It looks like Santa Claus didn’t get the letter. You know, the one asking him to send Chattanooga and Hamilton County officials the gift of "Policies and Procedures and Transparency" to use when they decide what companies get tax breaks through TIFs and PILOTs -- also known as development subsidies.
Rather than creating a play book with policies requiring a cost-benefit analysis to determine public benefit and whether the subsidy is really necessary (the "but-for" test), our local leaders continue to use unwritten criteria to decide how, when and to whom we give our special tax breaks. For now, it seems our unwritten guidelines are: do we like the company, do we like the developers, are their private attorneys skilled at facilitating tax incentives for their private clients, and are we comfortable with delegating negotiations about who doesn’t have to pay public property taxes to the Chamber of Commerce and River City?
Our officials answer “yes” to these questions and approve all the requests for tax subsidies with virtually no discussion at public meetings about the terms of the agreements. Remember reading about the re-approval process for the Black Creek TIF, a $9 million taxpayer-funded advance to build a road up Aetna Mountain to a future posh development See helenburnssharp.com if interested in information on my lawsuits.
Merry Christmas to Chattem, Coca Cola and Southern Champion Tray, which are among the companies recently granted new PILOTs. Congratulations to Walnut Commons Apartments. A city bond board, with no discussion and probably no awareness of possible policy issues,recently transferred tax breaks to the new out-of-state owners, even though the original developers did not do what they represented about public benefit.
On Friday, the Health, Education, and Housing Facilities Board will likely welcome the Chattanooga Choo Choo and UTC Five apartments into the PILOT club. In a twist on previous practice, the City Attorney’s office is asking the bond board to approve these requests before they have been approved by the County Commission and City Council. In addition to the conversion of some hotel rooms into apartments, the Choo Choo resolution references restaurants and a new music venue. Restaurants and entertainment are not housing.
When will local residents and small businesses start insisting that the public interest be given more consideration? Who will question the Magic 8 ball model of decision-making? When will we target incentives that will make a significant commitment to investment and jobs? When will we ask the companies to demonstrate they would not be here without these incentives? When will housing PILOTs be targeted toward redevelopment rather than new development?
Our policymakers want new jobs. Me, too. But I am surprised by our naiveté in believing that a tax break is typically a crucial factor in whether a company locates or expands here. Greg Leroy, who heads a nonprofit called “Good Jobs First,” terms most tax breaks as the icing on the cake. Our leaders seem to believe that the tax breaks are the cake rather than the icing. In a few cases, tax incentives may be an appropriate tie breaker. Think VW.
Transparency about the PILOT and TIF process is virtually nonexistent here. We need Sherlock Holmes to get a handle on the number of PILOT agreements currently in place and to estimate what we “forgave” in taxes, just in 2014. State and local taxes make up less than 2 percent of a company’s cost of doing business. City and county governments, on the other hand, rely on property taxes for more than 50 percent of their revenue.
We are talking about millions of dollars that could be collected and directed toward high priority community projects, like the Violence Reduction Initiative and the Wilcox tunnel.
Helen Burns Sharp is a retired community development director and public interest advocate.