The district will now be sent to the commissioner of the Tennessee Department of Revenue for final consideration.
Johnson City commissioners unanimously approved on third reading Thursday the boundaries of a roughly 947-acre retail and tourism incentive district around Exit 17 in Boones Creek, which was authorized by legislation signed into law by Gov. Bill Lee in May.
“I’ve been working here 29 working on 30 years, and Boones Creek has been identified as the next high-growth area of Johnson City and Washington County,” said City Manager Pete Peterson. “As far back as the mid-’90s we began significant infrastructure improvements out there. ... It has long been planned that Exit 17 would develop with a lot of residential as well as commercial and recreational and tourism type development out there.”
Vice Mayor Joe Wise, who critics had called on to recuse himself because he owns an office in the footprint of the district, voted with the rest of the commission.
Wise said Tuesday he asked the city’s legal department if his ownership of the office would be a problem during the vote. He was told that, because the property is already built up and doesn’t have the capacity to generate sales tax revenue, it would not be an issue.
The district would allow developers to apply for incentive money to offset the cost of tasks like property acquisition, design, engineering or construction on properties in the zone.
The incentives would be funded with a portion of the state sales tax revenue generated in the district, calculated beyond the current baseline revenue produced by properties in the zone. The money would be distributed by the city through agreements with individual developers. Properties must be in the city to be eligible for incentives. Much of the land included in the incentive district lies outside city limits.
Officials have said the legislation was narrowly tailored to apply specifically to Exit 17 around Boones Creek, but local attorneys and developers have argued that the location requirements could actually apply to multiple exits along Interstate 26.
The legislation says some boundary of the district must be “no more than one-half mile from an existing federally designated interstate exit” and be “no more than twenty miles from the state border of two neighboring states as measured by a straight line.”
The entire district must also require $20 million in capital investment, attract one million visitors a year and generate $2 million a year in state sales tax revenue.
Less than two hours before the vote, Johnson City attorney John Wood told city commissioners by email that he had filed a complaint and request for injunctive relief in Washington County Chancery Court, arguing that the city did not follow the correct process for adopting the ordinance. Peterson said Thursday the city has not been served with an injunction.
Wood, attorney Donald Spurrell and developers Greg Cox and Brent Long had urged commissioners in a letter earlier this week to delay their vote on the incentive district, arguing that the district requirements actually apply to multiple exits in Johnson City.
City staff have identified five interchanges in Johnson City along Interstate 26 that meet the location requirements of the legislation. Peterson said he had asked staff to identify parcels around those exits, whether developed or undeveloped, to assess what property could be hypothetically assembled into an incentive district. In a presentation, Peterson ran through each exit and identified notable properties.
“Of of all the exits in Johnson City, Exit 17 is the one that makes the most sense,” Peterson said. “It’s the most economically feasible. It is the only interstate interchange that anyone has expressed any interest in development over the nine months that this has been an available tool in our toolbox.”
To meet the minimum requirements of the legislation, Peterson told commissioners the district would have to generate $30 million a year in gross sales.
On $30 million a year, Washington County would realize $195,000 a year for school funding and the city would gain $180,000 a year in sales tax revenue to fund education. He said the city would also earn $375,000 in new sales tax revenue that would go to the city’s general fund for the commission to use at its discretion.
“It opens a lot of doors for a lot of opportunity throughout the community if a district like this is approved and someone comes in and is successful,” Peterson said.
Mayor Jenny Brock, who’s been a member of the city commission for several years, said it’s been a goal of hers to see how Johnson City can become an “epicenter” for economic activity that gives back to the region.
“People want different things and I think we have an opportunity here to provide for people in the Boones Creek area and Gray area shopping that they would have to support them and their neighborhoods as well,” she said.
Commissioner Larry Calhoun said officials have been talking about the need to promote economic growth at Exit 17 around Boones Creek for a long time.
“I’ve heard too many presentations over the last six months about our lack of population growth,” he said, “and I’ve also heard too many presentations over the last year about things we want to happen in Johnson City, all over Johnson City, and I just think this is an opportunity we cannot afford to turn our back on.”