The Chattanooga City Council is reviewing draft policies and procedures for its Payment-in-Lieu-of-Tax (PILOT) program. A PILOT is an economic development incentive that reduces certain companies' property taxes.
Since 1985, the city (and county) have approved tax breaks totaling millions of dollars without written standards for making approval decisions or monitoring agreements.
The draft document spells out that all companies must pay their school taxes in full and must pay their annual stormwater fee. It establishes an abatement schedule where the abatement percentage declines over the term of the PILOT.
However, the draft document presented by the Chamber of Commerce to the City Council raises several red flags that the Council must continue to wrestle with before adopting policies. Councilors began an excellent discussion earlier this week.
The document seems designed to put the PILOT program on autopilot. It reduces decision-making to a one-page matrix, removes the elected City Council from the approval loop for most PILOTs, and gives the Chamber even more power than it has now.
In a recent opinion piece, April Eidson wrote: “I am shocked that the City Council would even entertain relinquishing their decision-making authority for exempting a corporation’s property taxes through PILOT. The City Council was elected to make financial decisions and set policy regarding property taxes.”
The document recommended by the Chamber exempts from Council review any PILOT application for 10 years or less that meets the policies, aka the matrix. Had this policy been in place, the City Council would not have reviewed any PILOT over the past eight years.
Why do the Chamber and the City Mayor’s office want to eliminate the step where the Council discusses a PILOT request? They suggest that the current approval process is burdensome and time-consuming and may cause us to lose business locations to cities like Huntsville and Greenville (two cities that have abated less property tax revenue than Chattanooga).
However, this narrative does not reflect reality. It took less than a month to move the three PILOTs approved since Mayor Kelly’s term began in 2021 from the Council's "best interest" determination to IDB action. The mayor’s staff references the “politicization” of taking PILOTs to Council. If it’s “political” to include all 10 of our elected officials in the review process, isn’t it equally (or more) “political” to vest all the power in one (the mayor)?
This observation is not intended as personal criticism of Mayor Kelly. In fact, without him, we would not be discussing PILOT policies right now. At a candidate forum in 2021, when he was running for mayor, he said he would support written policies for PILOTs. He honored that commitment by asking city and Chamber staff to work with community organizations to develop a draft.
The City Council and the mayor should consider the implications of expanding the Chamber of Commerce's role in the PILOT process. Doing so would raise more questions of transparency, conflicts of interest, and abdication of what many see as a governmental responsibility because it involves tax dollars.
In 2010, the Chamber wrote this when asked by the City Council to explain its role: “The Chamber does not make policy for PILOTs nor determine what companies are eligible. We facilitate the process as an agent of the city and county and rely on the mayors, the Council, and the Commission to determine a company’s eligibility for a PILOT.”
We need the Chamber’s expertise and perspective. The city and county pay them $1.2 million annually, split equally.
However, we must also recognize that the Chamber is a business advocacy organization. Allowing the Chamber a much-expanded role is like putting the fox in charge of the hen house.
Is it appropriate to give a pro-subsidy, special-interest organization so much power to write government policies, oversee their implementation, and monitor company compliance?
Can you imagine how the local Homebuilders Association might react if the city hired the Sierra Club to write our environmental policies and direct enforcement?
Helen Burns Sharp