Chattanooga developer partners with tax-break critics to rewrite policy on controversial housing program

Chattanooga developer partners with tax-break critics to rewrite policy on controversial housing program

July 14th, 2016 by Joy Lukachick Smith in Local Regional News

Developer John Wise stands in front of his latest Chattanooga project to open in the 1800 block of Chestnut Street. City leaders are putting together a new zoning package for the future that is based on form, instead of traditional use standards.

Photo by Tim Barber /Times Free Press.

A local developer has teamed up with his critics to propose policy changes for Chattanooga's controversial program that offers tax breaks to developers building apartments downtown.

Developer John Wise has been working with Helen Burns Sharp and a group of middle-class residents — who in the past sharply criticized Wise and the city's payment-in-lieu-of-taxes, or PILOT, program — by calling on the city to adopt the new policies he has agreed to meet for his proposed Southside apartment complex for all future rental development downtown.

Helen Burns Sharp poses for a portrait on the top floor of a parking garage adjacent to the Chattanooga Choo Choo on Thursday, May 5, 2016, in Chattanooga, Tenn.

Helen Burns Sharp poses for a portrait on...

Photo by Doug Strickland /Times Free Press.

"If I can make the numbers work, then they can, too," Wise said, speaking of other developers who would request a PILOT.

Under the new agreement, Wise agreed to rent 20 percent of his new units at 70 percent of the area median income, which would be $750 for a one-bedroom apartment and $965 for a two-bedroom. Developers now are required under the program to set aside 20 percent of their apartment units at 80 percent of the area median income. Wise also agreed the PILOT agreement should only last 10 years with no four-year phase-in period and it should be terminated if he sold the apartment complex to a third party. Those would be new requirements that other developers have not been asked to make.

Sharp and members of Accountability for Taxpayer Money say they can support Wise's request because it does what the program was intended to do and creates more affordable housing for downtown workers who can't afford the rising rental prices in the city's core.

"That's been one of [the accountability group's] main frustrations that we can't get anyone to talk with us about the PILOT program," Sharp said. "There's never any give and take. What a breath of fresh air this has been."

Kim White, president of River City Co., the nonprofit organization that monitors the PILOT program, says she hasn't had a chance to review the proposal. She said if it meets the current requirements, they will pass along the application to the city's bond board, but River City can't approve significant policy changes. Those kinds of changes would be left to the City Council and the Hamilton County Commission to vote on since the program was authorized by both governing bodies, she said.

River City personnel, along with Mayor Andy Berke's staff, have been working on changes to the housing program after criticism of it hit a fever pitch this spring when a number of downtown property owners joined critics to pressure the city to suspend the housing PILOT program until significant changes could be made.

At the time, Berke said his office had been actively discouraging people for months from applying for tax breaks, a clear contrast to the stance he and his staff had taken in 2014 when he revived the program that had been dormant for two years. In 2014, Berke's staff called the PILOT program a "crucial step" to lowering rent for housing downtown.

But since downtown will add 2,100 apartment units in the next two years, nearly doubling the number of residents downtown, city leaders said it was time to take a critical look at their rental housing program.

Last week, the city canceled a news conference to announce changes to the PILOT program and has yet to reschedule it. Berke's chief advisor, Lacie Stone, said the city planned to announce changes to the program next week.

Wise said his proposal for a tax break has been months in the making, working with Sharp and other ATM members — unlikely allies whose relationship didn't start off as an amicable one.

In April, Wise received harsh criticism from Sharp and ATM members when he asked for permission to use a six-year-old PILOT agreement originally approved for land on Main and Market streets when it was owned by the River City Co. Wise bought the land in 2013 and said he was told the PILOT agreement was available with the property, and he built a mixed-use, market-rate apartment complex.

After the public hearing in April when the city's bond board decided to delay voting on the Main and Market PILOT agreement, Wise asked to meet with Sharp. Once they met, he told her about another proposal he had submitted for a different development on Chestnut Street to accommodate housing needs for his employees and other downtown workers. He asked what he would need to do for her group to support his tax-break request.

Wise initially approached River City to ask about the Chestnut proposal but he said he was discouraged from submitting a request because he was told PILOT programs are no longer popular.

When Wise came to River City, White said, she advised him that members of the City Council and County Commission would not likely support a PILOT proposal in the Southside, since developers were already building multiple apartment projects in that area of town without an incentive.

But Wise said he didn't need the PILOT program to build his proposed 210-unit apartment complex, he needed the tax break to rent a fifth of the units at an affordable rate below market-rate value.

For several months, Sharp and other members of ATM met with Wise to hammer out the agreement that would create affordable housing for residents who met lower income requirements than the city had required. The agreement met many of the requests that the group had asked the city to evaluate to make developers more accountable to taxpayers.

Wise said he couldn't imagine getting opposition to his plan since he went above and beyond the current requirements in exchange for the tax break.

"If this isn't a good PILOT, then what is?" he asked.

Contact staff writer Joy Lukachick Smith at jsmith@timesfreepress.com or 423-757-6659.


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