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County commissioners debate merit of tax programs

Robert Houk • Updated Nov 29, 2018 at 6:06 PM

Washington County’s Commercial, Industrial and Agriculture Committee approved a payment-in-lieu-of-taxes agreement Thursday for the redevelopment of a vacant warehouse in Gray following a debate between committee members on the basic fairness of such PILOT and tax increment financing plans.

”That’s a lot of money to be given away on a risk at a time when the county has so many needs,” County Commissioner Kent Harris said before joining fellow Commissioner Robbie Tester in voting against a motion to send the PILOT request to the county’s Budget Committee. Tester said the county “should treat all taxpayers fairly” in considering such deals.

Johnson City developer Mitch Cox is in the process of purchasing a 90,000-square-foot building with an appraised tax value of $2,056,100 on 16 acres at 149 Old Gray Station Road. The $3.5 million project calls for Cox to redevelop half the space as a distribution warehouse for Ashley Furniture, with the remaining square footage renovated for other potential retail clients.

The PILOT calls for for the owner to pay no county property taxes for the building during the first two years of the redevelopment. The warehouse, which was built in 1974, currently has an annual property tax bill of $19,572. Beginning in year three, Cox will begin begin paying 20 percent of the property taxes annually until the bill is increased to the full amount in the sixth year.

If the building remains undeveloped, Washington County would receive $137,007 in property taxes for the period. Under the PILOT, the county could collect a total of $230,365 after seven years. Cox told commissioners he is confident his investment would result in higher property tax payments a year earlier than projections.

Cox pointed to what he called the success of a simular redevelopment at Silverdale Commons in Johnson City. He said the Gray project would initially create 11 to 17 jobs, with a potential of as many as 200 more with completion.

Mitch Miller, CEO of Northeast Tennessee Regional Economic Partnership, told CIA Committee members the county is in desperate need of the kind of space Cox would be creating with the Gray project. He said the investment “would pay dividends” for economic development.

CIA Chairman Phillip Carriger said he was willing to “take the risk” on Cox’s project for economic growth.

“We are betting on Mr. Cox, and he’s got a good track record,” Carriger told his colleagues.

Harris, however, said he was not willing to “bet with taxpayers’ money.”

He later joined Tester in voting against a motion to amend the county’s downtown TIF agreement with the Johnson City Development Authority. Officials with JCDA have asked the county to bring the 2008 development plan up to date with state TIF law passed in 2012.

Commissioners are also being asked to remove the TIF district’s current debt ceiling of $11 million and replace it with a figure based on 10 percent of real property value in the downtown area.

“I feel we are picking winners and losers with taxpayers’ dollars,” Harris said.

Meanwhile, Commissioner Jodi Jones said she would like to see county officials be given a more thorough annual accounting of the status of all PILOT and TIF agreements.  

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