Minutes from Chattanooga IDB hearing 8-11-2014. Kinda long, but you will get the picture, some what. This was on a Monday, the following Monday is when they gave them the TIF again. INDUSTRIAL DEVELOPMENT BOARD SPECIAL MEETING MINUTES City Council Assembly Room City Council Building Chattanooga, Tennessee for August 11, 2014 11:04 a.m. CALL TO ORDER James Miller (Vice-Chair), Chris Ramsey (Secretary), James Woods, Ray Adkins, Skip Ireland, and Breege Farrell were present. Also present: Leonard Nixon; Helen Burns Sharp; Doug Stein (Black Creek); Gary Chazen; Brian Sewall; Clift Smith; Deborah Scott; Wayne Scott; Lynn Ashton; Michael Mallen, Robert F. Parsley, Roger Dickson, Jim Haley, and Alfred Smith (Miller & Martin); Melissa Smith (Elite Reporting); Robert Oldler; Candace Chazen; Robert Chazen; John Clark (Educational Outfitters); Robert Nodes (GCAR); Jimmy Lail (Raines Brothers, Inc.); Ed Love; Greg Stewart; Barry Valcallel; Caroline Crane; June Teuscher; Tresa McCallie; Franklin McCallie; Richard Ebersole; Kelly Allen; Melissa Cantrell; James R. Mapp; Joe A. Rowe; Perrin Lance (C.O.A.); Richard Hadden; John Konvalinka; Patrick Kellog; Jeff Perlacky; Jerry Wallace; Teresa Groves; David Moses; Lloyd Lonan; Rena Pruett; Ben Jones; Leanne Strickland; Everett Simpson; Ed Schbert; Vickie Haley (City Finance); Eleanor Cooper; Krista Stan; Eric Atkins; Daniel Cox; Jack Berghel; Robert Berghel; Mary Petruska; Peter Ehrenberg; Janice Gross; Ed Chapin; Loren Sheldon; Wade Hinton; Phillip A. Noblett; and Michael A. McMahan. There are 69 signatures on record. Mr. Miller thanked the crowd for coming to the meeting. This is the American way. Miller stated the purpose of this meeting is the business and legal decision pertaining to the Tax Increment Financing particularly Black Creek Mountain. SPEAKERS MICHAEL A. McMAHAN Mr. McMahan gave an overview. Mrs. Helen Burns Sharp filed suit against the City, the County, and the Industrial Development Board claiming that the approval of the Black Creek TIF was invalid for a number of reasons. One of the reasons that she stated was that there has been a violation of the sunshine law or open meetings law. Chancellor Brown sua sponte which means, he did so without having any party move for him to decide the case on that basis, decided that in his opinion that there had been a sunshine law violation because the Board’s initial resolution concluded with the phrase “opinion by Counsel or the Attorney General” and the Chancellor thought that the Board voted on whether or not the opinion the Board received was sufficient for that purpose. The Chancellor basically decided a case only on very limited issues about the open Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 11, 2014 Page 2 of 14 meetings violation, and basically said to this Board that he was not telling what to do, he was not telling how to consign the case, but basically it needed to be reconsidered. The Board’s decision that the Board made before needs to be reconsidered. As Mr. McMahan understands from talking briefly with the Chair, the purpose of today would be to obtain public input into the issues. As you may recall, the Black Creek TIF started with this body and under statutory procedure this body then forwards a recommendation to the City and County as to whether or not to adopt this TIF. Both this City Council and County Commission both passed resolutions approving the TIF. If they did not do so, it would never go anyplace because the whole idea here is that people would live within the TIF district, the increase in taxes, for something like maybe 1,000 or something like a very large area 1,800 acres. The increase in taxes as the development takes place is supposed to pay off this $9 million loan. There has been some misinformation that the developers have the $9 million. That is misinformation. The way that it works is that they spend money, money goes to them by the lender, and then they ultimately hope that over the 20 year cycle of the Tax Increment Financing of $9 million, plus interest, being paid. WADE A. HINTON Mr. Hinton stated that this is a special called meeting. The purpose of the meeting Mr. McMahan has already addressed is to listen to information with the business and legal matters regarding the Black Creek Tax Increment Financing. We have to be very clear to the members of the Board that while information will be provided today, no deliberation or assessment will take place. What that means is we can hear from those making presentations, we can provide information, we can ask questions, and clarify points made in those presentations, but we cannot deliberate or ask conditional questions. Shortly after the information has been provided, we will adjourn to executive session for an attorney/client meeting. At that meeting the Board will be provided information only. Any decision as to whether the Board chooses to appeal or reconsider, the matter will be done in public on Friday. This Board will reconvene on Friday. The purpose of that meeting is to make a decision about whether the IDB will appeal the Court’s decision, reconsider the TIF project or whether to ratify this action of the Board. One of the reasons it was important to have two meetings is that the Chair and members of the Board are enforced to have the public participate in the process. This is why on Friday the Board has set aside time for the public hearing. At that hearing, the Board will give proponents and opponents an opportunity to be heard. Subsequent to that hearing the Board will vote on the items mentioned earlier. JAMES MILLER Mr. Miller wants to make sure that we give each side the ample time to give their excerpts concerning this matter. But we would like to hold all comments to no longer than 10 minutes. That is more than normal that has been given in the past. Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 11, 2014 Page 3 of 14 ROGER DICKSON (MILLER & MARTIN) Introduction The Miller & Martin attorneys are present on behalf of the developers of Black Creek. The representatives are Doug Stein, Gary Chazen, Bobby Chazen, and Brian Sewall. A PowerPoint presentation was given concerning the update of the progress of the TIF project and answering questions. MICHAEL MALLEN (MILLER & MARTIN) Presentation and Handout The first slide is a 10,000 foot graphic view which depicts the Black Creek existing development and the Black Creek Mountain, with the spine road in between (TIF road). Black Creek Development The Black Creek development will encompass over 2,900 acres with 1,300 areas that will remain open road space. The developer will ultimately invest over $60 million, including investments in public road, utilities. Commercial investments are expected to receive $500 million. The developer will drive economic investment and job growth for the entire community. The developer will create jobs in construction, sales, landscaping, etc. The development will also generate substantial new tax revenue for the City and County. Black Creek TIF District The Black Creek TIF District is with the construction of the mountain top using the primary access road and related utilities. The public road will connect the valley and allow the public to access the Black Creek development and other area properties. The $9 million TIF for construction of the road and related utilities is being invested up front by the developer and will be repaid solely from incremental taxes generated by the developer. These funds will be used to offset a portion of the developer’s cost incurred constructing the public road and the utility infrastructure. It is important to recognize that we are not talking about a subdivision road but a spine road connecting the valley to the mountain. The economic benefit confirmed by City Council and County Commission is the standard. There is no blight standard and the IDB statute does not require blight nor does it require a but-for test. The map was reviewed. Benefits for Chattanooga The benefits that were considered by the elected bodies are new tax generation, new jobs, large new conservation area, community to attract professionals and executives in Chattanooga. Community to attract retirees and will create strong presence on the southeast side of the County allowing the creation of new commercial activity. It creates an attractive place to live. These elements that were evaluated by City Council and County Commission to the approval of TIF in 2012. Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 11, 2014 Page 4 of 14 Timeline On May 1, 2012, the IDB approved the Black Creek TIF project economic impact plan. On June 6, 2012, the Hamilton County Commission adopted Resolution No. 612-27 approving the economic impact plan. On June 19, 2012, the Chattanooga City Council adopted Resolution No. 27143 approving the economic impact plan. The City and County meetings like the IDB meetings are publicly called, publicly held, there was discussion, there was debate, and both made a decision to approve. On October 15, 2012, the IDB adopts the resolution approving the Black Creek TIF subject to a legal opinion, and then on February 14, 2014, with the IDB’s approval and IDB’s instruction, closing of the Black Creek TIF is consummated. The transaction closed at the direction of the IDB. The City and County elected bodies to approve the TIF in accordance with Tennessee law. Currently The City Council and County Commission have already approved the Black Creek TIF as creating a positive economic impact. With the IDB’s approval, the closing was held on the Black Creek TIF on February 14, 2013. It is important for the Board to know that the TIF project expenses paid to date are approximately $1 million. The specific number is $989,044.77. The total investment by the development group in Black Creek today exceeds $16 million. Professional fees such as legal fees, survey fees, engineering fees are permissible TIF costs under the Tennessee IDB TIF statute. ALFRED SMITH (MILLER & MARTIN) Mr. Smith has practiced law as a bond lawyer and volunteered as an economic development person in Chattanooga and Hamilton County for over 35 years. He is in the 40th year of practicing law. He does not think ever on any issue before the City or County bond board seen so much misunderstanding and misrepresentations of what the law of fact is on this project. The closest thing was when the aquarium was being planned and remember carrying before the County Bond Board opposition to that bond issue to build the aquarium which stated that the aquarium was really just a scheme to benefit private citizens and that the investment by the City and County governments and was a waste of public money. The first broad area is the public policy decision that Mike Mallen mentioned. The IDB statute creating the ability of this Board to do TIFs allocates to the City Council and the County Commission the right to make the public policy decision. It is not any slight to you, does not make you a rubber stamp, you have a very important role in this process. It was felt by the legislature that elected officials of the City and the County should be the ones who make the decision on this. They did over two years ago. They met after the appropriate 14 day notice there was a full discussion. Many of the people who were opposed to this project were present at the meetings and they voiced their concerns. Very similar concerns to what they are going to say today and what they have said in the press and on the internet in voicing public policy objections Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 11, 2014 Page 5 of 14 to the TIF. The public policy question is something that reasonable people can differ on. There are only two bodies that make the decision: The City Council and County Commission. The City Council voted 7-2, 1 abstention, 1 recusal, to approve the TIF over two years ago. The County Commission voted 9-0 to approve this TIF over two years. The City and County cannot reconsider that decision. There is no basis for reconsideration. There was no fraud. There was no arbitrary or capricious nature of the decision. There is nothing else to allow them to reconsider the decision. As you have seen, the developer in dependence on the approval of the City and County and the issuance of the TIF note in 2013, it proceeded to spend almost $1 million on the TIF project. The road up the mountain. And they have spent $15 million on other expenses of their development in reliance on the availability of the TIF to build the road up the mountain. Another reason that they cannot go back on this is that it would cause a total loss of credibility for Chattanooga and Hamilton County in the economic development community. Mr. Smith has worked closely with the economic development people of the Chamber for 35 years. They would simply have to close up shop and do something else. Chattanooga would have no credibility. Suppose VW two years from now has spent millions of dollars on the new SUV plant and the City and County would say that we would revoke the tax incentives that we appropriately considered and approved for VW. It certainly should not happen in this situation either. Legal Issues These legal issues are more directly with this Board and representation by the City Attorney. Five of the main legal issues that have been raised by the plaintiff in the lawsuit. Three of the things are totally wrong and two of the things, even though Mr. Smith disagrees with them, are curable by this board, by action today or on Friday. The first issue is whether or not this project meets the definition of project in this statute. The TIF statute says some portion of the plan area has to include either a project under the act or an industrial park. It does not say that it has to meet two definitions of a project, just one. The project is planned and this is being carried out contains commercial and retail facilities. One of the definitions of project says and Mr. Smith wants to emphasize the broadness of this language, “any land or building suitable for use by any commercial enterprise in selling, providing or handling any financial service or in storing warehousing or distributing any products of agriculture, mining or industry. There is no doubt that the commercial and retail facilities that have always been planned and will be constructed in connection with this facility meet that definition. It really is abundantly clear. The other definition that we also happen to meet although only one is required is pollution control facilities. Which are defined as including wastewater collection systems. Part of the money for the TIF will go for the sewer alongside the road up Aetna Mountain, now to be Black Creek Mountain. The second issue and this is one that the Chancery Court decided was a problem. It has to do with a conflict of interest in the opinion letter that Bassberry, Sims gave in support of this project specifically the opinion letter that said it was a project under the statute. When Miller & Martin got involved in this several years ago, they decided the TIF statute is fairly new, less than 10 years old, they decided they wanted the best law firm in the State to be bond counsel on the TIF. Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 11, 2014 Page 6 of 14 Bassberry Sims are the premiere bond counsel firm in the State of Tennessee, they are respected here and throughout the nation, worked with them entire career, when he has a really tough question he goes to them. Mark Mamantof in the Knoxville office of Bassberry was the draftsman of the section of the IDB act that allows IDB TIFs. Mr. Smith thinks he knows what Mamantof is talking about. Smith discussed this with Mamantof. Mamantof said yes this is a viable project under the TIF statute and he and George Masterson worked on this project together. The Chancellor felt that the fact that bond counsel was paid by the developers in this transaction with regard to the opinion requested that it was project. Chancellor felt there was a conflict of interest in that opinion because they were paid by the developer. All bond counsel opinions are paid for by developers or users of project. Mr. Smith does not believe this board has the financial resources to pay the lawyer and it is properly paid for by the developer. There is nothing wrong with that, if there were something wrong with that then every bond issue that he has ever been involved with would be subject to attack. The third issue which is also curable was that there was somehow a secret meeting held by this bond board. What happened was the language of the resolution that approved the document said that an opinion of counsel must be received as this qualifying as a project. That opinion was done by George Masterson. The opinion clearly stated it was a project. It was reviewed by the City Attorney Mike McMahan and it was accepted. It was entirely reasonable. The fourth is the but-for test as Mallen mentioned is not required under the statute. It would be if this were other than public infrastructure involved in the TIF money. But there is nothing but public infrastructure. It is the road and the sewer. Blight has been mentioned as being required for TIFs. Blight is not required for an IDB TIF. That is entirely clear. In conclusion, this is a substantial economic development project, government should pay for public infrastructure of this type, the TIF is an excellent way to shift the cost of the financing and construction oversight to a private sector. An elected official who voted for this project said, “you know if the developer had come to the City and County and said we need a road up Aetna Mountain so we can develop it, we would have had to build that road. We would have had to issue bonds, we would have to use our public credit, we would have to bid the job, we would have to oversee the construction, and repay the bonds. Instead under the TIF, the developer does the first four things. The developer lined up the financing of this. He oversees the construction and uses his own credit. This Board should re-affirm its earlier approval. RIC EBERSOLE Mr. Ebersole was Chairman of the IDB Board during much of the discussion in controversy concerning the Black Creek Mountain TIF development. There are a couple of points he would like to make and certainly not competent to argue with the attorneys who are presenting the various interpretations of the law with respect to the project. The Board did not require an opinion of counsel. The board required an unqualified opinion of counsel. Mr. Ebersole does not believe that we have heard a single attorney tell the Board that the Board received an unqualified opinion of counsel. Mr. Ebersole heard today for the first time that the mechanism that was used Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 11, 2014 Page 7 of 14 for closing was that the then Board attorney who was City Attorney Mike McMahan accepted the letter. Mr. Ebersole stated that he does not know if any other Board members were involved in conversations. Mr. McMahan and Mr. Ebersole were involved in what is recollected to be three conversations with Mr. Masterson regarding the letter. Mr. Masterson only recalls it as one conversation. The gist of those conversations was that the letter that the Board received is a qualified opinion. It says based on the foregoing they are of the opinion. That is not an unqualified opinion. An unqualified opinion is a relatively simple document consisting about eight lines and the Board members have seen it before. Mr. Ebersole understands why the Judge is confused. Mr. Ebersole is confused. Mr. Ebersole does not know how the issue closed. We did not have an unqualified opinion. We did not have an opinion from the Attorney General. Under what theory was the transaction closed. If any of the Board were involved in any way to correct his misunderstanding, but Mr. Ebersole does not believe any of the Board members had any communication with anyone else on the Board about the closing of this transaction until you read about it in the paper. A couple of other issues which are structural in nature. This is the way the transactions are structured which is a concern of this Board. Typically, in a transaction there is a relative degree of tension between the contractor, developer, and lender investor. That makes it unnecessary for the Board to insist on including a number of safeguards to be ensured that the amount of money being spent are appropriate for the purpose of what is being spent. Mr. Ebersole is not suggesting that anybody involved in this transaction had anything other than the very best intentions, but what Mr. Ebersole is suggesting to the Board is that the structure is subject to potential abuse. The road cost $9 million, 3,000 ft. give or take. Mr. Ebersole did a little bit of research. He did find a generic model that estimated road costs for a four lane, undivided roadway with five foot paved shoulders on either side at $474 a foot. $2 million to $3 million, but the figure is $9 million. There is a lot not included in that figure. Mr. Ebersole is not disputing the cost may in fact be $9 million. But the Board needs to see those things. The Board is authorizing taxpayer money to be utilized based on the assumed costs. Normally, you would expect the developer to put a tight rein on the contractor to hold down costs. Failing that, the investor or lender is going to be looking at those things to be sure the costs are held down. In this transaction because the parties are all related you lose that tension. Mr. Ebersole thinks that if the Board determines to go forward there are some steps that the Board needs to take to build in some safeguards. There needs to be competitive bidding. The road has to be built to City specifications. The City is going to be inspecting it anyway. Maybe the City certifies that the costs are in keeping with similar projects in similar areas. Mr. Ebersole stated that what was heard the attorneys supporting the project say, is good. But remember the words they use. The developer is expecting to do this. The developer is intending to do this. What if the developer does not do it? That is not a default under the documents. That is another safeguard to be considered if they may want to consider if they determine the project is moving forward. Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 11, 2014 Page 8 of 14 JOHN KONVALINKA Mr. Konvalinka also practices bond law. His first appearance in connection with this matter was in October 2012. It was the result of that meeting that we have a portion resolution that was passed by this Board. Because of the concern that this was a relatively new topic, it was the first TIF financing that the Board is going to be approving that you receive an unqualified opinion or an opinion of the State Attorney General. As Mr. Ebersole has told the Board, Konvalinka submits to the Board that the Board has not received an unqualified opinion. Mr. Konvalinka sent a form of an unqualified opinion. Never received any comment or reaction. Ms. Sharp has put together a package and presented it to this Board that includes the form. Number of people say what the Chancellor meant and what the Chancellor did. Mr. Konvalinka believes that Sharp has given two different documents. The order speaks for itself. She also gave the Board a facsimile in the Chancellor’s handwriting. A lot of things were said about what the Chancellor meant. On the second page of the facsimile what it says in his handwriting, “Open Meeting Law in violation, law, Ebersole.” And he is referring to Mr. Ebersole’s sworn testimony consistent with what he just said to this Board. He did not see nor did he ever receive an unqualified opinion and he communicated that to Mr. Masterson prior to the closing which was not disclosed to other members of this Board to his knowledge. On the second page, the record contains sufficient evidence that the proposed development is not sufficient to meet definition of project. And he talked about no contractual commitment. Mr. Konvalinka suggests to the Board to read. The Board will have to rely upon what you receive, but if you go back and read the economic impact plan it talks about expectations and intent. More specifically, if you look at the actual development agreement it says among other things that there are three phases to this project. The developer is only obligated to complete Phase 1. The suggestion is there is a commitment or contractual requirement under the development loan agreement signed by members of this Board. $60,000 of the $1 million was actually spent on hard costs for this road. The other portion of that $1 million is all soft costs. Everybody on this Board knows that when you get a representation that funds are going to be used exclusively for public purposes merely because the statute provides that you may be reimbursed soft costs that you knew you were reimbursing soft costs. County Commissioner Larry Henry did not know that. He said that he didn’t know that the reimbursement of attorneys fees in excess of $240,000 was going to be in the first draw request. He would not have voted for this project. With regard to the definition of the project it is interesting he disagrees that this defines a project. He told the Board in October 2012. They keep referring you back to the City and County decision with regard to this. And that there was plenty of public participation. What happened was that he does not believe that Ms. Sharp was at any public hearing with regard to the whole issue itself on the City and County level. She was allowed to express at the end of the meeting at that time there was a five minute requirement that Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 11, 2014 Page 9 of 14 they had that you could comment on. To suggest that this has been embedded in a public place, he would disagree. The Board was told what you cannot do. He disagrees with what you can or cannot do. If this Board chooses to table this issue until such time as they get further direction from the City or County that’s totally within your power. It’s totally within your power to send it back to them and say, City or County, you have the staff, you vet this. Don’t make us, who is a volunteer board that does not have staff, vet this project, require contracts, require clawback provisions, if you’re going to do this project, if they don’t do what they say they are going to do. Also, determine that there actually is a project and theres actually contractual commitments, because all youve got is a plan thats been proposed. Theres no contractual agreement to build a commercial facility. You have the Phase 1 undertaking, which would include a road and utilities. But where among the documents is there a contractual commitment to build anything, other than Phase 1 of the road? The undecipherable map thats attached to the Economic Impact Plan, you cannot tell where is Phase 1, Phase 2, and Phase 3. Thats true with even the person who gave an opinion, Mr. Masterson. Its very clear. He said he didnt know where it was. But, interestingly, he expects any member of the public to be able to do that with the public notice and the map. But somehow he is unable to do so, even though hes with a preeminent law firm in the State of Tennessee, if not one recognized in the nation, as to how TIFs work. Yet, he cant tell us. He can tell us there is, and he did tell us there is, no requirement that any construction be done at a fair market value. The escrow and disbursement agreement that was signed, first of all, with regard to transaction costs -- it defines transaction costs, which are the costs that were talking about in part, with regard to these legal fees. And that transaction cost is defined in that document, refers you to – a definition in the escrow and disbursement agreement refers you to a schedule. And the schedule is Schedule G. And Schedule G is blank. Theres nothing there. Nothing at all. The Chancellor decided this was null and void and suggests that you cannot send it back to the City or County, I do not think is correct. Show the statute that says you cannot. Show me the rule of law or the case law that says you may not. The defense counsel have said there have been no violation of law, and the Judge said there has been a violation of law. What you can do as a Board is that you can make a decision not to make a decision until the Board gets further direction from the City and County. We will have a situation where the City and County promise something from day one and this is going to be a setback. They knew about this in October 2012. The developer and whomever chose to close before this Board voted on it. As soon as it was discovered, two days after another public meeting where it was not even mentioned, in February of 2013, that issue was closed. A lawsuit was filed in March. This thing has been in contest and that was the reason he showed up in October 2012 and apparently there have been no decision by this Board with regard to that. It’s not a question of what was acceptable it is a question of whether or not did you get what you asked for in the way of an unqualified opinion. Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 11, 2014 Page 10 of 14 JEFF PERLAKY (PROPERTY OWNER/AETNA MOUNTAIN) Mr. Perlaky stated one of the concerns is that the TIF map shows them losing access, via Aetna Mountain Road, to the property. They believe that is a violation of the 2010 court order. If the TIF is approved by the City, they will have no choice but to file a lawsuit because they want to protect their assets. He would encourage the City to explore this before they approve the TIF because the TIF is a violation of the 2010 court order. COUNCILMAN CHIP HENDERSON Councilman Henderson represents District 1 where this project lies. He has received numerous phone calls and e-mails from concerned citizens. Councilman Henderson read a letter by Councilman Ken Smith District 3: Since taking office last year, I have worked hard to ensure City government is more transparent and accountable in how its leaders spend taxpayer resources, especially when it comes to funding nonessential projects and services. As an elected official for the City of Chattanooga, it is also incumbent upon me and other Council members to answer questions coming from the public and, when needed, quickly reassess decisions made by prior City Councils to address their concerns. These two guiding principles are why I feel compelled to send this letter stating my strong opposition to the IDB spending additional taxpayer resources to appeal Chancellor Frank Browns ruling that overturned the $9 million Tax Increment Financing incentive for the Black Creek development on Aetna Mountain and strongly encourage its members to delay any further actions on this issue, pending input from City Council. I made this request after reading the full opinion from Judge Brown, where the facts clearly show there are multiple legal issues that remain unanswered and a valid challenge whether or not this project even complies with state laws. From my perspective, these and other reasons cited by Judge Brown clearly necessitate a second look by City Council, especially given how there is no independent review and analysis about the legitimacy of the project and little, if any, of oversight and accountability measures for this incentive. I hope that the IDB will agree with my position and postpone action on its vote to appeal the lawsuit, so we can address and answer these critical questions raised by Judge Brown. Should the IDB feel compelled to vote on the judges decision on August 11, I would urge the IDB to vote no on this issue and reject the original TIF incentive. If the IDB believes this incentive is valid and deserves support, I Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 11, 2014 Page 11 of 14 request that the incentive should be sent back through the full review and approval process by all parties, including the City Council. As always, I appreciate your service to our community and actions to make it a better place to live and work. If you have any questions or would like to discuss this issue raised in my letter, please feel free to contact me at your convenience so we can discuss the issue further. Councilman Henderson is concerned that the City is named in the lawsuit. The process is what Judge Brown found to be in violation. He believes the violation in process merits a second look by City Council. Councilman Henderson asked that the Board send this back to the City Council for a second look. LEONARD NIXON Mr. Nixon’s family owns property adjoining Black Creek Mountain. It is the side of the mountain, and all the way up and down. Two basic things have been left out that are important. One is there has been an old road there for 150 years. The landowners that have owned it, all four of them, have refused to maintain it for 15 years, going back to Gordon Street. When he bought it, he put the gate up and locked it. After him came Jim Chapin, and he blocked us off, put some people in jail for crossing it. Doug Stein and now this group from New York owns it. That road should have been rocked, paved, etc. His purpose here is to talk jobs, jobs, jobs. Two there is a rock quarry (manufacturing facility), asphalt plant, concrete. They support the growth of Chattanooga. They have 40 people on the payroll and 60 trucks running out of the park. In the real estate business there are a couple of old adages. One is that nobody wants a garbage dump or a rock quarry in their backyard and a rock quarry does not want a million dollar house in its backyard. They are going to build million dollar houses on top of the mountain looking directly into the quarry. Mr. Nixon does not want his quarry shut down. There would be 40-60 families that will no longer have a job. Mr. Nixon disagrees that this should be a TIF. PETER DALE EHRONBERG Mr. Ehronberg lives in East Ridge and is looking for a lot in the City to build a LEED-certified Survey-of-Smart-Home qualified home. Mr. Ehronberg addressed the developer. The developer already has a 2,900 acre conservation area, and they will be cutting it down to 1,300 acres. The conservation area will be available for public use. There will not be a gated community for the executives. Everybody has to go back and evaluate which shows strength. People don’t just want to rubber stamp something. There is nothing wrong with re-evaluating. Generals do it in the army. There is no need for public money. Other neighborhoods need relief. An example of the Detroit planning model was given. Develop communities that are strong. Many people have given up on life. The community has to come first. Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 11, 2014 Page 12 of 14 DEBORAH SCOTT Ms. Scott stated there are three flaws but is only going to talk about four because one has already been mentioned. This is a TIF which has been advertised as a public project and that was never requested by the public. The majority of the public does not want it. The TIF pays the developer’s costs. Ms. Scott was concerned about their responsibilities had they been annexed into the City. Public Works said there was nothing to worry about, that the developers were responsible, they would build the infrastructure, and it would be turned over to the City. Ms. Scott voted to annex this property because it was a voluntary annexation. Sewer in the City is compromised and has been compromised. Another concern is overflow into the Tennessee River. This program did not go out on open market, was a specific buyer of bonds, and was bought completely by the developer. Sewer issues were explained. This project really has a questionable economic impact plan. If the second and third phase of the road does not get built, there is no road to reach what is the prize. Facilities have been built by the City with very complicated tax deferment plans and have debt. The TIF is increasing the load. Incremental taxes will be going to pay off debt so the money has to be spread. This project really was not well-vetted. Since Ms. Scott sat on the City Council this was a rushed, high-pressured job from the very beginning. There was discussion about more time needed. The vote was five, two, one, one. There was a rush to vote and coaxing was mentioned. Ms. Scott asked for an extension to speak. Ms. Scott thinks the public’s legal advice has a potential conflict of interest. Who can we trust? The public should not be forgotten. Ms. Scott implicitly trusts that the Board is trying to do the right thing. Ms. Scott urged the board to be cautious about stepping out of the box commonly known as state law. Ms. Scott said that you are blind-sided and is sorry for that. This is not a high priority project, it competes with existing businesses, it is poorly written, and it promotes number four, special favors for special groups. The logical choice is to table the TIF. COUNCILMAN LARRY GROHN Councilman Grohn represents District 4. Mr. Grohn said the Council that approved this TIF is no longer in existence. Immediately after approving this TIF, that Council placed a moratorium, which still exists today, on all TIFs because they felt they did not have enough information to properly make a decision. This is a poorly written document. Mr. Grohn stated that the very esteemed City finance official, Daisy Madison, has come before this Council and previous Council and stated that these types of tax incentives cannot continue, that the City cannot afford, and the financial expenses related to services such as to this project were coming to roost, and that the City could no longer give out pilots, and in this case, the TIF, as they have been doing in the past. Mr. Grohn encouraged the board to heed and take seriously the advice received. Mr. Grohn thanked the Board. Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 11, 2014 Page 13 of 14 JAMES MAPP (PRESIDENT) CHATTANOOGA/HAMILTON COUNTY BRANCH NAACP The NAACP are strong on four issues. (1) Public purpose; (2) Public benefit; (3) Public costs; and (4) Transparency. The NAACP has a lot of re-gentrification and gentrification with no housing of the moderate – local moderate income variety being built for those who are being displaced in the City. Mr. Mapp stressed transparency. The County has failed to provide schools in a fashion that would benefit all students. FRANKLIN McCALLIE After Ms. Scott talked, Mr. McCallie is not sure what there is left to say. Mr. McCallie was thrilled to hear new information and firsthand information. A mistake was made. This is not a TIF project. The taxes up there to pay for the road are from the taxpayers. He hopes they build it. Taxpayer money should not be in this. Let’s be fair. ROBERT BERGHEL Mr. Berghel had some general questions. Mr. Miller answered the questions. The bonds are not recoursed to the City. The bonds have already been sold. Mr. Alfred Smith then answered Mr. Berghel’s questions. The bonds have been sold and there is no obligation to the City or County. The IDB has a nonrecourse obligation. Only the incremental taxes from the planned area go to repay the bonds. If the road is built and the bonds and the incremental taxes are not sufficient to pay the debt service on the bond over an 18 year period, then it is the developer’s entity who loses the money. Mr. Konvalinka rebutted. Mr. Konvalinka stated that this is correct in part. It is a 21 year term on the bond issue, so the incremental tax over and above the existing tax, that is there for 21 years goes first to pay not only the bonds, but also interest, at a rate of two percent above the prime rate which is a favorable rate to another related party. PATRICK KELLOG Mr. Kellog thanked Councilwoman Deborah Scott. Mr. Kellog has also sat in the audience during the times in which this issue was presented to Council and had some sincere reservations. It is very telling that after the project was approved the moratorium was placed on TIFs. Mr. Kellog spoke of public benefit, opportunity costs, and whether monies are being allocated correctly. Promises were made. Some research needs to be done. We should allow these types of projects and let’s see how this benefits residents who reside in the true City of Chattanooga, in its urban core. Minutes of the Special Meeting of the Board of Directors of the Industrial Development Board of the City of Chattanooga August 11, 2014 Page 14 of 14 MICHAEL MALLEN Mr. Mallen clarified a comment that the amortization period on the bonds have a 20 year term and do not exceed 20 years. JEFFERSON HODGE (CHATTANOOGA ORGANIZED DIRECTION) Mr. Hodge spoke about development, income inequality, and introspection. JOE BLEVINS Mr. Blevins said there is an empty seat. There ought to be someone sitting for the company that is actually benefiting from this TIF which is York Capital. The seat from the person that benefits from this TIF is not filled. ERIC ATKINS (NAACP) Mr. Atkins inquired as to whether the minutes of the proceedings were going to be available to the public, and Mr. Miller said they are available. At this point, the Board recessed, with the attorney/client privilege meeting. Mr. Miller clarified that no decision will be made today but after the recess stated that the meeting will resume or reconvene on Friday, August 15th at 11:00 a.m. Mr. Konvalinka asked, for the record, is it fair to tell what attorneys did you meet with. Mr. Miller stated no and that would be done on Friday. The meeting was adjourned at 1:25 p.m. ________________________________________ Chris Ramsey, Secretary Industrial Development Board APPROVED: _____________________________________ James Miller, Vice-Chairman Industrial Development Board
Posted on: Sat, 30 Aug 2014 13:07:45 +0000
Trending Topics
Recently Viewed Topics
© 2015