True or false? “Nothing is certain, but death and taxes.”
If you own property you will be taxed. Those who fail to pay property taxes will suffer. Extenuating circumstances cannot be used as an excuse to avoid property taxes. Demise of your car’s transmission, job loss or death of a spouse may gain you sympathy, but alas no tax relief. You can skip payments, but then the bill expands. The next year a bill will arrive containing two years of taxes plus last year’s interest and penalty fees.
Tax bills never fade away, because forgiving your bill would be unfair to everyone else who owes and pays tax to support available city and county services.
Taxation is painful, but at least the rules burden taxpayers equally based on a property’s assessed value. The higher the property value, the more tax owed. Traditionally, residential and commercial property taxes are not based on who you know, sweetheart deals, the type of business you operate, the worth of your product or services to society or how many people you employ on your property. No person or commercial entity is more important than another. There shall be no favoritism or discrimination with regard to taxation, or so we have always believed.
Unfortunately, local tax fairness is over. It ended when state government passed a law allowing cities and counties to create Industrial Development Boards. Both the city of Chattanooga and Hamilton County have such boards. Favoritism creates discrimination for those that are not favored. Since state law does not allow the city and county to tax private property differently, the state law created a “back door” allowing local governments to circumvent the rules of fair taxation. The change spawned the Payment In Lieu of Taxes (PILOT) program. PILOTS allow some previously taxable business owners to be treated better than other taxpayers.
The state allows cities and counties to temporarily retitle private property from the name of an owner into the name of the city or county’s Industrial Development Board. This board is a shell corporation. The board owns nothing, though it meets and votes on issues that involve millions of dollars of formally taxable property. The IDBs currently hold title to Blue Cross Blue Shield, Coca Cola, Alstom, Volkswagen, Amazon, Chattem, Wrigley and dozens of other companies.
When the City Council, county commissioners and the IDB award a PILOT Agreement, the retitled private property temporarily becomes tax free government property. The company which previously had title to the property remains on the property and maintains full use of the property. At the end of a PILOT agreement period (historically lasting 8-30 years), property title reverts back to the original owner or the business person asks for another PILOT agreement.
Did you realize a city corporation (IDB) owned a Coca Cola factory, the land and building where Blue Cross Insurance is sold or the factory where a cars are manufactured? With a PILOT, the city requires a much reduced (lease) payment from the owner, called an “in-lieu” payment. Some PILOT recipients pay no fee or tax. Some pay only a school tax, which is 29 percent of the normal bill. Others make steeply discounted payments that can be 50 percent or less. While the PILOT Agreement is in effect, the original property owner freely operates the business or uses the property as they wish. “It’s having your cake and eating it too.”
Having full use of a tax free or discounted tax property is a sweetheart deal. You can lose your home or business property if you fail to pay property taxes. Unless you are a special PILOT recipient, you are on the hook for all city and county services that you and PILOT recipients receive, but their tax dollars do not support. PILOTs leave the remaining tax paying community carrying the tax burden. It is not fair, but the PILOT system continues and is expanding. The trend to remove properties from the tax rolls is increasing, thereby shifting the tax burden to others. It will continue until city and county elected officials stop approving every PILOT Agreement. No PILOT Agreement has ever been voted down by the city or the county. They apparently think you don’t mind.
Deborah Scott
Chattanooga