SOUTH PITTSBURG, Tenn. — A dispute between the city of South Pittsburg and its housing authority appears to be heading to court next year.
At the October meeting of the South Pittsburg City Commission, City Administrator Gene Vess said he recently received a fourth letter from the South Pittsburg Housing Authority stating that organization would not pay this year's payment in lieu of taxes, known as a PILOT.
The town has received a series of similar letters since 2015, officials said, and the housing authority hasn't paid the yearly $25,000 PILOT to South Pittsburg in over four years.
Vess said South Pittsburg Housing Authority Executive Director Lisa Bradford claims that the town owes the housing authority $385,128 for "concessions for the PILOT program."
That number brought some laughter of disbelief from those in attendance.
"This has got to stop somewhere," Vess said.
"What [the housing authority] is doing is making a calculation of grant funds and their own funds that they've expended for utility and infrastructure improvement on housing authority property," City Attorney Billy Gouger said.
He said the organization is taking a position that under cooperation agreement contract it has with the city, it is entitled to an offset or credit toward the yearly PILOT payment.
"That will effectively mean they'll never pay another PILOT in the lifetimes of anybody that's in this room today," Gouger said.
That claim is the basis of a lawsuit that is pending currently between the city and the housing authority.
The trial date could be set as soon as January, and the court will be responsible for interpreting the contract and explaining exactly what each side's rights and responsibilities are under it.
"Assuming it is even still an enforceable contract," Gouger said. "That's one of the issues that the city has raised."
The contract dates back to Nov. 6, 1957.
Gouger said the purpose of the PILOT is to compensate the city for the basic services it provides to organizations like the housing authority.
"Because [the town] is not collecting property tax or sales tax from them, then it's that in lieu of tax that's designed to offset some of that cost to the city," he said.
Most of the money spent by the housing authority is grant money, Gouger said, but that organization feels it should get a credit on the PILOT for spending it.
"It's a strange analysis of it," he said.
Commissioner Rob Woodfin said even in a declaratory judgment by the court, the town would not at risk for being liable for the $385,128 balance.
It could only be a credit on future taxes if the town loses the lawsuit, he said.
Commissioner Matt Stone said if anyone else didn't pay their property taxes, that property would be auctioned off in a delinquent tax sale.
"So, what's to prevent [the housing authority] from having the same thing done to them?" he asked Gouger.
Gouger said that can't happen because the town can't put a lien against the property since the housing authority doesn't pay property taxes.
"It's a statutory obligation to pay the [PILOT] payment, and it's a contractual obligation to pay the payment," he said. "Beyond that, [the city] doesn't have any lien rights, collateral, or security for the tax like [it] does with property taxes."
"But we do own the building that they operate out of," Commissioner Jimmy Haley added.
Vess said until the matter is settled, it's going to be "a never-ending cycle."
The town still has to include the $25,000 in its budget each year, even though the money is not being paid, and Vess said that puts a shortfall in South Pittsburg's budget every fiscal year.
Ryan Lewis is based in Marion County. Contact him at firstname.lastname@example.org.