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The Downtown Chattanooga Alliance board on Wednesday agreed to a partial fee waiver for four nonprofits which had sought exemption from assessments used to support the new entity.

The panel voted to waive 90% of fees of the United Way and YMCA. Also, the board agreed to waive all of the assessment on the property of Second Presbyterian Church and St. Paul's Episcopal Church.

But the Alliance's board declined to waive fees on two parking lots belonging to the churches.

Brad Whitaker, representing St. Paul's, said he disagrees with the board's decision.

"Fundamentally, we think it may be unconstitutional," he said.

Whitaker said the fee comes from the Hamilton County tax office and it's "a tax assessment on a tax-exempt organization."

Also, he said that it seemed that one church, which he didn't identify, was intentionally drawn outside of the district. He said that question has been asked and "we haven't gotten a good answer."

Pat Neuhoff, who represented the YMCA, said it wants a total exemption.

"This year will be a disaster," he said, citing the coronavirus. "We'll lose money at a high rate and next year will be even worse."

If the YMCA has to pay fees, that will hurt its preschool, youth services and other programs, Neuhoff said.

"We've been downtown for 148 years providing for the needs of the less fortunate," he said.

Properties within the roughly 50-block zone pay special assessment fees of about $1 million a year collectively to fund improvements to make the central city cleaner and safer, enhance beautification and for special projects.

The board of directors voted in February not to grant fee exemptions to Second Presbyterian on Pine Street, St. Paul's on West Seventh Street, the United Way on Market Street, and the YMCA on West Sixth Street.

The board elected later that same month to reopen the conversation about the exemptions, and it has been engaged in back-and-forth negotiations about how to resolve the requests.

Total annual fees from those four entities would come to $34,000.

Gordon Stalans, representing the board's finance committee, said the waivers granted Wednesday come to $26,000.

Stalans said the committee talked with the four nonprofits as well as other property owners on both sides of the issue.

He said the Alliance will determine waiver requests on a case-by-case basis each year. The landowner must be a nonprofit, the property must be exempt from government property taxes, and the owner must demonstrate a substantial hardship to qualify for the exemption, Stalans said.

Concerning the church parking lots, that property is not tax-exempt in accordance with the ordinance passed by the City Council governing the Alliance, he said.

"We cannot waive assessments on the two parking lot properties, Stalans said.

Concerning the YMCA and the United Way, he said both organizations offered in February in a letter to pay 10% of the assessment.

"We proposed a higher number," Stalans said. "At the end of the day, we went back to their offer to pay 10%."

Nine members of the 12-member board voted in favor for the partial waivers, with board member Matt McGauley dissenting and two abstentions.

Board member Travis Lytle said he wanted to see a process in place where property owners who request a waiver must demonstrate it.

"My concern is setting a precedent," he said.

Steve Hunt, who chairs the Alliance board, said the ordinance says any nonprofit or private landowner that's part of tax-increment financing can ask for a waiver.

"What you're speaking about is requesting information and understanding that," he said. "It would be better to set up a list of criteria."

Stalans said the difficult part is defining financial hardship.

"We'll work on trying to put criteria together," he said.

Contact Mike Pare at mpare@timesfreepress.com. Follow him on Twitter @MikePareTFP.

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