County Commission Debates Tax Break For New Highland Park Affordable Housing

Wednesday, February 24, 2021

The County Commission on Wednesday discussed a PILOT (Payment in Lieu of Taxes) tax abatement for the 47-unit Mai Bell II at 1715 Union Ave. The vote will be next Wednesday.

Commissioner Tim Boyd said the county cannot continue to give developers PILOTs with a possible property tax increase looming. He said, "I'm looking at the aggregate amount of tax breaks that this commission has approved over the years. Sometimes the county mayor is going to ask for a tax increase."

Noting that the City Council already approved it, he said that would not affect the county vote. He said if the county did not go along, it would raise rent costs $30 per month, which he said should not be a large issue for most renters.

Martina Guilfoil, who heads Chattanooga Neighborhood Enterprise which is heading up the project, said, "Many people cannot afford an extra $30."

Commissioner Warren Mackey spoke in favor, saying with rapidly rising housing costs in Hamilton County that affordable housing is getting harder to find. He said, "All of our improvements don't have to be for the big boys."  

Commissioner David Sharpe said, "$30 for a lot of folks in my district is the difference between having a place to lay your head at night or being on the streets."

County Mayor Jim Coppinger defended a number of the PILOTs that have been approved. He said they pay some taxes now and more in the future. "Nobody gets a free ride."  

The first project named to honor Mai Bell Hurley, who served on the City Council and in a host of civic roles, was built nearby four years ago.

Ms. Guilfoil said it only has a two percent vacancy rate.

CNE plans to invest $5.4 million in the new project that will include six buildings.

Ms. Guilfoil said CNE is non-profit, but is required to pay property taxes so it is seeking a 10-year PILOT (Payment in Lieu of Taxes) for the project.

She said the school taxes would continue to be paid as well as the water quality fee.

Currently, Mai Bell I pays $36,477 in city taxes and $42,612 in county taxes.

The PILOT would freeze the property taxes on the new venture for 10 years at the pre-development level.

The project is aimed at providing housing at affordable rates, it was stated.

There will be 26 units under PILOT restrictions and nine units under HOME restrictions. Twelve units will be at market rate with rents of $1,250.

Other rents will be as low as $795 per month and will be income based.

CNE has also acquired property on Bailey Avenue near Big Brothers, Big Sisters. It has torn down several structures there and is studying what to do with the property. 

Commissioner Boyd said he sent this email to Ms. Guilfoil:

FYI:  The county attorney, Rheubin Taylor, has concluded that the County and City may act independently of the other when a PILOT application is brought before either body for approval.  Therefore the County can approve a PILOT without the City's approval, and the City can approve a PILOT without the County's approval. 

Based upon my calculations of the property taxes, and the fact the CNE is committed to paying the Hamilton County Educational portion of the property taxes as a part of the PILOT agreement, I have concluded that if the County does not participate in the CNE PILOT program it will only impact the average cost of rent per month per unit an additional $30.00/month (or about three trips to Starbucks per month). 

I do not consider $30.00 per month a make-it or break-it obstacle for someone renting a new apartment at below market rates from the CNE. I cannot convince myself that having the County participate in this PILOT is necessary for the project to move forward and be viable for both the CNE and the tenants.

Property Tax Impact Calculations:
County Property Tax = (Assessed Value x 2.277)/100
Educational Portion of Property Tax = 55% of County Property Tax
City Property Tax = (Assessed Value x 2.7652)/100

County = ($1,700,000 x 2.277)/100 = $38,709.00/Year
Educational Portion = 0.55 x $38,709 = $ 21,290.00/Year
Net County Govt Portion of Property Tax = $17,419.00/Year
Avg Tenant Impact on Rent/Year = $17,419/47 = $371.00/Yr

        Avg Tenant Impact on Rent per month
                ($371.00/Yr)/12 = $30.89/month

I will not be supporting this PILOT request and will present my findings at the Commission meeting when the PILOT request is presented to the Commissioners for their consideration and understanding.

If my figures can be disputed or they are incorrect for any reason, please let me know.  It is not my intention to misrepresent the facts of the CNE PILOT application in any way.

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