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Budget Committee withholds approval on TIF district

A review of the Economic Impact Plan for the Boones Creek retail project left Budget Committee members wanting more return for the county’s investment.
Mitch Miller, CEO of the Washington County Economic Development Council, presented the plan during the April 16 meeting on recommendation from the Commercial, Industrial and Agricultural Committee.
Miller and WCEDC Immediate Past Chairman Bobby Jobe want to have the county’s commitment in hand to use as leverage when they attend the International Council of Shopping Centers’ global convention May 18-20 in Las Vegas.
The retail project under consideration will be located on Boones Creek Road at exit 17 of Interstate 26 on 100 acres of farmland bordered by Browns Mill Boulevard and Bart Green Drive.
The WCEDC is proposing the creation of a tax increment financing district that would include approximately 500 additional acres of contiguous properties to fund the Boones Creek development.
A fixed amount of property tax revenue based on the 2014 numbers would be guaranteed to the city and county for the next 20 years, and all incremental increases would go to support the project. At the end of the TIF period, the tax revenue would return to governmental entities.
According to Miller, the incremental tax increases come from enhancements and improvements to properties in the TIF District. “At the end of the day, we are using taxpayer dollars,” he said. “We want to use them correctly and efficiently.”
Miller said the WCEDC wants to use the TIF district as a driver to enhance Washington County’s position as the dominant retail location. Approximately $6 million will be needed to acquire all 100 acres, with another $17 million required to develop the site.
“One of the things the WCEDC wanted to know before we came to you is whether this project is feasible,” Miller said, referring to the decision to secure Jeff Green Partners of Phoeniz, Ariz., to complete a feasibility study.
Based on the analysis, the Johnson City area has the capability to support an additional 717,000 square feet of big-box and specialty-box retail, specialty lifestyle retail and restaurant space. Projections from the study include $248 million in annual sales, which would generate more than $6 million in sales tax.
“How much of the $6.2 million is new sales tax dollars?” Commissioner Mitch Meredith asked at last week’s meeting.
Miller couldn’t answer, but said without this development, the current leakage of shopping business to other states, and even Sullivan County, will continue.
Meredith said the language of the plan needs to be more clearly defined so Boones Creek doesn’t become a relocation site for current businesses.
“That is a big concern of the WCEDC,” Miller agreed. “We don’t want everything on State of Franklin moving.”
According to the Economic Impact Plan, use of TIF funds for the Boones Creek development is contingent upon the City of Johnson City’s approving and creating a Central Business Improvement District.
“This will be the only document Washington County will have the chance to review and have input on,” Mayor Dan Eldridge told Budget Committee members.
In a review of the financial projections, Eldridge noted a surplus begins to accumulate in year 15 of the project. “I think it should be distributed as soon as the project becomes positive rather than waiting until the full 20 years,” he said.
In regard to the distribution of property taxes, Eldridge said he wants to get language in the agreement that holds the county harmless in the event of a change in the assessed value; does not guarantee incremental increases if they are not received; and does not lock the county into a payment date.
He also commented on an incentive to attract a pilot business by giving the land at no cost for a certain number of years. “This will have a huge impact on cash flow, and I don’t want the county to have to pay the difference,” he said.
When Meredith questioned why the county should even participate, Miller said growth in the city is good for the county.
“What if the project tanks?” Meredith challenged.
Miller said no land purchases or grading would be done until they had a commitment.
Eldridge argued the current agreement could allow that to happen. “Putting permanent financing on it is what starts the 20 years,” he added.
Eldridge also noted, “We need to tie down how we deal with future surpluses.”
“There are a lot of things to tie down,” interim County Attorney Keith Bowers agreed.
Eldridge insisted the county needs to understand how the project will be funded. “I don’t know how incremental development funding over nine years can be calculated,” he said.
The distribution of sales tax to the city and county also needs to be nailed down, he added. “This is the only time we are going to have to get this in the document.”
Under the current sales tax allocation structure, 50 percent of the revenue from the Boones Creek Retail TIF would go to the Johnson City General Fund. The other half would be divided among the school systems, with 21.13 percent going to the city schools and 26.87 percent going to the county schools. No funds would go to the county’s General Fund.
Eldridge proposed a sales tax revenue allocation that follows current state requirements for distributing the first half of all sales tax collections to the county and city school systems based on percentage of enrollment.
By interlocal agreement, the second half of sales tax collections from the Boones Creek retail project would be distributed to Johnson City and Washington County in amounts equal to the pro rata share of each government’s respective property tax increment investment.
The agreement would allocate the second half of Washington County government’s sales tax revenue to county and city schools based on the percentage of enrollment. Eldridge’s proposal would increase the amount of sales tax from the Boones Creek project being designated for education from 50 to 77 percent.
A motion made by Meredith and seconded by Commissioner Ethan Flynn to recess until 8 a.m. on Friday, April 25, received unanimous approval. Committee members will review the changes requested in the resolution prior to presenting it to the full commission on Monday, April 28.