8% increase would not come out of tenants’ pockets

JOHNSON CITY, Tenn. (WJHL) — The Johnson City Development Authority (JCDA) will ask the U.S. Department of Housing and Urban Development (HUD) to approve rent increases for the John Sevier Center apartments that would yield an estimated $146,000 a year.

If approved, it would follow on last year’s roughly 70% rent increase that brought a much-needed boost to Sevier Center revenues. Operating the center has been a financial strain for the JCDA since it purchased it in 2019, with rent revenues generally failing to keep pace with overall costs that have been driven up consistently by major repairs and improvements.

Through nine months of the Center’s fiscal year, it has spent $475,000 on capital expenditures, which is about 12 times the budgeted amount of around $40,000.

“Spread out across the year it would help, but it is not a windfall,” JCDA Executive Director Tish Oldham told commissioners Friday just before the approved making the request. “It would just help us continue to do what we’re doing on operations.”

The so-called “mark up to market” rent request, if approved, would likely become effective in August for the 150 subsidized apartments in the downtown high rise. It would not increase out of pocket rent payments by the center’s disabled and elderly low-income residents. HUD subsidized the difference between income-based payments from residents and its approved fair market rent.

The total rent on the center’s 63 studio apartments would increase from its current $965 a month to $1,055. One bedroom apartments that rent for $1,050 would bring in $1,125.

“We can pretty much assure that you will get it at this time,” LHP Capital’s Alvin Nance told commissioners. LHP has operated and managed the Sevier Center since early 2022. LHP is also leading the complex process of securing tax credits and other loans and constructing replacement housing for the John Sevier.

The “Tapestry at Roan Hill” will consist of two buildings adjacent to the Food City supermarket on South Roan Street. Nance told commissioners that process is still on track for construction to begin in early 2024 and occupancy in late 2025.

The extra income would be about equal to an amount the JCDA has been spending monthly on private hired security for the Sevier Center since January. That service, provided by the Harrell Group, cost more than $15,000 in March but has made a marked difference in resident safety according to LHP and JCDA commissioners.

Even with a roughly $750,000 bump to revenue from last year’s rent increase, the JCDA has also had to turn to the City of Johnson City for additional funds, resulting in a $1.7 million amendment to the city’s current year budget for John Sevier-related expenses.

They include $400,000 for elevator replacement and another $1.33 million for a loan from the Industrial Development Board related to the new apartments.

JCDA already is laying the groundwork for marketing the John Sevier, a former hotel that’s 98 years old, to developers after the residents get new digs.

Commissioners also discussed the recent decision by Northeast State Community College to not renew its lease there, which came after a market study showing a fair lease amount would be around $30,000 a month. Northeast had been paying $1,000, and the lease had included access to a parking garage with more than 300 spaces.

Longtime JCDA commissioner Robert Williams said he believes the 36,000-square-foot building’s commercial potential is much greater now than it was when Northeast State moved in eight years ago. Controlling the parking garage will also be a key to marketing the John Sevier.

Williams said the campus “has not had the economic impact that we had hoped at that time, and so I really view this as positive. I think it’s a great opportunity for the city and the JCDA to have a greater impact downtown.”

Oldham and Johnson City’s economic development director, Alicia Summers, will meet weekly to work on strategies for filling the center’s space.

“I think we’ve worked hard to try to identify the opportunities for the space,” City Manager Cathy Ball said. “We’ll continue to do so, and I think it just means we’re going to have this on our plate over the next several months to find the best use we can for it.”

The Northeast State lease expires at the end of December, but the college is not going to use the space this summer or fall and could exercise a 90-day out.