city and the county have made a commitment that when individuals and businesses invest in properties within the district, thereby raising the value of their properties and those around them, the additional property taxes collected as a result of these increased property values will be reinvested within the district. This reinvestment happens through a dedicated and restricted fund administered by JCDA and the TIF Advisory Committee that operates under the JCDA. The TIF Advisory Committee is made up of representatives from the JCDA Board, Washington County Commissioners and appointees and City of Johnson City Commissioners.

The tool has been useful in incentivizing investment in properties that are simply not cost effective without the incentive. The cost of renovating an historic building can present many challenges that are not faced when building a new building. There are common issues such as asbestos removal, fire safety for multi-story buildings, ADA compliance for buildings that were built well before ADA existed, entry and exit requirements for buildings with other existing structures adjoining on multiple sides, etc. There are also unique challenges in many potential projects. A recent renovation of the buildings on Cherry Street involved buildings that had originally been used as a tobacco warehouse and shipping point. In its original use, the tobacco would be delivered at the back of the building and pushed down the sloped floors to the Cherry Street side where the trains were loaded. This building design included a sloped floor that was four feet lower on one side of the building than on the other. This worked great for the original purpose of the building but caused great challenges and costs when figuring out how to repurpose the buildings for use today. When you combine these added costs with the fact that in 2008 people were unwilling to pay rents equivalent to other parts of the city, it becomes clear why the downtown had become stagnate in spite of the energy and enthusiasm many had for what they saw as the potential in the historic core of our city.

Since 2008, the property values in the redevelopment district have begun to grow significantly. In 2008, the total value of property in the district as reported in the Annual Financial Report for Washington County was just over $166 million. Today, the County Trustee reports the value in the district as $253.8 million. This nearly 53% growth of over $87 million in the last ten years, has far outpaced the growth in the rest of Washington County. During this same period, the growth of all of Washington County (outside of the Redevelopment District) has gone from just under $8.7 billion in 2008 to a little less than $9.7 billion in 2018. This nearly $1 billion of growth is 11.4% since 2008. The Redevelopment District has grown at a rate 4.6 times greater than the rest of the county. It is important to note that within Washington County, approximately 46% of this incremental property tax growth does not go towards the TIF incentive tool but is instead retained by the county for debt service and general use. This means that while the county has made a sizeable and crucial commitment to the Redevelopment District, the county is also benefitting directly and immediately from this growth. While this growth cannot be attributed entirely to this tool, it is undeniable that the tool has had a marked positive impact. The cost of the TIF incentive must also be compared to the costs of preparing vacant land for development. By incentivizing growth within the existing core of our city, we alleviate the need for additional roads, utilities and other public services to an expanded area, all of which come at a cost to the taxpayer.

The impact of TIF is measurable in the increased value of properties that have been redeveloped using this incentive. It is also measurable by the more than $4.8 million of public-owned projects that have been funded using TIF, including the purchase and repurposing of the former Washington County Courthouse to the Johnson City campus of Northeast State Community College, as well as the Pavilion at Founders Park which expanded public parking and hosts the farmers market and other community events throughout the year. Perhaps the greatest impact of TIF is one not directly measurable. That is the vote of confidence that is given to potential investors as well as existing owners in the district when they see the commitment made by our city and county government officials. By supporting TIF, these officials are making a strong statement that they believe in the future of our downtown and that they support the individuals and businesses that are willing to take on the risks of purchasing, renovating and repurposing these challenging projects. With their continued support, the future of downtown looks bright!

Craig Torbett is a volunteer board member of the Johnson City Development Authority and serves as the Chairman of the TIF Advisory Committee. He is a Certified Financial Planner and owner of Ameriprise Financial in Johnson City and Kingsport.

For more information about Tax Increment Financing or investing in redevelopment, contact Dianna Cantler, Director of Downtown Development at the Johnson City Development Authority by email to [email protected] or by phone at 423.202.3510.

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