The Kingsport Economic Development Board Tuesday morning unanimously voted for a resolution outlining the PILOT — payment in lieu of taxes — agreement.
The agreement says that in the first year, the city and Sullivan County will receive $200,000 in additional property tax revenues from the redevelopment beyond what taxes they currently collect on the mall.
In the 11th year, when the PILOT expires, the new taxes generated will be $1.7 million plus the base amount.
However, Jeff Fleming, assistant city manager for development, said the numbers used were conservative and did not include the planned development of three or four outparcels.
KEDB Chairman Larry Estepp said that means the reduced payments could end sooner because of additional property taxes generated by the outparcels.
Fleming said the mall deal marks the fourth in-lieu-of-tax agreement the city has done, and every one is different.
For one thing, he said the increment of new development is going 45 percent to help repay redevelopment expenses and 55 percent to city coffers, compared to 100 percent of the increment that went to development costs for the TIF or tax increment financing deal for East Stone Commons, formerly the Kingsport Mall.
“Things are progressing forward well,” said Jake Farver, vice president of mall owner Somera Capital Management, adding that officials are close to announcing the development going on one of the two outparcels at the intersection of Fort Henry Drive and Memorial Boulevard.
General Growth Properties markets the mall.
Originally, J.C. Penney had planned a new store, but the retailer recently decided to renovate and expand the existing one.
That dropped the total PILOT amount from $5 million to $3.5 million.
J.C. Penney is to expand its space from the existing 87,000 square feet to 104,000 square feet, adding to the Memorial Boulevard side of the store.
Fleming and Estepp emphasized that the PILOT avoided letting the mall become a blighted area, which the old Kingsport Mall did before developer Roger Ball and his partner redeveloped it with mostly new buildings.
Somera paid $52 million for the Fort Henry Mall, which the county values at $33 million for property tax purposes, and plans to spend $30 million on improvements, not counting four outparcels and the J.C. Penney project that could bring the grand total to $45 million.
In other action, the board:
• Approved facade grants of up to $5,000 each for properties owned by George W. Taylor Jr. at 119, 117 and 113 Shelby St. The money is paid after the work is complete. The total work on the three properties is to be about $60,000, said Bob Feathers, chairman of the Facade Committee and vice chairman of KEDB.
• Approved a reimbursement of $2,414.29 for facade work at the 345 E. Sullivan St. building owned by Aaron Carson. Feathers said Carson spent $4,828.58, and the grant pays for up to half the cost of facade work, with a cap of $5,000 per building front.
• Approved a $1,495 redevelopment incentive fund for $14,850 in work done by Cindy Saadeh at her properties at 126-128 E. Market St. and 210 Commerce St.
The new grant program covers 10 percent of redevelopment costs and is designed to help offset things like demolition and demolition landfill costs.
• Increased the total amount available for buying property to expand the V.O. Dobbins Community Center to $240,000.