By Dave Ongie, News Editor
Last Thursday night, the Johnson City Commission unanimously approved the boundaries for a retail and tourism district that will cover roughly 950 acres around Exit 17 in Boones Creek upon third and final reading of the ordinance.
The vote paves the way for what city leaders hope will be a massive retail, entertainment and dining district on the north side of Johnson City that will have the potential to attract tourists and entice young professionals to put down roots in the region. A percentage of the state’s portion of sales tax generated in the district will be sent back to the city, which can use that money to offer incentives to developers to help offset the cost of land acquisition, engineering, construction and even improvements to existing infrastructure.
City manager Pete Peterson said getting the district approved under the terms of the Regional Retail Tourism Development District Act is a two-pronged process. The first step is getting the boundaries the commission approved last Thursday night certified by the commissioner of the Tennessee Department of Revenue.
Peterson said he has kept the commissioner’s office appraised of the boundaries and is confident the map will be approved.
“They’ve seen the map, and they’ve vetted the map for accuracy,” Peterson said during a meeting with state legislators earlier this month. “They are good with the map we’ve got laid out. Once we get it approved, I don’t think we’re going to have any problem whatsoever with the department of revenue turning that thing around really quick.”
The second component of approval process is the submission of a proposed development within the district. The state will need to be convinced the development submitted by Johnson City will be able to help satisfy stipulations in the bill that require the new district to generate at least $20 million in capital investment, have the ability to attract one million visitors and generate $2 million in state sales tax revenue per year.
In order to satisfy the second component, the city is sending preliminary plans for a 100-acre development proposed by Mark Larkey, Joe Wilson, Bryan Sangid, Bucky Mabe and Clarence Mabe to the state. Peterson said that project has taken shape in recent weeks, and he’s hopeful the research done by the developers will be complete enough for the state to sign off on the district and allow development to begin.
Once the district receives final approval, the city will have a 30-year window to draw upon state sales tax dollars to use as incentives for developers building in the district.
With the approval process moving on to the state level, here are three important things to know about the proposed retail and tourism district.
1. It was always “Boones Creek or Bust”
Despite an 11th-hour call for the commission to delay the third reading of the ordinance to consider whether the Boones Creek exit was the best location for the district, Peterson was adamant that Boones Creek was the only viable location.
First of all, Peterson said the high per-capita household income in the five-mile radius around Exit 17 makes Boones Creek attractive to retailers and owners of entertainment and dining establishments looking to move in to the area.
“We’ve recognized for 30 years that the Boones Creek corridor was the next major growth area,” Peterson said. “The retailers are driving that. There’s no local developer or the city driving the location of this kind of development.”
Also working in Boones Creek’s favor is the stipulation in the bill that Johnson City will receive only the incremental growth of the state’s share of sales tax dollars generated by the property included in the district.
Right now, most of the land in the proposed 947-acre district is vacant, and therefore generating no sales tax revenue. That means when that land is developed, 100 percent of the sales tax revenue generated on those properties will represent growth, which maximizes the state dollars that will flow back to the city to be used as incentives.
“You capture 100 percent of the state’s share of the sales tax when you develop a green site,” Peterson said.
So while multiple exits along I-26 could have theoretically qualified under the language of the bill, none would have been as lucrative as Boones Creek. For example, Peterson pointed to the North Roan Street exit, which is already developed. The cost of purchasing an existing building, demolishing it and redeveloping the property is much higher for a developer than starting from scratch on green space.
Moreover, if that property was generating a million dollars in sales tax revenue for the state the year before, the city would essentially be putting itself in a million-dollar hole since the new venture would have to generate over $1 million in state sales tax revenue before the city would start accruing state dollars.
As for the notion the district could have been used to bolster the efforts to revitalize downtown Johnson City, historic zoning would compound the issues listed above.
2. The economic impact could be substantial
Every state bill is analyzed by the comptroller’s office in order to determine the financial impact to the state. The analysis of the Regional Retail and Tourism Development District Act provided some data on the potential economic impact the new district might have for Johnson City and Washington County.
In order for the state to approve the district, it must be determined the development of the area is capable of generating $2 million a year in state sales tax, which would require $30 million in retail sales per year. If that threshold is met, Washington County could expect an additional $195,000 per year in sales tax revenue.
That scenario would provide the city with $375,000 of sales tax revenue each year for its general fund and $180,000 per year in additional funding for Johnson City Schools. Peterson reiterated last week that none of the city or county’s portion of sales tax dollars will go toward incentivizing development.
When you factor in the potential property tax revenue that would be generated by having an estimated $50 million worth of new construction in the district, Washington County would collect $430,000 each year in property taxes with the city taking in $375,000.
“It’s not a win or loss deal, it’s a win-win,” Peterson said.
Aside from tax revenue, Peterson said he sees the new district is another tool to help attract and retain young professionals, and it will also make it easier to attract employers to the region.
“Developments like we’re talking about at Boones Creek will hopefully help address some of those issues and present some entertainment and shopping and dining opportunities that don’t already exist here,” Peterson said.
3. Opportunity knocks, but landowners don’t have to answer
While several properties included in the proposed boundaries of the district currently sit outside the city limits, any proposed developments have to be within the city limits in order to be eligible for incentive money.
However, Peterson said the city won’t apply pressure to landowners inside the district boundaries who choose to remain in the county and leave their land undeveloped.
“We’re not asking anybody to request annexation,” he said. “We’re not going to force annexation. We’re not going to force a change in land use. We’re not going to go out and change zoning unless we’re requested to.
“It’s basically a tool to have in our economic development tool kit. We don’t have to use it. It’s just an opportunity to create some very significant positive economic development.”