Lenoir City developer says property appraisal too low
Hugh Willett knoxnews.com
LENOIR CITY - Developer Mark Matlock believes his commercial property here is under-appraised and he's willing to prove it.
It's not something you'd expect to hear from a developer, especially during an assessment year when rising property appraisals and a slow real estate market have combined to make many people feel their property is over-appraised.
"I might be shooting myself in the foot," he said.
Matlock, who has been involved in local real estate development since the 1980s, said he is more than willing to have his property appraised at a higher rate if the Lenoir City Council will consider a proposal based on appraisal-levied financing.
The City Council originally had been prepared to hear a proposal based on tax-increment financing, a method of encouraging investment in underperforming properties and increasing assessed values over an extended period of time.
"What we are proposing is something different," Matlock said.
While TIFs are targeted at underperforming properties with the hope of future success, ALFs are used with properties that already are a commercial success, especially those in which recent investment has raised their value, he said.
A piece of property might be appraised at about $1 million and generating about $25,000 a year in tax revenue, but it could be significantly under-appraised.
"I'm prepared to show you the real value of my property," Matlock said.
If the property actually is worth $5 million, the extra $4 million in appraised value would generate a significant increase in the tax base.
The increased tax revenue creates the opportunity to structure a private loan or bond that can help pay for improvements to the property.
Similar to a traditional TIF, under ALF the extra tax revenue generated by the higher appraised value is used to pay back the bond over an extended time frame.
The most important advantage of employing ALF is that the municipality retains the existing tax revenue base from the property. The fact that the property is already generating significant tax revenue should increase the likelihood that it will continue to generate more revenue in the future.
Appraisal Levied Financing really is a form of TIF and the statutes governing such deals were created for TIFs, according to Knoxville attorney Mark Mamantov. Although he has worked on a number of TIFs, ALF is a new creature in the world of municipal financing, Mamantov said.
"It works when you have an upscale property that is undervalued," he said. "The risk is lower."
The piece of property Matlock is discussing is located on Highway 321 in Lenoir City adjacent to existing Burger King and Kentucky Fried Chicken locations. The property includes existing businesses and is already a commercial success, Matlock said.
Recently, more than $600,000 worth of improvements were made to the property, including utility lines, sewer lines and other infrastructure. The improvements have significantly enhanced the value of the property, Matlock said. He is hoping an ALF proposal could be used to help pay for those improvements.
City Council agreed to hold a future workshop to learn more about the specifics of the proposal.