Mayor Andy Berke and County Mayor Jim Coppinger said in a letter to the owners of the Market City Center that they are in violation of an earlier PILOT tax break agreement after the owners converted apartment units to short-term rentals.
The center said in May that Stay Alfred vacation rentals would make up about half of the units.
The letter says the development will be assessed the full amount of property tax for each unit that is switched over.
It also says that Market City Center is delinquent on paying property taxes on commercial space within the high-rise development.
Also, Trustee Bill Hullander said he has advised the Market City Center that it needs to begin submitting hotel/motel tax collections to the county for any short-term rentals.
The letter from the mayors says:
In January 2014, a market study showed that Chattanooga had pent up residential demand that could accommodate the development of more than 2,300 rental units. To meet this demand, the City and County created a payment-in-lieu-of-taxes (PILOT) program intended to incentivize the development of new rental residential units in the city's central business district.
"To date, that program has helped to create a significant number of market rate and income restricted using. These new housing units have spurred additional retail and office growth in the downtown market, resulting in additional tax revenue and increased amenities for downtown residents and workers. There is considerable research detailing the economic and public having a “24-hour downtown" where residents have access to a variety of housing options, instead of a downtown that is only active during business hours. We consider the implementation of this PILOT program to be a success in furthering Chattanooga's progress toward our goal of having a true 24-hour downtown.
"Market City Center utilized this PILOT program to construct 125 housing units with 25 of those units being income restricted. This letter is to notify you that converting units to short term vacation rental (STVR) units is in violation of your PILOT agreement with the City of Chattanooga and Hamilton County. While the City and County believe it is vitally important to be welcoming to tourists, the PILOT program that was originally used for this development was specifically targeted to increase the number of permanent housing units. Therefore, Market City Center will now be assessed the full amount of the property taxes Owed on the units that have been converted to STVR units. Additionally, in reviewing our records, it appears that you are delinquent on your taxes for the commercial space within the development, space which was always excluded from the PILOT agreement. Accordingly, we will be sending you a bill for all STVR units in your building and the commercial space."