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Washington County Commission approves TIF plan for Model Mill site

Gary Gray • Nov 28, 2016 at 9:17 PM

A $1.2 million tax increment financing incentive plan is now in place to redevelop the former Model Mill, a site expected to play a key role in the growth of the new West Walnut Street District.

Washington County commissioners on Monday approved a resolution initiating a deal between the Johnson City Development Authority and R&G Ventures that is expected to place about $7 million on the tax rolls following the multi-year project.

“If there ever was a project that meets the definition of what a TIF was meant for, this is it,” said Commissioner Todd Hensley.

The vote was 17-4, with Commissioners Robbie Tester, Steve Light, Danny Edens and Robbie McGuire opposing the measure.

Tester read a statement before the vote, saying he did not oppose redevelopment but he felt the method being used allows local governments to pick winners and losers.

“This does not allow the free market to work,” he said. “And if this is intended for blighted areas, why is an operating bank involved?”

R&G Ventures plans to redevelop three parcels: 500 W. Walnut St., 612 W. Walnut St. and 929 W. Watauga Ave. The developer plans to subdivide the property into two or more parcels, with one including the historical “Mill” property  the other the former Mize Farm and Garden property.

The third parcel mentioned in the resolution is HomeTrust Bank at the corner of West Walnut and West Watauga. The bank may be included in a second phase.

Basically, TIF deals are meant to bring in higher property tax revenues as the value of a redeveloped site rises over the years. The JCDA recommended the full allowable amount of the tax revenue increase for the first phase, especially in light of the revenue-generating possibilities with a new tenant on the corridor between East Tennessee State University and downtown.

A first phase will only concern renovation of the building’s “footprint” — the 40,000 square feet of blighted floor space in the mill. R&G plans to redevelop the Mill property for use as Summers-Taylor’s headquarters. Office, retail, restaurant and education uses also are planned. The second phase will include the redevelopment of outparcels for office and retail uses facing West State of Franklin Road.

Principals Rab and Grant Summers have indicated that with remediation of the designated brownfield site (previously used for industrial purposes) and the cost of rehabilitating the large structure, the TIF funding barely allows the company to break even on its $7 million expected investment. They do, however, expect to reap benefits from the retail uses.

In July, Summers-Taylor announced a contract with the Johnson City-Jonesborough-Washington County Chamber of Commerce, the current mill owner, to buy the entire property for $570,000. Grant Summers said he expects to close on the property in a few weeks.

The JCDA will use the net proceeds of a TIF loan of not more than $1.2 million to assist the development of the first phase. The JCDA will administer the incentive program and borrowed funds will be paid back from new taxes generated by the increase in property values after development.

Additional TIF loans will be issued in an amount to be determined based on the utilization of 50 percent of the tax increment from the outparcels over 20 years. This assistance would be used to help the developer complete the second phase.

Commissioners unanimously approved a resolution that will end the flow of county tax dollars to Johnson City’s Downtown Redevelopment (TIF) District at end of 2029.

“We’re essentially ending this, and we’re limiting future commissioners to a certain date,” said Commissioner Joe Wise, who will step down on Dec. 31 and take a seat on the Johnson City Commission.

The County Commission will continue to consider TIF plans within the district, if the terms end before Dec. 31, 2029. They also would continue to look at specific projects initiated by the JCDA after that point. The general sentiment has been there is no reason to continue putting tax dollars in the district once blighted areas have been restored. 

The TIF District is within the county, but entirely demarcated in Johnson City’s downtown area by the JCDA. After a plan is approved by the JCDA, City Commission and County Commission, the JCDA borrows money to provide an incentive for developers. The city and county agree to jointly make payments on the amounts owed from the incentives.

These agreements are aimed at increasing revenues from local option sales tax. Currently, the local option sales tax rate (excluding the state’s 7 percent) is 2.5 percent. Of that, half goes to Johnson City’s general fund, and the remainder is split between Washington County and Johnson City schools.

Email Gary Gray at [email protected]. Like Gary B. Gray on Facebook at www.facebook.com/garybgrayjcp. Follow him on Twitter @ggrayjcpress.

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