The City’s Heath, Education, and Housing Facilities Board (HEB) on Monday approved a request by a current PILOT lessee to assign a housing payment-in lieu-of-tax agreement to Starwood Real Estate Investment trust for a 200-unit apartment complex at 1400 Chestnut St.
Helen Burns Sharp of Accountability for Taxpayer Money (ATM) asked HEB members to make sure that the 1400 Chestnut project has met the income-based tenant commitment in their PILOT agreement before approving the assignment of its PILOT tax break to another company.
She said, “If city and county tax dollars are being used as a bargaining chip in a transaction between two private companies, the public is counting on the board to make sure that all requirements of the current company under the PILOT agreement have been met.
"This board approved a housing payment-in-lieu-of-tax (PILOT) agreement in 2015 for a new 200-unit apartment complex at 1400 Chestnut.
The tax abatement began in 2017 and is set to last until December 31, 2030. The owners pay no city and county general property taxes for the first 10 years and a portion for the next four years.
"Because of this PILOT, the city and county will not collect several million dollars in property taxes that, if collected, could help pay for services like fire protection, police, streets, workforce development, and affordable housing. The 'public purpose' allowing the board to grant special tax status for multi-family housing projects is found in state law."
She said 'Housing' is defined as multi-family housing facilities to be occupied by persons of low and/or moderate-income, and/or elderly, and/or handicapped persons. The owners' obligation to get this tax break based on income is to rent at least 20 percent of the units - 40 in this case – to persons whose income does not exceed 80 percent of the Chattanooga Area Median Income as defined by HUD.
Ms. Sharp said, "The current (2021) income limit for a one-person household is $39,950 per year or $3329 per month. The maximum rent that a low-mod person may be charged is $999 per month, which is 30 percent of their monthly income. The income limit for a two-person household is $45,650, with a maximum rent of $1141 per month. (The website for the 1400 Chestnut complex shows “market” rents ranging from $1487 to $2100.)
“The original 2015 PILOT Agreement addresses what happens if the company wishes to assign the agreement to another company. One condition is that all requirements of the company under the original agreement have been satisfied as of the date of the assignment.
“According to a recital in the resolution prepared by the city attorney, the existing lessee has certified that these obligations under the PILOT agreement will be satisfied as of the date of assignment.
Ms. Sharp acknowledged an ‘Officer Certificate of 1400 Chestnut LLC,’ where the existing lessee certified that, ‘as of the Effective Date of Assignment, the company is current on all requirements and obligations of the Agreement.’ It is unclear when that effective date is.
She requested that the board ask Mark Smith, the attorney representing 1400 Chestnut, and city housing staff to confirm that at least 40 units are currently rented to low and moderate-income persons as defined by HUD and that their rent does not exceed 30 percent of their monthly income.
The Board seemed satisfied with their responses and passed the resolution authorizing the assignment.
Ms. Sharp said, “Mayor Kelly recently announced a major initiative for new or rehabbed affordable housing. He said when he took office a year ago that the need for affordable housing quickly rose to the top of the city’s needs."