published Tuesday, December 4th, 2012

Tax breaks for employers and developers under attack in Chattanooga


by Cliff Hightower

COMPANY FAVORS

Several companies have received tax breaks, known as payment-in-lieu-of-taxes agreements, with the city over the last few years. They include:

• Volkswagen

• Blue Cross/Blue Shield of Tennessee

• Wrigley

• Alstom

• Chattem

Source: City of Chattanooga

Chattanooga City Council members are wondering whether it's time to put the brakes on tax breaks for employers and developers.

Council Chairwoman Pam Ladd said the city provides essential services to new and expanding businesses, and "it's time we get some paybacks."

Council members are expected to discuss and vote tonight on moratorium of PILOT, or payment-in-lieu-of-taxes, agreements. These agreements historically have been tools for the city and county to lure developers or job creators by offering them tax breaks on property taxes.

The tax break formula traditionally required new or expanding businesses to pay the portion of property taxes that go to education. But Ladd asserts that is not enough anymore. The city also provides services, such as including fire and police protection, that should be accounted for in the tax break formula.

"We can't afford to just keep giving PILOTS," Ladd said.

The Chattanooga Area Chamber of Commerce helps negotiate deals with businesses and industries looking for tax breaks. Ron Harr, the Chamber's president and CEO, said Monday that incentives must be provided to keep Chattanooga competitive with other cities.

"We understand the city's concerns, and we're researching ways to restructure the program to address their issues," Harr said in a statement. "In the meantime, we hope the City Council will exercise its authority to consider tax incentive applications on a case-by-case basis to avoid the possibility of losing projects that would create large numbers of jobs for Chattanooga's citizens."

Richard Beeland, spokesman for Mayor Ron Littlefield, said slowing job growth is the last thing the city wants to do.

"Moratorium is not the right word," he said. "It should be a temporary suspension."

Many companies in the past have received tax breaks from the city and county. Some of the breaks have been given for newly created jobs, others for facility expansions or equipment.

Backers of two proposed student housing projects want council approval for tax breaks. The council is expected to discuss those projects and tax breaks tonight.

Ladd said there is inequality with the way the current tax break program is set up because the county receives education funds while the city gets nothing.

Hamilton County Commission Chairman Larry Henry said the county gives up its portion of property tax revenue as well. The education money flows to schools in the city and county, he said.

"We all benefit countywide from the PILOT program," he said.

Councilman Jack Benson, chairman of the economic development committee, said he thinks it's time for a restructuring that is more favorable to the city. He will be talking about the issue this afternoon during his committee meeting.

"We're trying to get some portion for the services," he said. "Not the full rebate."

Contact staff writer Cliff Hightower at chightower@timesfreepress.com or 423-757-6480. Follow him at twitter.com/cliffhightower or facebook.com/cliff.hightower.

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