Someone Has To Pay

Sunday, May 17, 2015

If your neighbors stop paying property taxes, does it hurt you? If the largest companies in town don’t pay taxes, does it affect you? If the Chattanooga City Council and Hamilton County Commission grant more PILOTS (also known as: tax breaks for  corporations), will it harm you?    

When local elected officials give big corporations tax breaks, less property tax revenue is collected by the city and county. Property taxes usually pay for 55-57 percent of our local government’s budget.  Fees for services, sales tax and a variety of other sources make up the balance. Construction of residential developments, be they TIF projects in Lookout Valley, hotel rooms or apartments downtown only add to city service demands.  That demand comes with a higher price. Property tax breaks for new businesses do not mean government spends less on fire, police, trash pickup or other public works functions. It takes more resources and time to serve more people and locations. When major taxpaying parcels drop off the tax rolls, the lost revenue must come from elsewhere. The additional costs mount up. This should lead taxpayers to wonder at what point the burden of non-tax payers shifts to the those that must still pay property tax. Remember the party game where music is played while people walk in a circle around an ever decreasing number of chairs? Soon the music stops and one is left standing without a chair. Taxpayers, we are the ones left standing and holding the tax bill.  

There are about 61 Chattanooga/Hamilton County business parcels receiving property tax breaks. (This figure does not include residential development PILOTs.) Here are two examples: 

In 2008, Volkswagen received incentives from local, state and federal sources equaling approximately $840 million. This figure included commitments from Chattanooga and Hamilton County for $245 million. [Additional incentives were granted to VW in 2014, but why talk about the additional millions. We have already been told those millions will come from the city and county’s reserve funds. Folks, that reserve is our rainy day fund.]       

In 2008, Alstom received a PILOT from Chattanooga and Hamilton County which cut their property taxes for 17 years. The abatement represented a property tax savings to Alstom valued at $30 million over the life of the PILOT. The state and federal government kicked in an additional $63 million in incentives. 

Do PILOTs increase local tax revenue enough to justify their use?

VW and Alstom have been economically subsidized by local taxpayers.  Together, Chattanooga and Hamilton County waive about $26 million in property taxes every year for VW, Alstom, and other businesses. Despite the size of tax breaks, no one has ever commissioned an independent study to determine the net effect on the local economy or the impact to those who pay property taxes.   

We do know this. In 2010, Chattanooga increased local property taxes 19 percent to cover a persistent multi-million dollar revenue shortfall. That was the past; now what about the future? According to a Times Free Press article dated May 17, city administration reports they will propose a very tight 2016 budget, spending more, and squeaking by with similar revenue. To avoid a tax increase, they say they will make reductions in nearly every department. City taxpayers heard this same song in 2009 and again in 2010 when taxes were raised. How soon will we hear the clamor for the next property tax increase?  

If the economy is significantly stimulated by the use of PILOTs, where is the positive  effect? If the local economy is humming from PILOT businesses, why aren't other revenue streams growing and making up for lost property tax revenue and increased expenses? Are PILOTs the magic bullets for economic success?  If so, why do city and county property taxpayers feel they are under the gun? 

Deborah Scott
Chattanooga


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Opinion

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Breaking News

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Sports

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