JOHNSON CITY, Tenn. (WJHL) — Business activity isn’t the only thing growing in downtown Johnson City — so are the cost of running the Johnson City Development Authority (JCDA) and the expenses associated with its biggest project ever, the John Sevier Center.
The JCDA will ask Johnson City commissioners to approve a budget for the fiscal year starting July 1 that includes 50% more for its operating budget (to half a million dollars) and $1 million for costs associated with its purchase and ownership of the John Sevier.
For JCDA Board of Commissioners Chairman Hank Carr both sides of that expense equation are part of investing for downtown and Johnson City’s future.
“There are some staff increases which have been long needed,” Carr told News Channel 11 of personnel expenses that rise from about $171,000 the current fiscal year (ending June 30) to $286,000 next year (if approved). “There’s the basic cost to run the organization as it’s changed. Both of those are justifiable and we certainly are prepared to make our case to the City Commission that none of it is frivolous.”
Carr and at least one city commissioner say they support budget recommendations made by new JCDA Executive Director Tish Oldham and her staff. Those include a proposed organizational budget hike of about $167,000 higher and the John Sevier Center (JSC) requests.
“It’s important to have people who have the experience and knowledge of a vast array of business acumen,” City Commissioner John Hunter said. “JCDA has developed into a very complex organization that’s dealing in everything from event planning to property management. That creates a level of sophistication…that’s needed in that organization.”
Carr said since Oldham took the reins in February, she has assessed needs and come up with a budget that meets those. Her written executive briefing from April 22 suggests she found much needed to be shored up and delivered a proposed organizational chart “based upon the current and expected tasks” along with anticipated goals and priorities.
“Having experienced the flow of the organization for the past two months, recommendations were based upon direct day-to-day activities and how often the organization was in a reactionary position,” Oldham wrote.
JCDA manages a complicated tax increment financing (TIF) program that has provided incentives to numerous large-scale downtown redevelopment projects dating back to around 2009. It’s also the lead organization in many of the large public events and small business development that take place in the downtown area.
“Their operations and mission has expanded and quite honestly, JCDA’s overall mission is much greater than just downtown,” Hunter said.
“To expect one or two people to be able to handle those things would be unrealistic, and so if we really want to see a successful Johnson City as a whole, JCDA being appropriately funded and staffed is a key piece to that.”
Carr said he’s confident Oldham can take a higher-funded JCDA and appropriately manage the current portfolio of tax increment financing projects while helping lead additional investment downtown. Beyond that, he said he’s excited about Oldham’s background in planning and community development.
“She has her eye on other areas in the marketplace, in the community, where the JCDA can begin to make a difference,” Carr said. “So could it grow in other areas? Absolutely. But right now we still have a very large project in front of us.”
What of the John Sevier?
That project, the John Sevier, is taking longer, bringing in less revenue and costing more than bargained for when the JCDA announced with much fanfare its purchase of the historic former hotel in September 2019. The long-term plan is to find new housing for the high-rise’s low-income residents and then sell the building to a commercial developer for what will likely be a multi-use project that could include retail, commercial, residential or even some hotel space.
Board members estimated 32 months ago it would take “at least two years to select the developer, transfer residents and begin construction at the John Sevier Center,” News Channel 11 reported at the time. Now that timeline appears to be about six years, with developer LHP Capital projecting a December 2025 completion date for new apartments off of South Roan Street.
JCDA leaders also hoped that when a developer for the new housing came on the scene, it would pay JCDA for the transfer of the so-called “HAP contract.” That contract permits the Sevier Center’s owner to receive federal income-based rental assistance payments for tenants, basically guaranteeing market-based income for each of the center’s 150 units that are occupied.
That expected windfall was built into the payment schedule for the John Sevier, with $700,000 due next March to HomeTrust Bank, the lender on the project. It eventually became clear no premium to the JCDA would be forthcoming when the deal went through.
“There isn’t going to be any revenue back to the JCDA in the short term related to the redevelopment of the John Sevier or the new housing for the residents of the John Sevier,” Carr said. “There was some anticipation that the JCDA could participate in that development process, but because of delays, because of rising costs, because of all the things that have made that project complicated, that opportunity was not realized.”
Carr said it’s possible the bank will push that due date back, but if not the JCDA will owe the money and won’t have it available without a subsidy from the city.
On top of the delays and how those are affecting the project’s financial numbers, the John Sevier was in very poor condition when the JCDA purchased it. Because the JCDA “has made a promise to put the residents’ needs first,” the organization has steadily drawn down on its reserves addressing structural and security problems.
As a result, the coming fiscal year request includes $300,000 for a camera system, roofing and elevator repairs.
“It isn’t going to end anytime soon,” Carr said. “We have four years before the new housing is done and we will have to carry that, which is part of the budget request to the city – a pretty substantial ask for some additional funds.”
Hunter said he supports the decision the JCDA made several years ago to purchase the John Sevier and doesn’t believe it was oversold.
“The opportunity to acquire it was made available and it’s a key piece of downtown’s success,” Hunter said. “The cost in my opinion is worth what needed to be done in order to ensure that that property can be maintained and put into a higher and better use while also making sure that the people that live there now can be provided with housing that’s really something that they’re worthy of having.”
In Hunter’s mind, the time is also right for increased investments in operations. He said the city’s tax revenues are strong and the budget allows for the recurring increase — and he believes it will benefit taxpayers.
“The things that JCDA is involved in have a return on the investment that’s provided them,” he said. “They are a conduit to create opportunities for residents and businesses alike to grow and to succeed in our town.”