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The Chattanooga Business Improvement District and economic development nonprofit River City Company, which ushered the district's creation through the city council, managed to beat an October deadline to secure a means of fee collection before property tax bills are issued despite a dramatic month of obstacles.

The legality of the district, though, is yet to be determined.

A summary judgment and tentative trial date were set Monday at the second hearing on a lawsuit filed against the city to block the formation of the district, meaning the outcome of the lawsuit will not be determined until after around $1 million in property fees are billed by the controversial district.

The Business Improvement District, 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.

The Hamilton County Chancery Court hearing Monday was the second on a lawsuit filed against the city by six property owners who claim the formation of the district was illegal, resulting in another deferment, setting a summary judgment hearing for Nov. 1.

According to City Attorney Phil Noblett, the summary judgment hearing is designed to determine the factual truth of certain issues in the case, and could, but will not necessarily, return a judgment on the overall lawsuit.

If the summary judgment does not result in an overall judgment, there will be witness proof, if necessary, after the motions for summary judgment are filed.

According to the Chancery Court clerk, a trial date of Dec. 5 has been set.

While this week's hearing did not give favor to either side of the lawsuit, a hearing in early September set the stage for the district to move forward with fee collection on tax bills, which will be distributed in October.

At the original hearing, Charles D. Paty, a plaintiff and attorney, withdrew his motions for injunctive relief and an extension at the hearing, ending his efforts to curtail the district 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 this week.

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 day after the last hearing, the Chattanooga City Council furthered the district's efforts to asses the approximately $1 million in property owner fees by approving a resolution that allows the city treasurer to collect the fee.

The treasurer was district supporters' last hope for fee collection after 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, the treasurer is set to provide collection services, after the council created amendments that allow the city to charge no less than a 2% fee on the collection and set a sunset period of one year on the agreement.

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

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