A taxpayer activist group asked a number of questions at a city board on Thursday about a complex tax abatement deal for Walnut Commons on Walnut Street.
The city, through its Chattanooga Downtown Redevelopment Corporation, has held title to the land under the apartments.
However, the new owner has opted to buy that land, causing a new round of paperwork involving the tax abatement granted earlier in which the apartment owners are mostly exempt from taxes for a lengthy time.
Three members of the five-member CDRC who were at the meeting postponed action.
Members of Accountability for Taxpayer Money (ATM) speaking included Tresa McCallie, Bruce Stewart, Becky Raymond, Helen Burns Sharp and Franklin McCallie.
Several speakers expressed dismay that the property does not even pay school taxes. Ms. Raymond said allowing owners of a property like this one to be exempt from taxes increases the burden on everyone else, including senior homeowners.
Lloyd Longnion, a member of the city HEB board, also asked a number of questions. That board will also have to take action.
ATM had this letter:
Dear CDRC Members:
Members of Accountability for Taxpayer Money (ATM) hope that you will discuss and answer a few legal and policy questions before voting on the resolution in your August 18 agenda regarding the PILOT Agreement for the Walnut Commons apartment complex.
In 2010 the City’s Health Education and Housing Facilities Board (HEB) approved a PILOT for Walnut Commons LLC that would provide a $2.4 million property tax break over the period 2012 to 2025. In addition to city and county taxes, school taxes were also waived.
The PILOT was granted under a provision in state law allowing the HEB to approve PILOTs for multi-family housing facilities (only) when low and moderate-income persons, elderly or handicapped, occupy them. This wording is referenced in the 2010 HEB resolution approving Walnut Commons.
Q.1-- Can the LLC provide documentation that at least 20% of the units are and have been rented to persons with incomes less than 80% of the Area Median Income (AMI) or elderly or handicapped?
C
ity Resolution 23253 established the local Downtown Housing Initiative. Section 4(d) states “ an applicant whose application for a PILOT Freeze is approved shall have one year from the date of approval to close a PILOT Lease. If this schedule is not met, the applicant must resubmit an application.”
The Limited Warranty Deed and Bill of Sale conveying the Walnut Commons property from the LLC to the HEB was executed on December 1, 2010. This document was recorded August 27, 2012. Closing happened more than a year after the PILOT was approved.
Q.2—Did the LLC resubmit an application?
S
ection 4 (g) of the city program states: “Upon completion of any project qualifying for a PILOT Freeze, the project shall be reviewed by the Bond Board to determine if it was completed substantially in accordance with the representations set forth in the application. If appropriate, the term of the PILOT Freeze will be reduced by action of the Bond Board.”
Q.3—Who did the review on behalf of the HEB? What were their findings relative to low and moderate-income compliance? What about the parking structure that the LLC originally proposed but chose not to build?
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n 2007 the CDRC and Walnut Commons LLC entered into a 50-year Lease and Option to Purchase for the real property where the apartment complex sits. At a meeting in February of 2016, the LLC chose to exercise its option to purchase.
Rather than recording a deed that would make them the new owner, Walnut Commons LLC approached the HEB in February about taking title to the property. The LLC is now asking the CDRC to execute a special warranty agreement from the CDRC to the HEB.
Q.4—Does the CDRC believe that the bond board is obligated to take title to the property or do you agree with the ATM attorney that the CDRC and Board have a choice?
Q.5—If title is to remain in the name of the HEB, does that relieve Walnut Commons LLC from the payment of real estate taxes?
Q.6—What public policy purpose would be served for the continuation of any exemption from property taxes?
T
he Special Warranty Deed attached to your Resolution 2016-09 (dated 8-18-16) states that the property to be conveyed from the CDRC to the HEB “shall be subject to a restriction that the residential units constructed on the property shall remain as rental units until March 24, 2019….”
Q.7—What is contemplated in 2019? Would the units become condos or extended stay hotel rooms?
Q.8--Is there an acknowledgement on the part of the Resolution’s proponent, Walnut Commons LLC, that a Housing PILOT granted by the HEB may only be for multi-family rental units for persons of low and moderate income, elderly or handicapped?
ATM looks forward to hearing your answers and to your being an advocate for the public interest. Walnut Commons LLC reopened the PILOT Pandora’s box in 2016 when they decided to exercise their option to purchase the land from the CDRC. We respectfully request that the CDRC do all you can do to get this attractive, market rate property back on the tax rolls so that it will contribute its fair share of property tax revenue for high priority community needs such as public education, job training, and public safety.
If you need more time to get answers to these questions, please take it. Walnut Commons has been before this board and the HEB off and on since 2007. Spending a few more weeks or month would be time well spent.