Johnson City to weigh $5.9M loan for Sevier Center replacement | News

A plan to build new housing for some of Johnson City’s most vulnerable residents is taking another step toward reality.

Next week, Johnson City leaders will decide whether to enter into an agreement with LHP Development, a Knoxville real estate developer, which plans to construct 145 one-bedroom apartments to replace aging subsidized housing offered at the John Sevier Center.

In December, city commissioners voiced support for a $31 million proposal from LHP to build a new housing complex at 2162 S. Roan St. in Johnson City, which is about 1.5 miles from the Sevier Center’s current location at 141 E. Market St.

The company has asked Johnson City to plug a $5.9 million funding gap in the project, which the agreement states the city will do in the form of a loan through its industrial development board.

LHP has said the remaining project funds will come from tax credit equity and a mortgage loan. LHP will charge a developer fee of about $914,000.

The Johnson City Development Authority will vote Monday on the development agreement, which includes a $5,943,525 loan. The deal will then need sign-off from the industrial development board and the Johnson City Commission, which commissioners will consider during their regular meeting next Thursday.

The city would also enter into a 20-year payment-in-lieu-of-taxes agreement with LHP, which will abate property taxes paid on the new complex. Once the new housing is complete, the company will pay $30,000 annually to the city, an amount that would increase 2% each calendar year.

The Johnson City Press requested an interview with a city official, but a city spokesperson said Assistant City Manager Randy Trivette was in the process of compiling information to present to the City Commission during a work session next Thursday and would not be ready share anything ahead of that meeting. The city may hold a briefing with local media on Thursday.

Good changes

Alvin Nance, LHP’s chief executive officer of development, said the new location has clear benefits. The most obvious being the addition of a grocery store next door to the property.

The Food City on South Roan Street, he added, also has a drug store, and the site is close to a bus stop, a commercial zone and the Haven of Mercy thrift store.

The “garden-style” development will consist of a handful of buildings as opposed to a single 10-story structure. There will also be an opportunity bring in more green space and other outdoor amenities.

The agreement states LHP is targeting a completion date of Dec. 31, 2025. The company, which is already overseeing operations at the Sevier Center, will manage the property once it’s complete. JCDA Chair Hank Carr said LHP currently owns and manages 54 properties with 8,000 units.

Nance said LHP will keep residents informed about the construction and relocation process.

Current tenants will have the option to move to another subsidized housing complex if they choose not to relocate to the new development on South Roan. No one will end up homeless, Nance said, and residents won’t face negative financial consequences.

Investing in people

Carr said the construction of new housing is first and foremost an investment in people. Second, it is an investment in downtown, allowing for the redevelopment of a massive historic building, but Carr said it will still take years to get that piece done.

The JCDA is still waiting for an inspection from the U.S. Department of Housing and Urban Development, but Carr is hopeful that will happen soon. An inspector has been assigned to the property and now has 14 days to contact the JCDA with an official notice.

Passing that inspection is a key prerequisite for the project planned on South Roan, affecting whether HUD will transfer housing assistance payment contracts at the Sevier Center to a new location.

Carr said the JCDA has invested $400,000 in repairing the Sevier Center since the organization purchased the building in late 2019. The building has previously failed inspections it received in 2015 and 2017.

“We’ve done everything we could and then some to be prepared, and the property hasn’t passed an inspection … for a long time,” Carr said.