Chattanooga development firm Rise Partners has reached an agreement with the city of Chattanooga to revitalize an obsolete Hixson industrial site that once employed more than 5,000 workers.
The project will address a shortage of industrial sites in the city, which has lost a number of projects due to lack of available space, says Chattanooga Mayor Tim Kelley.
For example, employment at the former Dupont facility, which was constructed at the end of World War II and once employed thousands, has dwindled to fewer than 500 workers under a succession of owners.
“At a time when Chattanooga has lost potential employers because of the lack of Class A industrial space, this project represents a major stride toward attracting good-paying jobs,” Kelly adds.
The $100 million project will replace the existing nylon production facility with 800,000 square feet of modern Class A industrial space and potentially create up to 600 direct jobs, not including additional indirect jobs and construction work.
As part of the agreement, Rise Partners is also in talks to preserve additional land along the river for green space.
The city will spend no cash as part of the deal, notes Kelly in a news release. Rather, the city is enabling the project to take place by giving back a portion of the increase in taxes, or tax increment, that occurs as a result of improvements to the site, giving the developer time to complete the project and bring in a tenant.
This funding mechanism, known as tax increment financing, is designed to allow cities to revitalize blighted industrial sites and spur economic development that will create jobs and bring in new property tax revenue.
Through this mechanism, all current tax revenue from the site continues to flow into the city and the county, including the school system. As the taxable value of the site increases, about half of the new tax revenue goes back to support the construction project, while the other half of the new tax revenue flows into Hamilton County Schools and the city budget.
Specifically, 100% of all existing tax revenue will continue to be collected by both the city and the county. Over the course of the project, the city will keep 40% of all new tax revenues, with 60% of all new tax revenues going back to support the project.
Hamilton County will designate the regular amount of new tax revenue – 45.2% percent – to support schools, with the rest going toward the project.
The city and county will begin collecting 100% of both existing and new tax revenue once $10 million in incremental revenue has gone back to the project.
“This is an opportunity for the city to move a much-needed industrial project forward without giving up current tax revenue and allow the site to fuel itself through its own growth,” says Jermaine Freeman, senior adviser for economic opportunity and interim administrator for the Chattanooga Department of Economic Development.
“Much like Enterprise South, which attracted Volkswagen by incorporating both a green space and a developed industrial space, this project can stimulate the creation of modern industrial jobs that are critical to Chattanooga’s future.”
Rise Partners has an option to buy the 88-acre parcel currently owned by Kordsa, which will be converted into a purchase when the tax increment financing agreement is complete.
Chattanooga’s Industrial Development Board is overseeing the tax increment financing process, which the Chattanooga City Council must approve.
Sources: Rise Partners; office of the mayor