Some call Chattanooga “Gig City.” Many African-Americans call it “Rig City.” We are concerned that the PILOT tax break program is fueling changes that are not in the best interests of the community.
There are two systems here. Large companies get huge tax breaks for promising to invest a certain amount, hire a certain number of workers, pay a certain salary or provide affordable housing. No one seems to research whether they would locate or expand here anyway before giving away future tax revenue.
No one seems to follow up to make sure that the businesses are keeping their promises. Rarely if ever do the city and county cut off the tax break for future years if companies do not meet their commitments in the early years.
We trusted Volkswagen. We joined ourselves at the hip with them. The city and county did not put wording in their PILOT agreements to protect the public if things went wrong. Now we are all praying they will survive. They lied. When minorities lie on applications for jobs or housing, we are kicked out immediately. But these people are wealthy.
I believe the entire PILOT program needs to be suspended until we see the results of a thorough, independent audit. The public deserves to know if these businesses have done what they said they would do in order to get the generous tax breaks.
When corporate citizens don’t pay their fair share of property taxes, it takes away from revenue that could go to high priority community needs. For example, If PILOT dollars got recaptured for non-compliance, the city could apply them to programs that get at the root causes of gang behavior. Let’s start by putting Alstom back on the tax rolls. They have not come close to providing the number of new jobs they promised when they got a $30 million tax break.
The housing PILOT program is broken. It should be an embarrassment to city and county leaders. It allows public dollars to be used to gentrify downtown. It takes a tool designed in state law for affordable housing and twists it into a corporate welfare tool benefiting wealthy developers.
Memphis has used this program to produce thousands of units of affordable housing for low and moderate-income citizens. No one seems to know if the Chattanooga program has benefited even one low-mod household. Developers are allowed to charge rents of $800 for very small units and are not required to certify the income of the tenants to see if they are below the income cap. What is the public benefit justifying the tax breaks?
The city’s housing bond board (HEB) recently decided to allow the $2.4 million tax break for Walnut Commons to continue, even though it appeared they had the choice of cutting it off for future years. Even a casual observer could see that the members of the board did not understand the complex title issues and that the city attorney did little to educate them.
City and county elected officials turned over the PILOT programs to the Chamber of Commerce and the River City Company without establishing polices and procedures to guide them. These private entities make the informal decisions on who gets tax breaks. Their decisions get rubber stamped by either the city or county IDB or the city’s housing bond board (HEB). There is no accountability and no transparency.
I ask that the city and county immediately suspend approval of new PILOT tax breaks until a program audit is completed and policies and procedures are adopted.
I ask that the city and county involve Accountability for Taxpayer Money in this effort. ATM is a grass roots citizens group that has gathered extensive information about the PILOT program and has developed reasonable draft guidelines. Our members represent groups from all across the political spectrum. Even in an election year, ATM shows that there one issue everyone can agree on—the need for PILOT reform.
Thanks very much to the Times Free Press for the current series on poverty. The newspaper is doing their part in educating. As the editor wrote, it is up to us as a community to provide the ideas, passion, and execution to change things. Reforming the PILOT program is a great place to start.
(Joe Rowe is active with the Unity Group, the NAACP and ATM. He once served on the Hamilton County IDB. He is a former productivity manager at DuPont.)
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Mr. Rowe correctly summarizes the downsides of a few PILOTs, but he only touched the surface of other local property tax giveaways "gone wrong." No professional audits have determined if the nearly billion dollars in commercial property tax exemptions and freebies (doled out to private corporations) during the past 40 years have substantially improved Chattanooga's public welfare. It's not surprising. Those who promote PILOTS do not want to be associated with PILOT agreements that failed. The best way to avoid a "bad news" PILOT is not to audit.
There are currently so many local companies with property tax exemptions that it would be impractical and cost prohibitive to audit them all. A better plan would be to do random audits on one or two each year and run spot surveys on the rest.
Mr. Rowe, I commend you for taking the time to comment on a corporate welfare program that has flown below the public radar for far too long.
Deborah Scott