Chattanooga IDB approves submission of Northgate Mall infrastructure plan to City Council

The Industrial Development Board of the City of Chattanooga voted to approve a resolution to submit an economic impact plan for the Northgate Mall infrastructure project to Chattanooga City Council after a public hearing and presentations by city staff, outside counsel and the property owner.

The plan would reimburse CBL Properties for developer-funded upgrades to sewer, water and stormwater infrastructure serving Northgate Mall and adjacent parcels by using incremental tax revenue generated after a baseline year is set. CBL told the board it will fund the upfront work and bear the economic risk until the developer is repaid from future increment.

The proposal was described to the board by Sherry Down, senior advisor for economic and workforce development for the City of Chattanooga. She said the proposal is infrastructure-only and that the new sewer and water systems would be dedicated to the city upon completion. "This is a developer who's able to do a project quicker than the city would be able to do it," Down said, adding the plan is intended to "preserve existing property taxes, preserve existing sales taxes, and put infrastructure in place to lead to future growth."

Outside TIF counsel Mark Mamantoff reviewed the legal framework and a public-finance review. He noted a recent change in state law that treats public infrastructure standing alone as a qualifying project and summarized the Water Street analysis used to test the "but-for" question. "Public infrastructure standing alone is a project," Mamantoff said, explaining that infrastructure-only projects require a different analytical approach than vertical-development TIFs.

John Michelle, representing CBL Properties (owner of Northgate Mall), told the board the existing privately owned system is inadequate for higher-intensity redevelopment and that parcel 13 (the mall parcel) cannot economically shoulder infrastructure costs for surrounding properties. "The reality is, the but for is, the mall and the related land cannot be redeveloped to its highest and best use without new infrastructure," Michelle said. He said CBL has invested about $1 million in repairs over the past two years to keep the system operational and that the company is prepared to fund the work and accept the economic risk.

Public comments included both support and concern. Hixson resident Kyle Nichols recalled Northgate's role as a longtime community center and urged the board to approve the partnership: "When someone steps up to fix a long standing problem in a way that the public is protected and benefits the community, we have to say yes."

Accountability for Taxpayer Money representative Helen Burn Sharp raised fiscal and policy questions, urging the board to consider whether the project "needs or deserves public assistance, and if so, how much." Sharp said the plan "would divert future property tax revenues from general city needs such as public safety, infrastructure, and parks towards private reimbursement for up to 20 years."

Other speakers included Charles Wood of the Chattanooga Area Chamber of Commerce and several Hixson neighborhood leaders and business owners who said the infrastructure is failing, affects employees of nearby businesses and will limit redevelopment if left unaddressed.

Board members asked staff to clarify several items: why Hamilton County declined to participate, the expected budget impact, and whether the Hickson Utility District had capital plans that would cover water-line upgrades. Staff said the county declined because it had not been briefed in time to place the item on its agenda and that Hickson Utility District told staff it had no capital budget for Northgate water-line work in the next three to five years. The city's finance office estimated roughly an $89,000 annual fiscal impact to the city related to one baseline parcel referenced during discussion.

The Water Street public-finance analysis provided a range of estimated incentive need. Counsel said a present-value grant of about $7.7 million would, under one set of assumptions, bring developer returns to roughly 12.7 percent; the plan in the board packet included an amount not to exceed $9.29 million plus interest over a 20-year allocation period. Staff and counsel described the analysis as inherently uncertain for an infrastructure-only, long-term, phased redevelopment.

Hamilton County will not participate in the allocation for this project, staff said; county participation would have reduced the portion of increment absorbed by the developer. The plan includes a 20-year allocation period per parcel and specifies a flat 75% of the increment for the 20-year term, with baseline taxes remaining with the city.

After closing the public hearing, the IDB voted to adopt the resolution to submit the economic impact plan to Chattanooga City Council. The motion passed with a voice vote.

The plan will now go to city council for consideration where council may alter allocation amounts; counsel noted council can amend the plan and return it to the IDB for final approval if changes are made.

Clarifying details recorded at the hearing: the EIP packet documents an estimated project cost in the plan of roughly $8.6 million and an allocation authorization not to exceed $9.29 million plus interest over a 20-year term; Water Street's sensitivity work produced a lower bound of about $7.7 million under some assumptions; staff indicated Hamilton County's opt-out equated to approximately $1.5 million in property-tax increment over 20 years that would have otherwise participated; Hickson Utility District indicated no planned capital funding for water-line replacement in the next 3–5 years; finance staff estimated about $89,000 of annual baseline revenue would be allocated to repayment instead of general fund use for a referenced Sears parcel.

The IDB's approval to forward the plan does not itself commit city funds beyond the city taking no baseline taxes; any future use of additional sales-tax support or other revenue mechanisms would require separate city approvals. The board also noted that separate non-TIF support statutes exist for sales-tax or other non-ad valorem revenues, which staff said may be part of a broader package presented later to council but are not before the IDB at this meeting.

The board directed staff to continue outreach to county officials and to provide additional information to council and the public before final council action.