LHP Capital plans to invest $4 million into the 103-unit apartment complex, performing extensive rehab and remodeling, including such things as:
— Replacing the vinyl siding with Hardi Board.
— Installing new kitchen cabinets, countertops, sinks and fixtures.
— Installing new bathroom vanities and fixtures.
— Replacing flooring with vinyl flooring.
— Installing a video surveillance system and playground.
Funding will be from tax-exempt multi-family bonds and 4% low income tax credits from the Tennessee Housing Development Agency. According to information provided to the BMA, the rent for these units will be based on no more than 30% of the tenant’s verified monthly gross income.
The incentive unanimously approved by the BMA calls for a payment in lieu of taxes (PILOT) for LHP Capital. The PILOT would be for 15 years and allow LHP Capital to pay the city a reduced amount of property taxes during this time.
Here’s how the PILOT offers an incentive:
— Instead of paying yearly property taxes on the complex, LHP Capital will instead pay $56,500 in taxes the first year and add $500 increments every year for the next 14 years.
— Currently the property generates $55,600 in annual property taxes.
— However, a renovated facility would likely result in a more valuable property. A more valuable property means greater property taxes.
— By using a PILOT, that increase in property taxes is deferred for 15 years.
During the term of the PILOT, the property will generate $900,000 in taxes, split between Kingsport (43%) and Hawkins County (57%).
City Manager Chris McCartt notes that LHP Capital plans to utilize local contractors and local supply houses for the renovations and to maintain the property in very good condition. LHP Capital notes that Kingsport West Apartments has suffered from 40 years of unmet capital improvement needs.
LHP Capital manages 8,000 units in five states. The company also renovated Miller Village and Model City Apartments in the recent past.