Chattanooga and Hamilton County collectively forgave more than $26 million in tax breaks in 2014. Many tax breaks last 10 years: the biggest ones last longer. More than $300 million in future city and county property taxes will not be collected due to tax breaks already on the books. Now that these numbers have surfaced, one could hope that our officials would be more judicious about approving new PILOTs. Unfortunately, we are not there yet. Our leaders seem addicted to the status quo and love the flexibility of making decisions on tax breaks without being "burdened" by review criteria. It's time to break this cycle of addiction for reasons related to tax equity and community priorities.
A city bond board will vote on Monday to take title to a 1977 hotel building at the Choo Choo complex. For 16 years, the company will pay an “in-lieu” of tax amount that is far less than what they would otherwise pay in property taxes by transferring their real and personal property to the tax-exempt bond board. Since the project calls for converting hotel rooms into small efficiency apartments, the city and county will also lose out on sales and occupancy tax revenue.
I hope this PILOT will become a poster child for galvanizing public opinion on needed changes to the current housing PILOT program.
The city and the county do not have written policies and procedures to guide decisions on property tax breaks. Because of this vacuum, some of our elected officials may have formed their opinion on the Choo Choo request based on who the applicant is rather than on the merits of the application. Being a former mayor, a power broker, and the owner of an iconic entertainment complex constitutes an impressive resume. The River City Company was a determined advocate and lobbyist. Once again, it was the public interest that had difficulty in finding a seat at the table. Think Black Creek TIF.
We have no criteria focusing the decision on public benefit. If we did, this application might have struggled. State law allows PILOTs for housing projects that benefit low and moderate income persons. This project targets workforce housing, primarily young workers in the technology sector. With the very real need for affordable housing for families in our city, should the downtown "techie" demographic be the focus of our tax dollars? And at $2 per square foot for a tiny efficiency, these will be some of the most expensive apartments in town.
We have no criteria focusing the decision on whether the tax break is really needed. In other words, even if it passed the public benefit test, would the project happen without the tax break (the but/for test)? Apparently no major improvements have been made to Building 2 for quite some time. Whether it was going to be renovated as hotel rooms or converted to apartments, this building very likely would have been remodeled anyway as part of the major expansion/restoration project going on at the Choo Choo. With the housing option, we the taxpayers help pay for it. I don't fault Mr. Kinsey for wanting to take advantage of this program. He is a savvy businessman. The blame rests with our local governments and their development partners for not asking these kinds of questions. Did anyone ask why personal (movable) property is included in this PILOT? Is the bond board taking title to beds and refrigerators?
It takes money to run a city and a county. This money has to come from somewhere. The majority of it comes from property taxes. We assume that all taxpayers pay their fair share. When certain companies are given special consideration, this arrangement impacts other property owners. It can lead to a tax increase or a reduced level of service. It means there is less money available for high priority community projects.
Please encourage our officials to establish policies and procedures to ensure that we are using PILOTs and TIFs judiciously. We need these tools in our economic development toolbox. But we also need policies that target incentives to companies that commit in writing to making a significant commitment to investment and quality jobs or affordable housing and can demonstrate that they would not locate or expand without the incentive. We need to develop procedures so that this information is accessible. We need to make sure that companies are held accountable for their commitments.
Helen Burns Sharp