Thirty-five years ago when Marvin Smith was a student at David Lipscomb College in Nashville, he worked summers and holidays at the Chattanooga Glass Company. Like the other "schoolboys," Smith did the grunt work: sweeping floors, stacking bottles, driving the forklift.
After college the business administration major worked for Chattanooga Glass for 10 years, leaving a year before the company — by then Anchor Glass — fell victim to the global passion for plastics and closed its doors after 85 years in business.
For almost 20 years the 13-acre site in Alton Park was an industrial wasteland. "I’d drive by it a lot," says Smith, who founded Chattanooga Labeling Systems in 1991 and moved the thriving business to Lookout Valley in 1995. "Windows were knocked out, siding had been stripped off, the roof was falling in. It looked horrible."
In 2004 Smith decided to purchase the dilapidated property on W. 45th Street. He was prompted in part by nostalgia, in part by concern over the site’s sorry state. But Smith freely acknowledges that he viewed the property as a smart investment.
It wasn’t, however, until he had bought the remains of the glass-making operation and received a call from Maria Noel that Smith discovered the deal included a bonus he never expected.
Noel informed Smith that the property he had purchased and was renovating for commercial purposes is located in the Renewal Community (RC) — 12 census tracts of depressed areas located throughout the city. "That meant I was eligible for substantial federal income tax breaks on my renovation investment of $1.3 million," Smith said.
Noel, who is manager of the RC program in Chattanooga, also told Smith that businesses located in the RC are eligible for tax credits for each of their employees who reside in the zone.
"That tax incentive helped me interest Polymer Alliance in one of the buildings I’d renovated," Smith said. "They have 18 or 19 employees living in the RC. That adds up to quite a lot of tax credits."
Smith says the RC program provides an excellent opportunity for developers who want to expand to a larger building or buy a piece of property. "They can buy a depressed property relatively inexpensively, then renovate the site and get some money in return," he says.
The Chattanooga Glass reclamation is one of 47 projects that have generated $60 million in tax savings for local businesspeople since 2002 when Chattanooga was among 40 communities designated a Renewal Community by the U.S. Department of Housing and Urban Development (HUD).
Each Renewal Community receives $12 million a year in tax incentives through 2009 for the construction or major renovation of commercial buildings in the zone.Within the Renewal Community, businesses may receive up to $1,500 a year in tax credits for each employee who resides in the RC, and there are tax breaks for housing development, equipment purchases, capital gains and other business investments.
In all, there are 12 different tax savings programs for Renewal Community investors. Chattanoogans who have taken advantage of the $12 million in tax breaks for commercial development estimate that more than 1,500 new jobs and almost $316 million in investments will result from the completion of these building projects.
"The tax incentives for commercial development are awarded to projects that create new jobs, pay higher-than-average wages and have a positive impact on the city’s or a specific neighborhood’s economic goals," Noel points out.
"The whole purpose is to reward people who invest in distressed communities. The incentives help jumpstart improvements to vacant eyesores and breathe new life into old, abandoned buildings. The result is more businesses, more jobs and, as a result, better housing, more prosperity and improved schools. It elevates the entire community."
Chattanooga’s RC program is considered one of the most successful in the nation, according to Noel. "We award all the tax incentives for commercial development that we’re eligible to receive. Only one-third of the communities achieve that goal.What’s more, we were one of three RC cities selected to host a delegation from Guatemala and model our program to the visitors."
Last summer Mayor Ron Littlefield announced that HUD had approved an expansion of the Renewal Community in Chattanooga, a move that doubled the geographic size of the area. The RC now consists of more than 23,000 residents and 1,500 businesses.
"The Renewal Community designation is already having a transformative effect on many of Chattanooga’s re-emerging neighborhoods and business districts," Littlefield said. "The expansion will spur additional business investment in many of the areas that need it most."
The 47 Renewal Community projects include:
• The Southern Saddlery Building at 3001 South Broad Street. The handsomely renovated complex includes the Arts and Education Council offices, Tanner Hill Gallery, and many other enterprises.
• The smartly redesigned and decorated Moriah Group headquarters at 2622 Broad Street, formerly Carnahan’s Antiques.
• Metro, a pizza and coffee shop at 536 M. L. King Blvd., one of the new commercial establishments in the evolving district.
• Staybridge Suites, located next to the Convention Center. The $7 million in tax savings for the hotel developer is one of the largest RC awards.
All but one of the RC tax incentives can be sought through an individual’s tax advisor. Businesses eligible for the tax incentive for commercial development must make application through Noel’s office. A volunteer selection committee reviews the applications and determines who receives the tax savings. This year the board reviewed applications for $39 million in requests and allotted the prescribed $12 million.
"The awards aren’t made just for fixing up a building," Noel points out. "The project has to assist a depressed community in making a comeback. It has to create new jobs and promote hiring within the community. The idea is to make a change, to impact people on a human level."
Marvin Smith, who now owns the plant where he "interned" as a youth, says the Alton Park residents around the old Chattanooga Glass site have welcomed his project.
"When we began fixing up the plant, the people across the street started working on their yards," he says. "We talked to the residents and told them what we were going to do. They were happy to see something happening that would benefit their neighborhood."
|
Back in the Saddle
Attorney George Caudle and his wife, Angela Usrey, an art dealer, were looking for a real estate investment on the Southside when they heard that the owner of the Southern Saddlery Company building had decided to divide the property into four parcels and offer them for sale.
"It looked like a good investment," Caudle said. "The Southside is the future growth area near downtown. The building’s in a good location, and it will become an even better location now that Wheland Foundry and U.S. Pipe are poised for redevelopment as commercial and/or residential areas."
The couple purchased the central portion of the plant, an area amounting to some 15,000 square feet. "We cleaned the floors, built interior walls, installed new wiring and an HVAC system," Caudle says.
"We removed the single-pane windows and put in high-end thermo-panes by Kolbe to deaden the sound from South Broad Street. There was a lot of painted brick. We stripped that off. We’ve got a lot of sweat equity in the property." Thanks to Renewal Community (RC) tax savings, the couple received an unexpected return on their investment.
"Through the RC program, property owners receive a super-accelerated depreciation," explains Renewal Community Manager Maria Noel. "That means they may choose to deduct 50 percent of their expenses the first year the building is placed in service with the remainder deducted over the standard 39 years. Or they can take the full 100 depreciation over 10 years."
Caudle and Usrey chose to "straightline it" over the next decade. As a result, they will receive about $30,000 a year in tax savings for 10 years for their $300,000 depreciation. The standard depreciation schedule would have yielded only $7,600 a year in tax benefits.
"George and Angela are among the investors who have taken a lifeless building and resurrected it," Noel says. "In their section of the building alone you’ll find the offices of the Arts and Education Council, the Tanner Hill Art Gallery, a court reporter, a printing company and a psychology practice. It’s a great mix of businesses and a great contribution to the growing vitality of the district." |
(To learn more about the Renewal Community contact Maria Noel at the Renewal Community Office at 423-425-3776 or noel_m@theenterprisectr.org.)
