PILOTs In The Pandemic Period

Wednesday, August 12, 2020

The COVID-19 pandemic has changed almost everything. But there are a few exceptions. 

One exception is how easy it still is for a company to get a Payment-in-Lieu-of-Tax (PILOT) Agreement from Hamilton County.

On Wednesday at the Hamilton County Commission agenda meeting, commissioners and the county mayor appeared enthusiastic about approving a property tax break for Southern Champion Tray.

Hamilton County already leads the state in the amount of non-collected tax revenue due to PILOTs. Do our leaders know this? Do they care?

For 2019, the amount of tax revenue abated was $25 million ( $15 million city of Chattanooga, $10 million Hamilton County). This money, if collected, could go towards public safety, streets, parks, workforce development, etc.

Because of the virus, county tax revenues have taken a big hit, especially sales tax and hotel-motel tax. 

So now the county apparently wants to approve a new property tax break for a company that has received three PILOTs in the past, including one approved in 2014 that is in effect until 2022.

The Chamber of Commerce presented the project at the meeting. There was no discussion of how much property tax revenue would be lost over the duration of this PILOT. 

The Chamber representative said that it is no different from any other PILOT in recent years. That news is not reassuring to other taxpayers. The standard agreement is flawed and one-sided in favor of companies.

Accountability for Taxpayer Money has suggested policies for the city and county to adopt and then pass on to the Chamber when they negotiate with companies.

ATM believes we need the PILOT (and TIF) tools in our economic development toolbox. 

However, we believe that tax breaks should be reserved for projects which have significant public benefit and would not happen without the incentive. This is called the "but-for" test.

A company should be asked to demonstrate that the tax break was the determining factor in their site location decision and that they would not locate or expand "but-for" the incentive. 

This PILOT flunks the "but-for" test. 

While claiming to need the PILOT to convince them to expand here, it is clear this is a done deal. The cake is already baked and the PILOT would be the icing on the cake.

In fact, the Chamber had already issued a press release announcing the expansion project before the county commission met.

Apparently the city of Chattanooga was not interested in participating in this PILOT, marking the first time that both city and county taxes would not be forgiven in a PILOT. 

The city may be taking a more nuanced and responsible view of tax breaks. That would be good news.

Citizens and the vast majority of businesses pay their fair share of taxes. It is part of individual and corporate citizenship.

Why aren't our government representatives more diligent when they consider tax breaks?

"If it is a sound investment, the market will make it. If it is not sound, why should taxpayers be asked to subsidize it"? 

Helen Burns Sharp, Founder
Accountability for Taxpayer Money



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