Kingsport BMA tackles 'nightmare' on Roller Street

Matthew Lane • May 8, 2013 at 6:44 PM

KINGSPORT — You would think Kingsport selling a surplus piece of property to Food City would be a routine matter and not something that lingers for months and has the Board of Mayor and Aldermen bitterly divided.

But when you add East Tennessee State University, the carousel project and Mayor Dennis Phillips’ son James into the mix, that’s exactly what’s happened.

“This has been a nightmare,” Phillips said Monday following a 45-minute BMA discussion on the matter.

The property in question is two empty lots on Roller Street, given to the city of Kingsport by Quebecor World as part of the 20-acre Quebecor site. The lots are empty, had previously been used for parking and were declared surplus by the city more than two years ago. In that time, Kingsport had received no offers on the property.

Last fall, Phillips pushed for the properties to be included on a list of surplus properties the city could potentially sell, noting at the time his son James might be interested.

Around the same time, other activities were taking place that could ultimately affect the future of the Roller Street properties — Kingsport and Phillips were working with ETSU to bring a campus to downtown Kingsport, likely at the new Food City shopping center. If that occurs, additional parking will be needed.

Lou Scudere, vice president of real estate at Food City, said on Monday the “general impression” was Food City could use the Roller Street property for parking, even though no formal agreement existed with the city. Only in the past few weeks did Food City realize the property may not be available for parking, Scudere said.

Another sticking point is the carousel project. Last year, Engage Kingsport agreed to keep the carousel at the farmers market site, but requested that the city build an adjacent park. This required a small sliver of property along Clinchfield Street, purchased from the city by Food City three years ago.

City Manager John Campbell has been negotiating with Food City for several months regarding the Clinchfield property, with the preferred choice being a swap for the Roller Street property. After months of talks, a deal has yet to be struck. Phillips has been critical of the negotiations and has pushed for something to be done with the Roller Street properties.

Last month, the BMA informed Campbell to auction off the properties with Phillips declaring no member of his family would be bidding. However, in an email to other BMA members, Campbell and City Attorney Mike Billingsley, Phillips explained his son’s intent to bid on the properties.

“Due to the fact (James) is 31 years of age, has his own means of paying for the property and is not under my control, legally I do not have the authority to keep him from bidding,” Phillips wrote in the email. “It is very important to me that this be done fairly and without favor to anyone in my family. I will ask that I not be involved in the signing of any documents or participate in any discussions concerning this property should our son be the winning bidder.”

On April 30, Kingsport held a public auction for the two properties with the two bidders being Scudere and Blue Ridge Properties agent John Moody (who represented the mayor’s son). After bidding back and forth a few times, Scudere had the high bid on the larger lot at $115,000 or $24,000 over the appraised value. No one bid on the smaller Roller Street lot.

Prior to the auction, Billingsley announced to those present that per city ordinance, other bids could come in following the auction and could be considered by the BMA.

Which is exactly what happened on Monday when James Phillips made a counteroffer on the larger lot for $150,000.

“I plan on building 28 to 36 apartments on the site and maybe a small dog park. I have nothing but love for Food City,” James Phillips said.

During Monday’s work session, Alderwoman Valerie Joh (the designated alderman for property) and Phillips indicated they had spoken with Billingsley about the property and that they were going to recuse themselves from voting on the matter. Joh said that she was recusing herself because Moody represented James Phillips in the auction and that she still has vested interest in Blue Ridge Properties.

But that didn’t stop a nearly 45-minute discussion taking place on the matter Monday afternoon.

Alderman Jantry Shupe came out in strong support of Kingsport selling the property to Food City.

“The concerns I have heard, before Food City ever built, was the understanding parking would be available on the Roller Street property,” Shupe said, adding Food City left last week’s auction with the understanding it had bought the property.

Billingsley explained how the auction was not “absolute” and how offers could come in after the fact. Billingsley continued by saying the BMA — per city ordinance — can choose to dispose of the property in any way or not at all.

“Personally, I’m concerned we’ve moved too rapidly, without enough consideration for Food City,” Vice Mayor Tom Parham said. “We have a strong responsibility to go back and check what our needs and commitments are.”

Mayor Phillips agreed that Food City is a good corporate citizen.

“But this city ... we have a piece of property we declared surplus and not one person objected until the last meeting. Don’t we have an obligation to get the maximum amount of dollars out of it?” Phillips asked. “We’re leaving money and future tax revenue on the table.”

Joh confirmed that for nearly two years after it was declared surplus, Kingsport received no offers on the Roller Street property. Campbell and the BMA have said they forgot the property had been declared surplus.

“(Food City’s) understanding ought to be considered from day one,” Shupe said.

Phillips said the situation has been botched from the very beginning.

“It has divided the board and if I could do anything about it, I would tell James to forget it,” Phillips said. “It’ a shame we have to sit here and go through this. It’s an embarrassment to this board.”

Aldermen Tom Segelhorst, Mike McIntire and John Clark remained fairly quiet and neutral during the discussion.

“I’m wondering if we should reject both bids and go back and do it right.” Segelhorst said.

In the end, the BMA reached a compromise by agreeing to remove the surplus designation from the properties and either lease the property to Food City or keep it until the actual parking needs of ETSU are determined.

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