After much back-and-forth debate over how the government should oversee tax breaks to private developers, the City Council unanimously approved a 14-year tax break for renovations to one of Chattanooga's landmark downtown structures, the Maclellan Building.
The council voted Tuesday to waive the city's portion of about $1.3 million in taxes for a Memphis-based developer, Heritage Land and Development Co., over the next 14 years and then slowly reintroduce the taxes in increments over another four years.
The Hamilton County Commission will vote on waiving the county's portion of taxes this morning.
The request was made by River City Co., the company that oversees the city's residential payment in lieu of taxes program, sparking debate in both city and county government bodies over the necessity of tax breaks for residential development downtown and the need for more accountability for developers.
"Here we're being asked to approve [a PILOT] for 18 years and it just seems exorbitant," County Commissioner Tim Boyd said at last week's commission meeting, regarding the Maclellan Building.
River City President Kim White explained that developers doing historical renovations get 14-year tax breaks because of the steep costs to modernize old buildings.
The city did suggest two changes to the Maclellan PILOT to require more accountability. Under the agreement, both city and county mayors must approve the transfer of property to a new owner before a sale could take place, and the City Council asked to include a clause that allows the city or county to request an independent audit to ensure the developer is keeping up with their agreement.
But City Attorney Wade Hinton admitted that this transfer of property clause isn't as restrictive as the one attached to the Chattanooga Choo Choo PILOT that was introduced in March to add more accountability.
In other action on Tuesday, the City Council approved a five-year consolidated plan to spend a projected $13.8 million from three federal grants to increase affordable housing options, employment opportunities and neighborhood safety.
The Community Development Block Grant, Home Investment Partnerships and the Emergency Solutions Grants have been diminishing for local governments in the last five years. While in 2010 Chattanooga received $4.1 million from the grants for annual projects, the city is estimated to receive $2.7 million this year.
In the past, those funds have gone to projects that include renovating sidewalks and to nonprofits such as the Chattanooga Neighborhood Enterprise to use on its home improvement loans.
In the city's updated five-year plan, officials set a goal to add 1,107 affordable rental units in the city, to renovate 1,305 homes and to assist 100 households with a home purchase.
Sandra Gober, the city's manager of community development, said the city's five-year goal is ambitious, but with help from private developers and nonprofits it's an obtainable goal.
Next week, the City Council will vote on whether to approve a $690,000 contract with Massachusetts-based consulting agency Cambridge Systematics to study the feasibility of the city building a light rail system. The city will spend $290,000 on the study and the other $400,000 will come from a federal grant.
Contact staff writer Joy Lukachick Smith at jsmith@timesfreepress.com or 423-757-6659.