JOHNSON CITY, Tenn. (WJHL)- Progress on a large retail development in Boones Creek is at a standstill as the Tennessee Commissioner of Revenue won’t approve the project.
The development is located off Interstate 26 near the Washington County Memory Gardens.
“Our development group submitted our development plan with all required documents as required to the City of Johnson City, who approved the plan. Then Mr. Peterson sent it to the state and Commissioner of Revenue David Gerregano wouldn’t sign it, even after an in-person meeting in Nashville,” said developer, Mark Larkey. “Mr. Gerregano said he wanted to know our specific tenants and, as is typical in these, we are under [non-disclosure agreements] with those retailers.”
Under Tennessee law, state sales tax incentives can be used to entice retail development near the Boones Creek exit.
“Without the incentive package being offered by the state of Tennessee, I think it is highly unlikely that a significant development will occur in the Boones Creek area,” said Johnson City City Manager, Pete Peterson. “I think what you would possibly see would be very small parcels being developed on an individual basis, much like some of the retail stores that are already located up and down Boones Creek Road.”
According to the Tennessee Department of Revenue, the “Extraordinary Retail or Tourism Facility” must meet requirements as outlined in the legislation to qualify for the incentives.
A spokesperson for the department said the “most notable” requirements are the development must draw at least one million visitors, generate $2 million in state sales tax and require at least $20 million in capital investment.
“[The state commissioners] have to have something that gives them the perspective that this is a project that would be beneficial and could work. It’s not something that we’re going to start and then it falls through. You’ve authorized the tax incentives and then it doesn’t work,” said state senator Rusty Crowe.
Crowe sponsored the “Regional Retail Tourism Development District Act,” and there is concern over the precedent set by the empty Tri-Cities Crossings retail space not far from where the Boones Creek Development will be.
“That’s never materialized, and so the state may be a little apprehensive because of that,” Crowe said. “But, I’ve told them ‘Don’t worry about this, this is a different project. This is the real deal. The city, the county, everyone is partnering in this. Let’s pull this together and get it going.'”
Larkey says the state’s delay has caused two tenants to back out and wants to know if previous agreements required tenants to be disclosed to the department before approval.
“There are conditions being required of us that haven’t previously been required for approval of other similar projects, most notably the crossings in Kingsport where they received an extension, and that property is still empty. There are inconsistencies that one can’t ignore,” Larkey said. “Having access to this performance-based tool allows Johnson City to now to be competitive for experiential retail that people want today and are traditionally only in larger metropolitan areas, and now Nashville won’t allow it to be used in Washington County.”
But Crowe says another state law might help the project move forward.
“There is precedent, obviously, for these non-disclosure agreement situations and for companies not wanting to make public what they’re doing before they decide to do it. Obviously, that’s why we had to pass that law years ago that says you can talk to the state, and it will all be kept confidential,” Crowe said. “They can go ahead and talk to these commissioners without really breaking those non-disclosure agreements because the state has a law that says that can be kept confidential. I think maybe we can bring them together and we can try to get this done.”
Peterson confirmed that the developer is aware of the state keeping the information confidential.
“They’re a part of putting these types of deals together, and they’re not bound to make all of that information public until it’s time to announce the project, so that possibility or that occurrence has been pointed out to the developers by the commissioners and everyone is aware of that,” Peterson said.
With the project being in the works for more than two years, the developers, local and state officials are eager to get the project approved.
“The department has communicated that approval of the project depends on a specific development plan that clearly meets the requirements of the Public Chapter. The department does not otherwise have the authority to approve a project,” said Kathleen Jacob, the Public Information Officer for the Tennessee Department of Revenue. “We remain committed to working with Johnson City in any way possible to fulfill the goals of the Development District law.”
Although time seems to be of the essence, Peterson says the incentive opportunity will be around for a while.
“The legislation and the zone is good for 30 years, and the clock doesn’t start running until the commissioners give final approval on a project to move forward. While it’s not happening right now, it is not in any way precluding a development from occurring at some point in time,” Peterson said. “We’re very hopeful the developers and their tenant mix can come to an understanding that it is safe to turn this information over to the state of Tennessee and that the information will not be released until an official announcement is agreed upon.”