JOHNSON CITY, Tenn. (WJHL) — The Johnson City Development Authority (JCDA) is ending the current fiscal year with very low cash reserves and large deficits, but the year that starts July 1 should turn out much better, JCDA Chairman Hank Carr told board members Thursday.

“You just need to understand it’s tight, it’s been tight for several months and it’s going to remain tight until hopefully the September-October time frame,” Carr said.

Carr was referring to a potential large increase in rental revenue from the JCDA-owned John Sevier Center (JSC) that could be approved as early as the fall. Near the end of Thursday’s meeting JCDA commissioners authorized Carr to make that application to the U.S. Department of Housing and Urban Development (HUD).

The JSC, which JCDA purchased in 2019, is running a deficit of about $527,000 through 11 months of the fiscal year. If the “mark up to market” request is approved, HUD-subsidized rent would increase to $990 for efficiency apartments and $1,075 for one-bedrooms in the 150-unit downtown high rise.

The John Sevier Center passed a crucial HUD inspection this week, passing an important hurdle in the journey to getting new housing built for its low-income residents. (WJHL Photo)

The JCDA operating fund is also nearly $100,000 in the red through 11 months of the fiscal year, but the City of Johnson City has approved a significantly larger contribution for the year that beings July 1.

The JSC’s low-income residents, who will have the opportunity to move to a newly built apartment complex off of South Roan Street by around the end of 2025, will not see their out-of-pocket rent change even if HUD approves the request.

What that change would do is add about $66,000 to the JSC account’s monthly revenue — nearly $800,000 a year.

“It’s enough to really change how the John Sevier operations from a cash flow perspective,” Carr said.

If approved, the increase will be retroactive to Aug. 1, 2022. Carr essentially acknowledged that the current revenue from the JSC hasn’t been enough for the JCDA to manage the building at the level it should. And for the past several years, JCDA has tapped reserves and received cash injections from the City of Johnson City just to address significant problems in the building that have cost more than $1 million if a planned elevator fix is included.

“If we get this approved, another important step in the process,” Carr said. “That’s additional revenue that’s going to come into the John Sevier that will begin to help us manage this property correctly.”

The last time JSC had a rent increase was 2014, and Carr said the pending request is only possible because the building received its first passing Real Estate Assessment Center (REAC) score since 2012 just last week. Property owners can’t ask HUD for market rate increases unless their property has a passing REAC score.

Carr said the success was due in large part to the investments JCDA has made to the building and the guidance of LHP, the company that is building the new apartments and has also managed the JSC since April 2021.

JSC failed REAC inspections with scores of 46 in 2017 and a 47 in 2015. Its 2012 score was 96 and last week’s score was a 69, which is nine points above the minimum passing score.

That passing score not only unlocked the chance to ask for higher rent, it allows for the transfer of the Housing Assistance Payment (HAP) contract to LHP and to the new site once that is ready.

“You need to just reflect on the things that you’ve accomplished, the steps that you’ve taken, the victories you’ve had, and there have been some setbacks,” Carr said to board members.

“We’re not done with challenges, but I still believe as I sit here today, the residents of the John Sevier are winning. We’re doing everything the right way. I didn’t say the easy way, I just said the right way. So I’ll say thanks again to this board for sticking with it, for depleting your reserves to get there. That’s a big challenge.”

Carr and LHP representatives both said the first written notice June 17 about the rent increase wasn’t well communicated and created anxiety among residents. LHP is meeting with residents June 30 to answer questions, and resumption of a resident newsletter is also in the works.

One board member, though, said she’d like to see even further efforts to connect with residents, who have complained about both security and safety concerns and about the building’s condition. Jodi Jones said such efforts were beginning in the months after JCDA’s purchase of the JSC but were kind of waylaid by the COVID-19 pandemic.

“There’s proactive, which is seeing something that needs to be communicated before,” Jones said. “And then there’s another, richer more nuanced layer of relationship with the residents that creates a rapport, creates an ongoing style of interaction.”

Jones said the work it would take to accomplish that can create trust and “pathways that allow people to feel connected to what we’re doing.”