A request for the City Council to approve a 14-year tax freeze for renovations to the Maclellan Building, one of Chattanooga's landmark downtown structures, turned into a lively discussion Tuesday about whether the city's residential tax breaks are beneficial in the long run.
Councilman Yusuf Hakeem said he wants to rein in the city's payment in lieu of taxes, or PILOT, agreements, noting that downtown is vibrant enough to support itself. Meanwhile, Councilman Moses Freeman argued that reducing tax breaks could force the city to raise taxes or cause more downtown buildings to remain empty or in disrepair.
"An empty city is a scary city. It's a dreary city," Freeman said. "We can't stop focusing on the heart and soul of our community that is downtown. If this place, downtown, dies, our whole community will began to die."facebook
Others, including Councilman Ken Smith, asked for more government accountability to monitor developers and make sure they keep their agreements.
The current debate is over whether the city should give developer Heritage Land and Development Co. a 14-year waiver of taxes (with a four-year phase-in of taxes at the end of that period) to renovate the Maclellan Building on Broad Street that has remained mainly vacant for 10 years. Under that agreement, the developer would pay roughly $1.5 million in property taxes over 14 years, but Hamilton County and the city also would waive about $1.3 million over the same period.
The debate over the city's residential housing program -- which freezes or reduces taxes for downtown apartment developers who agree to set aside 20 percent of their rental units at lower rates -- has become a contentious subject for local leaders.
In March, a 16-year tax break for the Chattanooga Choo Choo to convert 97 rooms into apartments sparked much debate by members of the Hamilton County Commission. Some commissioners favored limiting or eliminating the tax breaks.
Next Tuesday, the City Council will be asked to vote on the tax agreement for the Maclellan Building. City officials estimate the tax base for the structure will grow for the city and county to $4.4 million over the next 30 years. Most members of the City Council have indicated they will support the tax agreement, but say they just want more discussion on accountability.
Helen Burns Sharp, a retired city planner and government watchdog, said the solution for more accountability is simple. She said the city should create review criteria for every payment-in-lieu-of-taxes agreement that asks: "Would the project likely happen anyway without the tax incentive?"
As for the Maclellan Building, Sharp pointed out that the developers of the project built similar projects in Memphis and South Carolina without a tax break.
Contact staff writer Joy Lukachick Smith at firstname.lastname@example.org or 423-757-6659.
This story was updated at 11:59 p.m. to note that the project's developers have been involved in similar initiatives in Memphis.