The East Ridge Industrial Development Board approved an incentive package to Southern Honda Powersports that could bring the dealership more than $7.4 million over a two-decade period, Tuesday afternoon.
City Manager Scott Miller told the board that city staff had been in negotiations with dealership officials for several years. Southern Honda has acquired six acres of land at 6750 Ringgold Road from Community Baptist Church. The dealership intends to build a 35,000 square foot building from which it would sell motorcycles, all-terrain vehicles, generators, apparel and more.
Miller said that a proforma provided by the dealership projected Southern Honda Powersports would generate retail sales of $243.2 million over the 22-year period of the deal. The dealership would receive 90 percent of the Border Region sales tax for the first six years of the deal. During the next six years it would get 80 percent of the state sales tax. That percentage would decline to 70 percent over the next six years, then 60 percent over the final four years.
Miller said that over the same time period the city would receive approximately $2.5 million in Border Region sales tax, $2.73 million in local sales taxes and $626,000 in property taxes. The total to the city as a result of Southern Honda Powersports relocating to Ringgold Road would be almost $6 million.
The measure will now go before the East Ridge City Council for consideration.
IDB board member Mac Pendley asked if there was any way the city could lose money in the deal?
“If they don’t sell motorcycles we don’t owe them anything,” Miller responded.
Miller said the financial data provided by Southern Honda is conservative. Sales could very well exceed the projections and both the dealership and the city would benefit. Unlike the previous incentive packages the IDB has extended to the owners of Marco’s Pizza and Dunkin Donuts, there is no cap to the amount of the incentive.
Miller said this is the largest incentive package the city has offered to a business within the Border Region District other than the Bass Pro Shops deal inside Jordan Crossing.
Doug Hoyt, the Chief Financial Officer with Southern Honda, said the organization is the largest volume Honda motorcycle dealership in the world. He told the board that the dealership was looking for a more high-profile location. The business is currently located on Workman Road off Rossville Boulevard.
“We feel that being in East Ridge near the Bass Pro and Camping World will make us more visible,” Hoyt said.
Hoyt said that most of Southern Honda’s sales are to people from out of state. He believes the East Ridge location will promote more in-state sales.
Southern Honda, Hoyt said, is a long-time, family-run business that “takes pride in the community.” He said prior to opening Southern Honda in 2004, owner Tim Kelly’s family had been in the car business in downtown Chattanooga since the 1940s.
It is not clear how much Southern Honda will have to pay for the land along Ringgold Road. Hoyt did say the dealership’s total investment in the building and the land will be about $6 million. He said Southern Honda wants to move quickly and anticipated being open for business in July of next year.
In other business, the IDB gave its blessing to a development agreement with Jack’s Family Restaurant. The restaurant intends to build a 3,500 square-foot building at 4209 Ringgold Road across from the Fire and Police Service Center. The city has agreed to provide a $600,000 incentive package to the owners. That will be paid in $30,000 increments over a 20-year period.
Officials with Jack’s Family Restaurant anticipate opening by July 2019.
_ The meeting was the first for Rick Torok, who was appointed to the IDB to fill the vacancy created by the death of Barton Burns. Torok is retired from Tandus Carpets in Dalton, Georgia where he was a sales and use accountant.