We all agree: downtown needs help. It is a shadow of its former self. Multiple buildings are completely empty, panhandling is commonplace, COVID-19 has reduced the number of tourists and weekday employees visiting restaurants, and there have been no signature improvements or additions in many years.
The Business Improvement District is a great idea to re-energize downtown. This partnership between local governments and the business community is a strategic way to restore downtown to become an inviting and thriving district.
I am the founder and managing director of Roundtree, a donor-focused marketing agency based in Chattanooga that serves nonprofits around the country. Roundtree formerly leased office space in the heart of downtown before converting to a remote model with employees spread around the country. I am passionate about nonprofits and see the great work they do in communities across America. They are the backbone of cities like Chattanooga.
The Downtown Chattanooga Alliance is the organization tasked to improve Chattanooga’s downtown. It is primarily led by those who own commercial real estate in the district who have a keen interest in seeing businesses and visitors return downtown.
The alliance is financed by taxing property owners in the district, whether they are for-profit or nonprofit — churches included. (Technically, the fee is referred to as an “assessment,” not a tax, but legal and financial penalties for failing to pay it are the same. According to the city of Chattanooga website, the district is recognized by the state as a special assessment district and does not permit property owners to opt-out of the assessment. A mandatory “assessment” enforced by the government is a tax.)
So what about nonprofits? They are legally exempt from taxes. But the Downtown Chattanooga Alliance insists they are not exempt from “assessments.” This is wrong, morally and legally.
Why is it morally wrong for nonprofits to be taxed? There are a number of practical and historical reasons for nonprofits to be exempt from ordinary fees assessed to other businesses:
First, the Downtown Chattanooga Alliance is taking donor money when it “assesses” nonprofits. They are literally taking money out of the offering plates of churches and reducing the grants United Way can make to worthy causes across the city. The intent of the donor was to support the work of the organization, not improve the market for commercial real estate.
Second, it is treating all entities as equal. A for-profit restaurant can pass on the assessment to their customers in the form of price increases. A nonprofit such as a local church cannot pass along the fee to its members who contribute voluntarily. The assessment ignores the unique nature of nonprofits.
Third, nonprofits play a unique role in the community landscape. Nonprofits have been improving Chattanooga’s business district for years! For decades, they’ve been voluntarily organizing and implementing activities to help downtown thrive from caring for the homeless to improving physical spaces.
Fourth, these nonprofits are being taxed at the worst possible time. Due to the ongoing pandemic, many churches and organizations have gone over a year being physically disconnected from their donors.
Fifth, the alliance is unclear. It will argue the assessments are mandatory due to state law while also waiving assessments when requested. These fees are either mandatory or they are not. Certain organizations can be exempted or they cannot. Right now, the alliance is saying one thing while doing another.
Finally, the alliance is bullying the little guy. Nonprofits are too busy serving the poor and caring for others to lobby and plead their cause. They are servants who are happy to go unnoticed. It is easy to extract revenue from them because nonprofits wield so much less power than other property owners.
Chattanooga can do better. We can build a great downtown without crushing the organizations that have been serving our city for decades. We need Mayor Kelly and the City Council to speak up on behalf of these nonprofits and permanently waive this immoral and unwise tax on local nonprofits.
Andy Jones
Founder and Managing Director of Roundtree