In June, the Hamilton County Commission voted unanimously to approve $9 million in tax increment financing (TIF). The TIF funds a road and other amenities to serve an upscale, private residential subdivision on Aetna Mountain, called Black Creek.
The decision to approve the TIF forced taxpayers to pay the investors $9 million with interest for up to 20 years.
Prior to the vote, Commissioner Fred Skillern expressed concern, stating, “I’d like to set some parameters as to what the limitations might be, developers have been building for years without the tax incentives.”
Yet those parameters were never set and, with no public discussion, the Hamilton County Commission proceeded and unanimously approved the Aetna Mountain TIF.
Later in June, the Chattanooga City Council followed suit and voted to approve the Aetna Mountain TIF in a 5-3 vote.
Prior to the vote, Councilwoman Deborah Scott stated, “Every time you do one of these creative financing things, you’re carving something out of the general fund, there is a tremendous outlay here, a subsidized cost that everyone else will be paying.”
Yet, the city council proceeded and approved the TIF without first quantifying taxpayers’ cost to subsidize services.
Who do citizens call when their elected boards, charged with safeguarding public resources, cut deals that obligate taxpayers to the tune of $9 million, plus interest? This decision effectively renders all Chattanooga and Hamilton County taxpayers responsible to subsidize services for Aetna Mountain with absolutely no additional tax revenue for up to 20 years.
Knox County defines TIF as “a program that is primarily for economic development projects that provide improvements to public infrastructure in blighted and under-utilized areas.”
The Aetna Mountain TIF is best described as “bling, not blight,” by taxpayer advocates. That description is supported by Black Creek, LLC’s online description: “[S]pend a day at the pool, play some tennis, enjoy a round of golf, or just hang out with friends and neighbors at the clubhouse.”
Of course, taxpayers in the truly blighted areas of Chattanooga won’t be granted access to the country club facilities they are subsidizing for 20 years.
Tax increment financing is commonly defined as an economic development tool used by municipalities to allocate all or a portion of the new, additional taxes generated by a development over a limited period of time to pay for public infrastructure.”
Traditionally, developers fund infrastructure to serve their subdivision lots, and recover the capital investment from the proceeds of selling the subdivided lots. In the case of the Aetna Mountain TIF, the increased property taxes, if any, generated from the development will repay the developers and investors for $9 million in infrastructure with interest for a period not to exceed 20 years.
There is reasonable objection found in the fact that all city and county taxpayers are on the hook to pay to maintain the Aetna Mountain infrastructure for up to 20 years.
Councilwoman Scott stated, “The TIF Agreement allows our city to provide a banking function for private development. The TIF Agreement sequesters future increased taxes from new assessments for up to 20 years to repay the cost of a new road, water and sewer line on private property. Meanwhile, existing Chattanooga taxpayers will pay for city services on Chattanooga’s newest residential mountaintop retreat for up to 20 years or until the city’s $9 million in bonds are repaid.”
In mid-October, after the Aetna Mountain TIF was approved, the city council placed a 90-day moratorium on the issuance of TIF’s to develop policies. The city’s moratorium on TIFs is confirmation of irresponsible governance that acted in the complete absence of public policy.
City and county taxpayers should pay close attention to other tax incentive deals that allow governments to act as banks for builders of upscale subdivisions and convert property taxes into private developers’ working capital.
April Eidson is the founder of Little Chicago Watch, a local citizen watch group that monitors the financial transactions of local government.