Who would sign a financial contract involving millions without failure to perform provisions? The answer is our city of Chattanooga and Hamilton County government.
The city of Chattanooga and Hamilton County governments adopted resolutions granting the Chamber of Commerce and River City Company with the authority of government to develop property tax exemption agreements to industry, business, and housing development. The Chamber of Commerce website claims their organization can grant preliminary approval of a PILOT without a vote of the city council or county commissioners. That is an interesting notion, taxation or exemptions from taxation, without representation. It is very concerning that third parties are vested with decision making that adversely impacts public revenue without public review.
I have attempted on many occasions to acquire PILOT applications and records, and the Chamber of Commerce deems themselves as not subject to open records. Yet, the Chamber of Commerce is making monumental decisions with public resources and property taxes. Our public money flows into the Chamber to the tune of $1.2 million annually, but public review of their work product is not allowed. They did agree to meet with me and discuss a graph of city property tax revenue that is flat and only spikes due annexation, and sales tax revenue that is flat and only has a spike from ending the shared sales tax agreement with the county. It was crickets during the review municipal revenue graphs from city and county budget documents a few years ago.
I am left asking, where is the “beef,” the cash return to municipal government from all of this PILOT corporate welfare the Chamber of Commerce and River City Company initiates? The measurement of return to the community from PILOTs should be apparent in municipal revenue streams.
The PILOT study conducted by activist, Helen Burns Sharp, cites that $26 million in property tax revenue was exempted last year through the PILOT process that originates with third parties, Chamber of Commerce and River City Company. That is just mind boggling, and most of these projects would have occurred without the property tax exemption, including the Choo Choo PILOT for remodeling old hotel rooms.
For many years, the Chamber of Commerce and River City Company have drafted proposals for property tax exemptions to their members designating the number of jobs to be created, or in the case of housing the number of units that would be affordable housing. Many of these commitments have not been fulfilled as promised, with the number of jobs created, or affordable housing units.
The PILOT contracts did not include failure to perform contract provisions to protect the taxpayers if the company or developer failed to deliver, commonly called a claw back provision. This would have ensured that if the minimum number of jobs were not created in accordance with the PILOT agreement, the taxpayers would be protected and able to collect the amount of property taxes that were exempted.
No one would sign a contract that did not include failure to perform provisions to protect the parties. This is a fundamental component of basic contract law. Yet, our City Council and County Commission signed many of these contracts with absolutely no claw back provision. What is more concerning is that the city and county have large legal departments with full time attorneys. Why aren’t the attorney’s including failure to perform provisions in the PILOT contracts. It is their job to ensure these contracts protect their clients.
Who was looking out for the best interest of the city and county taxpayers who fund services?
In the case of Alstom and other PILOTs, no one included a failure to perform provision, claw back. No one would do this in the business world. Bottom line, our city and county government exempted millions in property taxes with no claw back provision.
So, who is damaged here? We the people of the city and county have lost millions in revenue for public purposes. Blighted neighborhoods with decaying infrastructure are being robbed of resources, as well.
The PILOT debacles do not end with Alstom. The study conducted by Helen Burns Sharp also found that one PILOT issued by city and county government is not even paying the school portion of the property taxes. That is an unlawful condition that must be remedied, since Tennessee Code Annotated prohibits property taxes exemption for the school portion. Do we have to sue our own government to get them to follow the law?
Finally, these third party entities, Chamber of Commerce and River City Company, are not an arm of government and should be removed completely from the PILOT process. The Chamber of Commerce is issuing PILOTs to their members, and River City Company issued a PILOT to their own project, Majestic Movie Theatre.
The city and county currently pay the Chamber of Commerce $1.2 million annually for economic services. The city and county need to take the $1.2 million and start an economic division within the framework of government to review applications, manage, and monitor the PILOT agreements. If it were not for the work of Helen Burns Sharp, the public would not even know the entire financial impact. That’s right, neither the city or county was calculating the full amount of exemptions until Helen began doing the heaving lifting for public good.
We the people must trust the system of taxation that belongs with government, not third parties.
April Eidson
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Well said, Ms. Eidson. You are exactly right on all counts. As a taxpayer I am insulted that the few "power players" in town seem to thumb their noses at us when we dare to question the legality, fairness, and necessity of these tax breaks. They buddy up to the commissioners and council people, slap each other on the back, smile at us and leave with their government approved 17-20 year tax breaks.
And, as you pointed out, one of the most shocking elements of the whole process is our very own city attorneys read and vetted the PILOTs that were previously approved. Were they representing the interests of the PILOT recipients instead of the interests of the city? Demanding a claw back for non-performance should be at the very heart of any agreement like this. Wasn't that taught in Business Law 101? I know attorneys come and go at the city, but all the elected officials can read too. As a taxpayer, I want to know who is watching out for us?
It is high time for these PILOTs and TIFs to be regulated by written policies and procedures that will ensure that they are only issued when there is significant public benefit that has been independently verified. Unfortunately, the Chamber of Commerce and River City have not historically proven themselves capable of doing a cost benefit analysis of the pilot applicants. The applicants need to be properly vetted in the beginning and audited for performance. I like your suggestion that we should redirect the current annual donations away from the Chamber and River City and allow these functions to be done by truly independent objective parties.
I will say that I am encouraged by the recent increased discussion about PILOTs. Maybe our elected officials are beginning to see that these "rubber stamp" tax breaks need to be monitored and challenged. It is my hope that this will lead to new written rules to make the process more fair and transparent. This should lead to PILOTs and TIFs used for legitimate reasons relating to actual public good rather than the usual preferential treatment for special interest applicants.
Lynn Ashton
Chattanooga