With Knoxville voters set to decide whether to raise the local-option sales-tax rate on Nov. 4, City Council gave preliminary approval Tuesday to devoting 22 percent of the new revenue — an estimated $10 million a year — to the Affordable Housing Fund if they do.

Every taxpayer dollar invested in affordable-housing projects leverages $15 in funding from other sources.

The ordinance, which passed by an 8-1 vote on first reading, would triple the amount of money the city is legally obligated to invest in the fund. 

Council member Lynne Fugate, who spearheaded the drive to establish the Affordable Housing Fund in 2021, said she supports the ordinance because the fund has proven to be effective, and there is an unceasing need.

“I spent 30 years in the financial industry,” she said. “There was a need for affordable housing in the early ’80s; there will be a need for affordable housing in 2080. There is always someone that needs access to entry into the American dream of maybe one day owning a home.”

The 2021 ordinance requires the city to allocate at least $5 million a year over 10 years into the fund, a target the city exceeds every year (this year’s budgeted amount is $8.2 million). The new ordinance would triple the required amount to $15 million annually.

The initiative is one component of Knoxville Mayor Indya Kincannon’s proposed spending plan for the estimated $47 million in annual revenue that would be generated by the sales-tax increase if it is approved by voters. The ordinance would require that $10 million or 22 percent of the revenues, whichever is lower, would go into the Affordable Housing Fund. 

According to the plan, the money would go toward housing along commercial corridors, gap financing for affordable-housing projects, permanent supportive housing for the chronically homeless, senior housing and continued support for the Knoxville-Knox County Office of Housing Stability. An advisory committee helps set priorities for allocations from the fund.

From 2021 to 2024, the city invested $34.9 million in the Affordable Housing Fund, according to a city report. The city’s efforts have facilitated the construction of nearly 3,000 housing units for low- to moderate-income households. Every taxpayer dollar invested in affordable-housing projects leverages $15 in funding from other sources.

Fugate worked with the Kincannon administration and Justice Knox, an association of diverse ministries committed to social justice, to create the Affordable Housing Fund four years ago. A large contingent of Justice Knox members wearing matching red shirts attended Tuesday’s meeting in support of the proposal.

Ann O’Connor, co-president of Justice Knox, said the fund has proven its value over the years and Council members could guarantee its future. 

“Affordable-housing projects take years to develop because they require stacking many layers of funding to make homes affordable for people like nurses, teachers, firefighters, daycare workers, hotel staff, bank tellers and restaurant workers, the people who keep our city running and welcoming to visitors,” O’Connor said.

She concluded: “This investment benefits our entire city. Stable, quality housing builds strong families and a thriving community. By voting yes, you’re setting Knoxville on a course for a strong, secure future.”

The ordinance is a “trigger law” that would take effect only if the voters pass the sales-tax referendum. Council member Andrew Roberto, who has said he would vote against passage of the referendum, voted to approve the funding ordinance in case tax-increase proponents prevail.

“I’m going to support it because this is a very good vehicle. It’s been used well by the city to produce affordable housing and workforce housing, which I think is really critical,” Roberto said.

Council member Amelia Parker, who has been outspoken about the need for the city to invest more in affordable housing, nevertheless cast the only vote against tripling the Affordable Housing Fund.

“I unfortunately am not able to support this, and the reason is because of the message that it would send to the community about how I believe this money would be used and how I believe it should be used,” she said.

Parker said that the fund does not address temporary housing or homelessness and that city officials need to engage in a broader discussion of those issues.

Kevin DuBose, Knoxville’s director of housing and neighborhood development, said the city has a variety of other funding sources, including federal Department of Housing and Urban Development grants, for housing-stability initiatives.

“There’s a mixture of funding types that go toward producing our goals,” he said.

Earlier in the meeting, Parker engaged in a terse exchange with Chief Financial Officer Boyce Evans over the city’s ability to afford the mayor’s spending plan. She referenced a chart from a budget meeting several years ago that showed expenditures would exceed property-tax revenues by 2027 and asked for an explanation. 

Evans said he’s answered Parker’s question several times in the past. Economic conditions have changed dramatically — the COVID-19 pandemic subsided, sales-tax revenues surged, the city saw an influx of American Rescue Plan Act funds, inflation has slowed and the city’s property-tax revenues are growing about $2.5 million every year.

“So your stated concerns that those (funds) are going to run out in FY27 or 28 are just not accurate,” Evans told Parker.

When Parker objected to his tone, Evans replied, “I’m just a little frustrated because you’ve asked it the same way several times and I’ve responded in the same manner several times, and I’m getting real tired.”

Evans and Kincannon have said that the city is in good financial shape — this year’s budget was healthy enough to allow a $25 million lump-sum payment on the convention-center debt — and that the sales-tax increase would merely allow the city to complete planned infrastructure improvements at a faster rate to stay ahead of population growth.

City Council will take up the ordinance on second reading at its Oct. 28 meeting, but Knoxville voters will have the final say on the funding at the polls on Nov. 4.