Out-Dueled Last Time, Alfred Smith Scores Parliamentary Coup In Latest Fray With Taxpayer Group

Wednesday, March 22, 2017

He may have been outdueled last time, but attorney Alfred Smith scored a parliamentarian coup on Wednesday in his latest battle with a taxpayer advocate group headed by Helen Burns Sharp.

A month ago, a South Carolina developer who is purchasing the Bread Factory Lofts on the Southside agreed to set aside five units for "affordable housing" in order to get the approval of a city board for the financing of the purchase. Only four members of the Health, Education and Housing Facility Board were present, and Lloyd Longnion said he would not give approval unless the developer agreed to the five set-asides. He abstained, while three others present voted in favor.

The developer then made the concession and the revote was 4-0. There are seven members of the board so four affirmative votes were needed to pass a measure, it was ruled at the time.

Attorney Smith, who specializes in tax abatement projects, was back before the same board on Wednesday on a complex issue involving an execution of a rider on a security instrument involving the Walnut Commons apartment project.

Again there was a bare majority of the seven-member board present. There is one vacancy on the board and Gregg Gentry and Nicole Osborne were absent. Board member Longnion again sought concessions from attorney Smith's client, placing an amendment that would require the apartments to also set aside vacant units at a rent of no more than $858 per month. The motion did not get a second from Richard Johnson or Dana Perry.

Assistant City Attorney Phil Noblett said the request was "a very simple transaction" and did not have an effect on the developers' tax abatement that runs through the end of 2025. There are currently no taxes paid on the Walnut Street property except for a small commercial area on the ground floor. Attorney Smith said it will start paying taxes in stages the last four years of the PILOT.

Attorney Smith asked for a two-week delay, but Mr. Longnion said he could not come on the requested date.

The attorney said the board action involving Bread Factory Lofts "bothered me quite a bit. That did not set right with me. I do not want the same thing to happen again." 

The attorney then said the reason for his delay request was that City Attorney Wade Hinton was looking into the legalities regarding quorums at the board.

Attorney Smith said he had learned that, according to the board's bylaws, that it does not take a minimum of four votes to approve an action. He said it is a majority of those present.

Chairman Hicks Armor said he has chaired committees for many years and that is his experience.

He said he was validating a vote of 3-1 in favor of the Walnut Commons request. Mr. Longnion was the only no vote.

Mr. Longnion said Walnut Commons had been before the board nine times since the project was launched in December 2010, which he said caused much time and expense for the staff and board.

Attorney Smith said the project is so complex because of the number of requirements by HUD.

Jack Cassidy of the development firm said he had not expected that HUD would require the mortgage rider. He said plans are still ongoing for a South Carolina group to buy the apartments from an Omaha group that bought it from the original Chattanooga developers.

Asked if he would be back before the board, attorney Smith said, "No, I'm not a masochist." 

Early in the meeting members of Accountability for Taxpayer Money read statements.

Ms. Sharp said, "We are here to speak about your one agenda item today, a resolution about the Walnut Commons PILOT.

"Last month ATM suggested that you start receiving a one page staff report that would summarize what an applicant is requesting and why. It would point out policy implications, if any, for the board. We could not find such a document in the information for this meeting on the city web page. It would have been helpful for a lay person.

"The rider you are being asked to execute states that this Board would convey your right, title, and interest in the mortgaged property to a Trustee, with power of sale. You would be agreeing to encumber this property by granting the Lender, Wells Fargo, a first priority lien.

"Please make sure you understand the implications of why the company and the lender are “asking” you to do this. Have you been asked to take this action on any other of the 16 housing PILOT agreements you have approved over the years?

"Last fall ATM suggested that you defer passing a resolution on Walnut Commons until you held a work session to discuss all of the legal aspects of this complicated project. We offered our attorney to provide the ATM legal opinion. Of course, your city attorney and attorneys for Walnut Commons LLC would present their perspectives.

"Would you please table action on this resolution and schedule a work session before voting on any more changes to Walnut Commons?"

Franklin McCallie said, "Are city and county taxpayers being used as a bargaining chip in what is essentially a financial transaction in order for Walnut Commons LLC to keep its tax break until 2025?

"Did you realize that, unlike in all your other PILOTs, Walnut Commons would keep its 100 percent tax break for the entire 14-year term? This is because the base tax in 2010 was $0 because the property was owned by another city entity, the CDRC. During the last 4 years of a PILOT agreement, the company starts to pay a percentage of the base tax. A percentage of 0 is 0.

"Are you aware that Walnut Commons is the only PILOT since 2007 that was not required to pay school taxes?

"Do you realize that the applicant was required to build a parking structure but did not do so?

"Are you aware that in this very room the original developers told the CDRC that 20 percent of the units would be set aside for those making 80 percent or less of median income? We have a newspaper account of that meeting.

"Are you aware that Walnut Commons sits on a prime piece of property near the riverfront and that property values have escalated in this area? Can you imagine how neighboring property owners feel about paying for services to serve this development when there is no public benefit?

"Are you aware that future tax dollars from this development could be used for the school district and city government for street maintenance, public safety and workforce development?

"Can you explain why it is ok for the developers to come back to the city at least 10 times over the past 10 years to change the original deal and yet you are told that “a deal is a deal” and you must honor your agreement to grant the PILOT even though they did not meet their obligations?"


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