Alstom Power has agreed to a negotiated settlement that includes a $6 million payment to the city and county, resolving a lengthy dispute stemming from a 2008 Payment in Lieu of Taxes (PILOT) agreement.
Under the original 2008 agreement, Alstom Power was required to invest $265 million in capital and create 300 new jobs.
As of Jan. 1, 2015, Alstom Power had exceeded the investment required in property but had failed to meet their jobs target. In November 2015, GE Power acquired Alstom Power and quickly committed to continuing to work with both the city and county to find a solution to the shortfall from Alstom Power’s PILOT agreement.
Helen Burns Sharp, leader of the Accountability for Taxpayer Money (ATM) group, was critical of the deal.
She said, "Only in Chattanooga would elected officials do a victory dance when they leave $7 million of taxpayer money on the table in a settlement with a multi-billion-dollar company.
"City Mayor Andy Berke has declared the GE/Alstom $6 million settlement as a 'clear win' and County Mayor Jim Coppinger has described it as a 'good deal.'
"It was a good deal and a clear win - for GE.
"The city and county had calculated the 'payment due' amount at $13 million, not $6 million. Why did our officials agree to accept less than one half of this amount? They have a duty and responsibility to protect the public interest. There are so many priority needs in our community where the 'lost' $7 million could have helped.
"Perhaps in an attempt to put a positive spin on the reduced settlement amount, Mayor Berke said that the PILOT is Alstom’s commitment, not GE’s. The fact that GE bought Alstom while the PILOT was in effect has no bearing on the new owner's responsibilities. The Agreement clearly states that it 'shall be binding upon and inure to the benefit of each of the parties and signatories hereto and to their respective heirs and assigns.'
"In announcing the agreement, Mayor Berke said, 'It’s the first time we’ve pursued a company that has not met its obligations.' Why hasn’t his administration pursued Walnut Commons and other PILOT recipients who have not met their commitments?
"Mayor Berke is also quoted as saying that one of the things he did when he came into office was to change PILOT agreements 'so they clearly state what happens when companies do not meet their obligations.'
"How then does he explain the very weak clawback language in the 2014 MOU for the second Volkswagen PILOT?
"The city and county should have vigorously pursued the reimbursement of the $13 million. If homeowners and small businesses get behind on our property taxes, we can't cut a deal to pay a reduced amount. And we pay a penalty and interest if we fall behind.
"ATM has developed recommended policies and procedures that could govern future PILOT agreements. We can do a much better job of vetting, monitoring, and enforcing. But will our elected officials show leadership and do what is right for the public when more than 20 of the major ($500+) campaign contributors in the city elections are with companies or law firms that have benefitted from PILOTs?"
County Mayor Jim Coppinger said, “We are pleased to have resolution on this matter. Time, effort and money that could have been spent in litigation can now be focused on developing future business on this site.”
Mayor Berke said, “After months of negotiations, we have come to a solution that will not only recoup funds back for our taxpayers but clears the way for this valuable property to once again be used for creating jobs. This is a huge win -- not only because of the very real dollars that help the city and county provide vital services, but for the reforms we made over two years ago, in large part due to this 2008 Alstom Power PILOT, which added more accountability to all PILOT agreements moving forward.”
Officials said, "In 2014, Mayor Berke and Mayor Coppinger engaged in a collective effort to reform the PILOT process to add stricter provisions and clearer accountability measures as well as changes to the abatement schedule to provide for more frequent checks and balances. In addition to these reforms, companies would be required to pay an economic development lease payment at 15 percent of the company’s property taxes due. The economic development payment is in addition to payment of the school portion of taxes due, a requirement that resulted from early PILOT reforms instituted by the County."
“Hamilton County taxpayers can be assured the financial clawbacks put in place in 2014 for all future PILOTs will safeguard the people’s money as we continue our everyday efforts to create new, family wage jobs for the people of Hamilton County,” said County Mayor Coppinger.
Although Alstom Power did not meet its target number of jobs, the company exceeded its capital requirement, with over $364 million in capital improvements since 2008, and paid over $5 million to the public school system prior to its acquisition by GE Power. Throughout negotiations, all parties prioritized the return of this parcel to a usable site for future economic development, it was stated.
“We appreciate the strong commitment shown by City and County officials to work together and arrive at a solution that is agreed upon by all parties,” said Karen Simons, senior counsel, GE Global Operations - Properties. “We value our ongoing relationships in Chattanooga and are actively focused on working across the community and beyond to look for opportunities to put the property back in use.”
For more information about the PILOT process, existing agreements, and investments enabled through PILOT investments, citizens can visit the open data portal which contains data on every agreement.
Ms.Sharp gave this history of the Alstom PILOT:
In 2008 the city and county entered into three separate 15-year payment-in-lieu of tax agreements with Alstom.
Over the term of the agreements, this incentive package would have resulted in a $30 million tax break, with about $2 million per year not being collected. About $13 million was “forgiven” since the first agreement started in 2010.
In return for the generous incentive, the company pledged to add approximately 300 jobs to the 600 they had when the agreement was signed.
In 2016 the company, now owned by General Electric, announced that it would close its Chattanooga plant by the end of 2016.
The PILOT agreement states that if the companies close the project during the term of the PILOT agreement, the city and county reserve the right to require the partial repayment of amounts that would have been payable on the property if it were subject to property taxes.
In the fall of 2016, the city and county hired the Waller law firm in Nashville to negotiate with Alstom. In a letter dated Nov. 30, Waller attorney James M. Weaver wrote: "The City and County can and should recoup the full amount of taxes abated on the real and personal property subject to the PILOT agreement and owed to them from the inception...."
Later in the letter, Mr. Weaver wrote that the preliminary calculations show the total cost of the PILOT Agreement through the current tax year is just over $13 million.