Chisca project gets PILOT, loan
Tax break would last 20 years as long-vacant hotel inches closer to new life as apartments
A $20 million effort to save the historic Chisca Hotel got a boost from a Downtown development board Tuesday.
The Center City Revenue Fi- nance Corp. approved a 20-year payment-in-lieu- of-taxes (PILOT) and backed a $1 million loan to help the Downtown Parking Authority buy and renovate the building’s parking garage. The loan still needs approval from city and county mayors, the City Council and County Commission.
The two incentives would be in addition to $2 million in blight-reduction funds from the city’s capital improvement program budget, intended to help shore up the dilapidated structure and clean up environmental hazards.
Developers want to convert the 100-year- old, eight-story building at 272 S. Main into about 150 apartments and 5,500 square feet of ground-floor retail.
The Chisca is celebrated in Memphis music history as site of a 1950s radio station that first aired an Elvis Presley record and an interview with the entertainer.
“It’s an important piece of history, it’s literally crumbling down, it’s a dangerous structure, it’s a horrible -looking structure, and it’s an embarrassment to us,” said Downtown Memphis Commission president Paul Morris.
“It’s especially embarrassing because people around the world know it as a part of our history.”
The developer, Main Street Apartment Partners LLC, includes some of the parties responsible for renovating One Commerce Square last year. They include Gary Prosterman, chief manager, and members Terry Lynch and Gail Schledwitz. Former county commissioner J.W. Gibson was introduced Tuesday as a newcomer to the group.
The developer says projected rents will support a private investment of about $17 million but won’t cover the full renovation cost because of the building’s age and advanced state of decay. Lining up the incentives allows the developer to pursue investors, but it’s not a sure thing, Morris said.
Speaking to the difficulty of renovating the building, the commission’s longtime lawyer, James McLaren, said at least four previous redevelopment plans had fallen f lat .
Morris emphasized that if the building is redeveloped with the help of a PILOT, the city and county would receive significantly more tax revenue than if the building is left derelict and empty.
A PILOT encourages development by tying future taxes to the predevelopment value of a building.
“We’re not reducing the taxes. We’re slowing down the rise in the assessed value,” Morris said.
Developers are working with building owner the Church of God in Christ and the Shelby County Assessor of Property to get a $1.3 million appraisal reduced to $595,000, commission director of development and diversity outreach Jaske Goff said.
The commission estimates the PILOT benefit to developers at about $5.6 million, although Morris says the savings are hypothetical because the project won’t happen without incentives.
“It can’t be done as a purely private project . It has to be done as a public-private partnership.”
Goff added, “This project is insolvent without the public incentives the developer is seeking.”
The project would still generate nearly $1.7 million in property taxes over 20 years under the PILOT program, the commission calculates. That’s about $1.3 million more than taxes would be at the lower value sought by developers. Ultimately, after PILOT benefits phase out, property goes on the tax rolls at full value.
The board usually limits PILOTs to 15 years, but it exercised discretion for a longer term because of the Chisca’s potential to spark other development along South Main and west of FedExForum.
“Basically it’s an obstacle to development,” said Goff.
Recent exceptions include One Commerce Square and a planned Hilton hotel near the Forum.
A commission- controlled trust fund would provide a $1 million loan to the parking authority to acquire and renovate the garage and sublease it to the developer.
A similar approach has been used on other key developments, including One Commerce Square and the Gayoso parking garage beneath Barboro Flats Apartments. — Wayne Risher:
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