Phillip Noblett, Signal Mountain town attorney, speaks at Signal Mountain Town Hall in this file photo.

The City of Chattanooga has asked the court to drop a lawsuit filed by property owners to prevent the formation of the controversial Business Improvement District.

Late Thursday, the city filed a motion to dismiss the lawsuit, filed by siblings Pam Rymer O'Dwyer, Charles D. Paty, Kem Alexander, Ralph Paty, Marion Gaye Paty Wade and fellow property owner William Wise, which claims the ordinance passed on July 30 to form the BID violated state statute for establishing such a district.

The city's answer to the lawsuit says that the plaintiffs failed to "allege any colorable basis for the challenge to the ordinance," arguing that since the BID was first heard as a petition-initiated ordinance, which failed, and then heard as a council resolution, the city was not required to wait before the second vote.

"We're very hopeful that [the lawsuit] will be dismissed," Kim White, President of local economic development nonprofit River City Co. said Friday.

The BID, which has been spearheaded by River City Co., passed the Chattanooga City Council in late July after failing earlier in the summer, despite claims from property owners that the reintroduction of the ordinance violated state law.

Under the BID, commercial and nonprofit landowners in the district will pay an annual assessment of 9 cents per square foot, of either the lot or building size, whichever is greater, plus $4.95 per linear foot of lot frontage. Residential property owners with townhouses or condominiums would pay a flat annual fee of $150 per unit.

This fee has been the driver of controversy around the district, as many property owners and renters in opposition feel it is unjust taxation.

"My dream outcome would be that [the council] clears the ordinance procedurally, and then, if they do bring it back up in a year, they do the assessment the right way, based on tax assessment values," Charles Paty, a plaintiff and attorney said after filing the initial lawsuit.

The city also filed in opposition of the property owners' motion to expedite the lawsuit through the legal process in order to nullify the ordinance before tax bills are sent in October.

Fee collection for the BID on the upcoming tax bill hit another roadblock this week when the Hamilton County Commission voted to reverse their agreement with the city to provide collection services on the BID.

The agreement was originally approved at the August 7 commission meeting, but was reconsidered and undone by commissioners who fear potential litigation, citing the lawsuit filed just two days after the agreement was made.

After Wednesday's meeting, White called the reversal of the resolution "extremely disappointing." Asked if the fee will still be assessed this year, she said, "that's exactly what we're going to try and figure out."

Council Chairman Erskine Oglesby, sponsor of the second BID ordinance and representative of District 7, where the BID is located, said that he was "surprised" by what happened with the commission this week, but is ready to move forward with the district.

"It's time that we as a city look at what we need to do next for the future of the BID," Oglesby said Friday.

White said that the BID will definitely be formed and assess a fee this year, despite the impending deadline of tax bills in October.

"I was disappointing since we had been talking to the trustee since the very beginning and that's what he does, bill for other entities, but we're moving forward with putting together a nominating committee and the BID board," White said. "We're on a pretty quick timeline to get it up and runningwe're going to find an alternative, [not assessing the fee this year] is not even a consideration."

White said the nominating committee should be formed in the next 30 days or so and will reflect a diverse group of property owners to find a similarly representative group to serve on the BID board.

A Hamilton County Chancery Court hearing on the lawsuit and city's answer is set for September 9 at 1:30 p.m.

Contact Sarah Grace Taylor at 423-757-6416 or at Follow her on Twitter @_sarahgtaylor.