KINGSPORT — An $18 million residential development, with 90 new homes, could be coming to the site of the former Stonegate Plaza off Highway 11-W at the Interstate 26 interchange.
The new builds would be three-bedroom, two-bath homes and are estimated to be priced from $215,000 to $265,000.
Redevelopment of the site depends on approval by the Kingsport Board of Mayor and Aldermen and the Sullivan County Commission of tax increment financing for the project, which is being called West Gate.
Tax increment financing (TIF) allows local governments to pledge growth in property tax revenues that result from increased value of property because it is redeveloped to help offset the cost associated with redeveloping a blighted area. Those costs are often seen as prohibitive by developers, compared to using “greenspace” property.
With TIF, property taxes continue to be paid, but for a set amount of time after a project is completed. An agreed upon portion of the new taxes generated is dedicated to help pay off redevelopment costs.
In this case, the developers are asking for $1.2 million in TIF money (for their $18 million project) with a payback period not to exceed 15 years.
The Stonegate Plaza Redevelopment District was designated as such by the Kingsport Housing and Redevelopment Authority in 2002. The district originally contained the former Stonegate Plaza, a shopping center anchored by a Walmart. The company vacated the property prior to 2002, and that portion of the shopping center has remained vacant since.
The redevelopment district currently experiences one of the highest crime rates in the city, according to a draft proposal presented to the Sullivan County Commission.
“The asphalt area remaining on the property is dilapidated and constitutes a deleterious land use which negatively impacts the safety and welfare of the neighboring areas,” the draft reads, in part. “Delay of the redevelopment of this site will continue to have a blighting influence on the adjacent residential areas.”
According to the proposal:
• The use of TIF will allow the redevelopment of a site that has remained almost entirely unused in the past 20 years.
• The presence of approximately 90 new single-family homes and townhomes would boost the local schools and increase economic activity in and around the redevelopment district.
• The project also would help alleviate the shortage of market rate entry level single-family homes in the Kingsport and Sullivan County markets. Available residential ownership options are critical to assist businesses in recruiting new employees to the area who will both work and live in the city and county.
• The total estimated costs of all the proposed improvements to be made by developer Landstar Partners, LLC for West Gate is $3,891,528.
• Proposed improvements by the developer include removal of the existing asphalt, grading, installation of stormwater and utilities, construction of roads, installation of landscaping, lighting and other related amenities.
• Landstar Partners, LLC will then sell the residential lots to a home builder who will construct approximately 76 single-family homes and 14 townhomes.
The single-family residences will be between 1,800 and 2,800 square feet and contain at least three bedrooms and two baths. The townhomes will be of similar size and have similar amenities.
• The purchase price for the residences and townhomes is currently estimated based on current construction costs to be between $215,000 and $265,000.
The total project investment by the developer and home builder is estimated to be in excess of $18 million.
• The primary sources of revenue to pay for the project are a $2,310,240 permanent loan to the developer, developer investment of $316,160, and tax increment based debt (to be issued by the KHRA in the form of bonds, notes, or other indebtedness) in an amount not to exceed $1,200,000.
• In no event would the bond debt be allowed to exceed debt that could be paid within 15 years.
• The total current property tax assessment for the project area is $561,320. This results in annual property tax payments to the city in the amount of $11,587 and annual property tax payments to the county in the amount of $14,425.
• The redevelopment project would result in a total estimated assessed value for property within the project area of $4,714,525 (based on an $18,858,102 tax appraised value).
• Based on current tax rates, this would result in total estimated annual city taxes of $97,321 and total estimated annual county taxes of $121,163.
• The portion of each local government’s tax rate that is dedicated to debt service is excluded from use in calculating TIF payback funds.
• The estimated total available increment from Sullivan County taxes after the statutory debt service set aside but prior to any county holdback is $ 97,600.
• The estimated total available increment from city of Kingsport taxes after statutory debt service set aside but prior to any holdback is $ 72,029.
• But the draft provides that 35% of the tax increment shall be retained by the city and county, resulting in an estimated total annual available tax increment after holdbacks and KHRA administrative fees of $104,746.
• The combined new tax revenue above the current base as a result of this project would be $43,297 to the county and $38,915 for the city.
• Approximately 180 total jobs could be created during the construction phase of the project with an estimated total economic impact of $12,350,000.