What if Chattanooga policy makers and taxpayers used several recent business announcements as a wakeup call to learn more about how our community decides what companies get property tax breaks? If enough people accept this assignment, it just might result in the adoption of some sound policies and procedures to guide us in the future.
We read in the newspapers this week that "CBL Profits Are Up; Unum Boosts Profits, and Downtown Apartment Complex Fetches $15 Million." These are three of the 55 or so companies receiving a tax subsidy under a PILOT agreement.
My issue isn't with these businesses. CBL and Unum (Provident) have been major investors and employers in Chattanooga for years and the Walnut Commons Apartments are an excellent addition to downtown.
My issue is with our elected officials and the three bond boards for not yet developing policies and procedures to ensure that all tax incentives are used wisely and further the public interest. Some PILOTs are warranted and may be a determining factor on where a desirable company locates. Think Volkswagen. But many PILOTs appear to me to be rewards rather than inducements. For example, the CBL PILOT was for an office building for EMJ at Hamilton Place and the Unum PILOTs were for their parking garages. Did we really think that these companies would have moved their Chattanooga headquarters if we hadn't agreed to forgive the lion's share of these property taxes for 15 years?
A PILOT is a property tax abatement supposedly used to "recruit" companies. Since local governments cannot legally exempt businesses from paying property taxes, wealthy corporations and their lawyers devised a way to greatly reduce the amount of taxes certain businesses pay for a prescribed period. The private company transfers its real and personal property to the public Industrial Development Board or Health Education and Housing Facilities Board. These boards are exempt from taxation. In exchange for favorable tax treatment, the private company agrees to pay the local government a negotiated amount, referred to as a "Payment In Lieu Of Tax," or PILOT. Locally, it is not clear who does this negotiation or what criteria they use. These agreements seem to have already been negotiated when they are brought to the city, county and bond board for approval. At the end of the agreement period, the property is transferred back to the company and is placed on the tax role.
Property taxes are by far the major source of city revenue. Working class families, small businesses and retirees help pay for city services to these corporations under PILOTs, even though they receive the same level of city service (police, fire, etc.) as we do. The revenue the city does not receive isn't available for high priority city projects. It is very difficult to determine how much in taxes is being "forgiven" each year. I hope that one of these days the process is a lot more transparent and this information shows up on the city web site.
This week the city's Health Education and Housing Facilities Board and the Chattanooga Downtown Redevelopment Commission (CDRC) were asked by the city attorneys' office to consider a resolution authorizing a certificate about a change in the membership interest in the Walnut Commons Apartments. The local developers are selling their stock for $15 million to a large real estate investment firm based in Omaha. News accounts quote them as saying they had spent $12 million on the complex they opened last year.
Sadly but predictably (based on my experience with the Black Creek TIF "re-approval" process at the IDB), this will likely be another missed opportunity for local taxpayers. With no discussion as yet by the CDRC, it appears that the new owners will become beneficiaries of the major tax breaks on this property, even though the development never followed through on what I thought were the reasons the tax breaks were granted to begin with. Who is looking out for the public interest?
The original developers had a 50-year ground lease on a piece of city property on Walnut Street probably worth $2 million. The Lease Agreement states that "Lessor (CDRC) desires to lease to Lessee...in consideration of Lessee's agreement to construct the building and a parking garage." They did not build a parking garage. The original developers were granted a 14-year PILOT agreement. The 2010 resolution passed by the housing bond board states that "the Board hereby finds that the project constitutes housing as that term in defined in TCA 48-101-301 in that the project will be a multi-family housing facility to be occupied by persons of low and/or moderate income, and/or elderly, and handicapped." It isn't. I raised these questions to several members of the CDRC and the city attorneys' office to see if they wanted to revisit the tax breaks to determine if they should or must pass them on to the new owners. Apparently, they do not wish to pursue. I believe we deserve an explanation of how this is fair to all taxpayers, to other apartment developers and to the neighbors of this complex.
I started looking at PILOTs after I filed a lawsuit about the Black Creek TIF project. They are the other commonly used tax break and I wondered how we made decisions on who got them. Friends advised me to leave PILOTs alone, reminding me that I was consumed by the TIF and that there is a powerful PILOT constituency that benefits from the status quo. This group includes the 55 or so companies currently under a PILOT, companies that hope to get one in the future, the private attorneys that draw up the agreements, and the city's economic development partners at the Chamber of Commerce and River City. I decided to do what I could to pull together what I know about existing PILOTs, with the hope that this information might be helpful to those who might consider changes in the future.
I never aspired to be a citizen activist. I certainly don't enjoy coming across as a constant critic of our elected officials, whom I believe are honorable people who want to do the right thing. What I discovered during the original Black Creek TIF approval process is that there are no review criteria and no neutral professional asked to frame the questions and the issues for the decision makers. I believe that the city and county officials and the IDB members assumed that "someone" had raised and received good answers to the "right" questions. Because this didn't happen, they voted to approve a $9 million project (plus interest) where there is no commitment to provide any permanent jobs or to build the entire road.
Let's add some policy and procedural tools to our economic development toolbox.
Helen Burns Sharp
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The people in Chattanooga need to get beside Helen Burns Sharp and actually take an active role in reversing the questionable use of tax exemption laws by profiteers. The majority of decent citizens pay their property taxes, you need to make sure the others do to.
If you want a more prosperous city and your tax money not abused, jump in there with Helen. Look her up and see how you can pitch in.
The first step in fixing a problem is identifying the problem, well she has identified the problem and she needs everyone's help in fixing it. She is a brave, decent citizen that has stuck her neck out for all decent citizens and she can use your help, please.
Joey Blevins
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Helen, you have more support than you realize. The problem is we have corporations masquerading as government, the City of Chattanooga is a corporation. The City is going to take care of itself first, “we don’t have to listen to anybody” Manny Rico. The bottom line is property tax should be reduced for all businesses and property owners. The concept of helping me by helping corporations doesn’t pay my bills. All the non-propfits and corporations that support spending in Chattanooga have members that benefit financially from the spending. These corporations and foundations control elections by controlling campaign funding. We only get to vote for the hand picked candidates that the corporations support, we the people don’t really run our government anymore. These are the principles that have caused the fall of all Republics throughout history.
Helen, keep up the good work!
Chuck Davis
Lookout Mountain, Tn.
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It's great to cheer Mrs. Sharp on, but she's been using her own money, for the most part, to cover the cost of litigation so far.
10,000 citizens signed the recall petition, bona fide signatures, for Chattanooga's Mayor Littlefield, of Ron's Excellent Adventure fame... as he was reminded by a judge a while back. I wish there were pictures. It's always a pleasure to see someone else on the receiving end of a pretty girl's retribution. I'll bet she was smiling too.
10,000 citizens, 10 bucks each, the cost of 2 packs of smokes, (10K x 10 = 100K) gives Mrs Sharp a pot with 100 grand in it. That's serious eye-poking jingwa... especially if she, as the kind of person she appears to be, turns around and keeps that fund in place for future adventures.
Helen Burns Sharp
c/o John Konvalinka, Esquire
633 Chestnut St.
Chattanooga, TN 37450
Except if I give up 2 packs of smokes The Gang has to sacrifice too, so they'll do half McDoubleCheeseBurger rations for the next couple trips to town. We'll go big time with 20.
Royce Burrage, Jr.
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I am with you Royce, $20 I am in.
I cannot fathom that the citizens of Chattanooga are being required to fund services for a golf course subdivision, and act as the bank to give the Black Creek Subdivision a $9 million dollar bond issues.
Thankfully, Helen Burns Sharp and her attorney have successfully exposed all the “just us girls” meetings in the back room. Yet, there are still no TIF standards or policies adopted by our local governments, why not?
PILOTs are issued on a first come, first serve basis, and have grown to about 78 rich corporations not paying their share of services. I believe that PILOTs are impoverishing Chattanooga’s ability to fund services, because the service demand increases and the city revenue is flat. City revenue growth has only occurred due to annexation, and ending the sales tax agreement with the county.
There are also PILOTs issued through River City Company for Walnut Commons, movie theatre, and other large scale rental units that render these rental facilities exempt from property taxes.
Who is left to pay for the services? That is a reasonable question.
Helen Burns Sharp, I am a fan. Please keep sorting it all out.
April Eidson