I was delighted to see the letter from Mayors Berke and Coppinger dated August 23, 2019. It says that conversion of units to short term vacation rentals (STVR) within the Market City Center apartment complex is in violation of their payment-in-lieu-of-tax (PILOT) agreement and that these units will now be assessed for property taxes.
I assume the response to the Maclellan "news"--they want to lease two units as travel units--will be viewed the same way. They have 90 total units, with a requirement that 20 percent (18) be rented to low and moderate-income tenants.
Actually, I wish that both developers would acknowledge that their business model has changed and ask to terminate the PILOTs.
I founded Accountability for Taxpayer Money (ATM) several years ago. While ATM is not against all property tax incentives, we believe that the city and county always need to be strategic in awarding them, making sure they go to businesses that pass the "but for" test. (But for the incentive, we would not do the project. Occasionally a developer may have already decided to do a project that would pay property taxes if not for the PILOT.)
Also, we believe that clawback language in PILOT agreements could be made more clear. For example, language could be added to all new housing PILOTs to make crystal clear that conversion to STVR units voids the PILOT.
We believe that language in the agreement should make clear that it is not acceptable to just "set-aside" units for low and moderate-income. State law references housing units to be occupied by low and moderate-income citizens.
People ask me from time to time why I get my feathers ruffled over some PILOTs and tax increment financing (TIF) projects. Two reasons: tax equity and social justice.
Tax Equity. This gets at the fairness issue, aka "should government be picking winners and losers? Example: On housing PILOTs, the vast majority of apartment developers pay full property taxes on their units. When your board approves a housing PILOT, you are giving a very generous tax break that lasts from 14 to 18 years to a handful of developers. Under state law, the public purpose allowing you to approve a PILOT agreement requires the project to provide housing to be occupied by low and moderate-income citizens. (The policies adopted by City Council set the definition for low-mod at $38,000 per year and allow a rent of up $950 per unit.)
Social Justice. This gets at the issue of what these "forgiven" taxes could be used for if they were collected from PILOT and TIF beneficiaries. The long list includes equipment for firefighters, job training for East Chattanooga residents who want to work at the Paint company coming to the Tubman site, and all the streets in town that need to be improved. A conservative estimate of city and county property taxes that will not be collected due to housing PILOTs currently on the books is over $10 million.
Thanks for your service on the Board.
~Helen Burns Sharp