(WBIR-Knoxville) The old Baptist Hospital is a lot closer to a facelift. The city had already approved tax increment financing, or TIF, for the deal, and Monday evening the Knox County Commission voted in favor in a workshop.
According to city leaders, most TIFs are for a 15-year term, but the TIF for the riverfront property was set for 30 years.
"Some deals are small enough that we can keep them small. But this is a very large deal. This is a very big deal," said Alvin Nance, the CEO of Knoxville's Community Development Corporation.
Many TIFs are for single buildings, but the former Baptist Hospital site project calls for public improvements.
"This is a major, close to 10-acre site. Multiple buildings. Brownfield. Public improvements. There's going to be about $12 million of public improvements," said Bob Whetsel, director of redevelopment with the City of Knoxville.
City officials say the $22 million TIF is a large investment with a high return rate.
Once the TIF is approved, the city will receive over $500,000 per year on property tax revenues. When the TIF expires in 30 years, taxes received will increase to about $1.5 million. The county will also receive nearly $375,000 when the TIF is approved, and nearly $1.4 million when it expires.
"These individuals are not getting a tax break. Because when you think about a tax increment financing note, they are paying a full amount of taxes on their project," said Nance. "But the county and city don't see all of that money during the TIF since it's going towards the TIF loan."
Nance said with redevelopment projects, property values go up, so that's why property taxes also increase.
For example, the Southeastern Glass building was worth about $55,000 before it was redeveloped. The developer must immediately get an appraisal value to determine what the property will be worth once the project is over. The value of the building jumped to $3.8 million.
As for the property taxes, the city was only receiving $608 per year before the project. Now, Knoxville receives about $10,000, and will receive nearly $29,000 starting in 2022.
"The developer is paying the full $29,000 right now. But the difference of about $14,000 is going towards the TIF loan. That's how the TIF works until it expires and is paid off, at which point the city will receive all of the tax revenue," said Nance.
If a TIF was not approved, many projects would never have happened.
"There have been projects that prior to us being involved with them with some tax increment financing, they were never developed. These were vacant buildings in our downtown area that no one could make them work," said Nance.
"The great risk to the taxpayer is where we don't do anything. And all of the sudden it sits over there and becomes a Jackson Avenue property where there's no activity. Fires are a potential danger. Vagrants are a potential danger," said Whetsel.
The McClung warehouses on Jackson Avenue caught fire and sat empty for years. Other buildings had been vacant for many years as well, causing the city and county to lose potential revenue from property taxes.
As for the old Baptist Hospital site downtown, the county commission will have a final vote on Monday, October 28. City leaders expect the TIF to be officially approved by the 31st.