Coca-Cola bottler gets tax breaks for Chattanooga expansion

Coca-Cola bottler gets tax breaks for Chattanooga expansion

April 9th, 2014 by Alex Green in Business Around the Region

The Olan Mills facility near Shallowford Rd. and Highway 153.

Photo by John Rawlston/Times Free Press.

Site of Coca-Cola expansion in Chattanooga.

Photo by Laura McNutt/Times Free Press.

Coca-Cola Bottling Company United is another step closer to building its $62 million distribution center in Chattanooga after the city's industrial development board approved property tax breaks for the planned expansion.

Under the resolution adopted Tuesday, the Coke bottling plant -- the oldest in the world -- will lease the Olan Mills property from the industrial development board, which is a city agency. This allows for a PILOT (payment in lieu of taxes) agreement to be offered the company, which will pay only a portion of the city and county taxes it would otherwise pay if it owned the property.

PILOT agreements are a common tactic of local and state governments in Tennessee to woo businesses by reducing their property tax bills while a company builds up its business. The property is owned by local development authorities like the Chattanooga Industrial Development Board and leased back to the business to allow the private owners to avoid or limit the property taxes paid while the lease is in effect.

"The thinking is if they did this in another community, we wouldn't be getting those property taxes anyway," said J.Ed Marston, vice president of marketing and communications at the Chattanooga Area Chamber of Commerce.

The resolution which passed on Tuesday calls for Coke United to pay only the school portion of local property taxes, or about 27 percent of what would otherwise be paid.

For the next 10 years, the percentage of general city and county taxes increase, also a common feature in PILOT agreements. In 2027 -- the last year of the lease currently offered -- Coke is slated to pay 45 percent of what its city and county taxes would be, in addition to 100 percent of the school tax.

When the tax abatement period and lease expire in 2027, Coke would begin paying normal property taxes.

Chattanooga Coca-Cola Bottling Company is currently in a PILOT agreement for an expansion project it undertook at its Amnicola Highway site. Another previous PILOT agreement expired in December.

According to Chattanooga Chamber documents, Chattanooga Coke in its last two PILOT agreements andcommitted to investing $28 million and retaining 386 jobs with average wages in the mid-$40,000's.

Chamber documents state the company -- over two expansion projects combined -- invested $29.6 million, kept all 386 jobs plus added 81, and finished 2013 with average wages at $50,250.

In Tuesday's industrial development board meeting, chairman Ric Ebersole voted alongside other board members to give the resolution granting Coke its latest PILOT agreement the green light. But he did voice the desire to meet with all officials involved again to discuss the way property tax breaks under PILOT agreements are being negotiated. Ebersole said he has questions regarding the resolution.

Having already been approved by the City Council and the County Commission, the industrial development board had the final vote on the agreement.

But Marston said it's still unclear whether it's a done deal. Coke officials have not yet firmly committed to building at the Olan Mills site, he said.

"This is an important step, but we haven't quite crossed the finish line," said Marston. "This isn't an easy green field type of a project."

Because of the wait, the industrial development board has not yet purchased the Olan Mills site, which last year was listed at $7 million.

Contact staff writer Alex Green at agreen@timesfreepress.com or 423-757-6480.