Lawsuit hearing leaves Chattanooga Business Improvement District fate unclear

Lawsuit hearing leaves Chattanooga Business Improvement District fate unclear

First hearing on BID lawsuit yields victories for both sides

September 9th, 2019 by Sarah Grace Taylor in Breaking News

This story was updated Monday, Sept. 9, 2019, at 8:33 p.m. with more information.

What is 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.

The Chattanooga Business Improvement District's fee collection hangs in the balance ahead of a city council vote Tuesday after a benign first hearing in a lawsuit filed against the city to block the formation of the district.

The city and economic development nonprofit River City Company, which ushered the district formation to the city council, have been racing against an October deadline to secure a means of fee collection before property tax bills are issued.

Meanwhile, property owners who oppose the Business Improvement District have been trying to reverse the council's establishment of it before the approximately $1 million can be collected.

The BID, which struggled to make its way through the council throughout the summer, is a non-governmental, citizen-formed district in Central Chattanooga. 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.

(Read more: City asks court to dismiss BID lawsuit amid week of obstacles for the controversial district)

The Hamilton County Chancery Court hearing Monday was the first on a lawsuit filed against the city by six property owners who claim the formation of the district was illegal, resulting in small wins for both the property owners and the city.

Charles D. Paty, a plaintiff and attorney, withdrew his motions for injunctive relief and an expedition at the hearing, ending his efforts to curtail the BID fee collection during the court process.

Despite the city "refusing to cooperate" with his request for an extension to respond to the motion to dismiss the lawsuit, Paty was granted an extension in Hamilton County Chancery Court on Monday, moving the dismissal hearing to Sept. 23.

According to Paty, any fee collected by the city likely would have to be reimbursed if the ordinance establishing the Business Improvement District was found to be illegal.

The BID may not be able to assess a fee this year regardless, as the district does not yet have a means of collection in place.

An agreement between River City Co. and the Hamilton County Commission to use the county trustee for collecting the fee was reversed in late August, as commissioners grew increasingly concerned about the legal problems surrounding the district.

Now, River City has asked the city treasurer to provide collection services. With an amendment that allows the city to charge no less than a 2% fee on the collection, the council narrowly passed the agreement on first reading last week in a 5-4 vote.

The ordinance will go before the council for a final vote Tuesday at 6 p.m.

If the council does not approve the agreement, it is unclear how or if the BID will collect a fee in its first year.

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