Four downtown Chattanooga nonprofit organizations recently asked to be exempted from the fees they'd be required to pay by the end of the month because they sit inside the city's recently established Business Improvement District.
They didn't like the answer they got.
"We were told that we would be given the opportunity to present a hardship exemption from this [district], and so we implemented that option, and apparently the BID has just turned us down cold," said Michael Morrison, chairman of the finance committee for Second Presbyterian Church on Pine Street.
The district's board voted Feb. 5 to deny the exemptions, largely because the four entities didn't adequately demonstrate that paying the fees would create "substantial financial hardship," as the application requires, improvement district board chairman Steve Hunt said.
"I was surprised that none of them met the prerequisites that were well identified," he said. "There was a lot of missing information, as I understand it."
In addition to Second Presbyterian, St. Paul's Episcopal Church on West Seventh Street, the United Way on Market Street, and the YMCA on West Sixth Street applied last month to be exempt from paying the fees associated with the district.
Total annual fees from those four entities would come to $34,000. In three cases, the annual assessment is less than 1% of the organizations' budgets. In one case, it's about 1%, said Gordon Stalans, head of the BID board's finance committee.
"We asked them to submit budgets, and when we looked at the information from the four, we did not see a case for substantial financial hardship," Stalans said.
How BID fees are calculated
To fund the district’s services, 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.
In a meeting of the district board's executive committee on Wednesday, members decided to ask the full board to reopen the discussion of the exemptions during its next meeting on Feb. 26. The four organizations will be invited to submit further information about the financial impact of the fees, and to outline the services they provide that are in line with the Business Improvement District's mission.
"We're their friends and neighbors," Hunt said. "We're in the district with them."
Donald O'Connor, the district board member who was the lone dissenting vote on the denial of the exemptions, said he'd welcome the chance to revisit the issue.
"I just thought that these particular groups can do a better job of spending the money than the BID could," O'Connor said. "Part of that is my belief that, when special needs come up, those groups are capable of getting volunteers organized to things, and that's much more valuable than money."
The Business Improvement District was established by city ordinance in July 2019. The contentious process prompted lawsuits and objections by business owners included in the district.
Properties within the district zone pay special assessment fees of about $1 million a year collectively to fund improvements to the central city to make the area cleaner and safer, as well as to fund enhanced beautification and other special projects.
Morrison said the work of Second Presbyterian to shelter the homeless is just one example of how the church already contributes to the district.
"We take care of our property," he said. "We have a shelter we maintain on our premises. We do not need the services being offered by this [district]."
Though there is no formal process established for the nonprofits to appeal the decision against exemption, they will work together to continue the conversation with the BID board, said Tom White, who is treasurer at St. Paul's and board chairman of the United Way.
"We're going to go through the process," White said. "I'd like to think we'll get to a good place on it."
If the Business Improvement District board and the nonprofits can't sort it out, the next step would be Chancery Court, which is not a step anyone wants to take, said Amy Donahue, director of marketing and communications for River City Co. The economic development nonprofit ushered the district formation to the city council.
"Just as those nonprofits are trying to be good stewards of their funds, the district is trying to be a good steward of the BID fees," she said. "Everybody wants to come to consensus, to find a reasonable path forward, and that's why we're bringing it back for more discussion."
Contact Mary Fortune at firstname.lastname@example.org or 423-757-6653. Follow her on Twitter at @maryfortune.
BID board members
The 15 members of the board, and the properties and location they represent are:
— Pierre Dabit - Giorgio’s - Commercial tenant and small property owner south of 4th Street
— Kelly Fitzgerald - Society of Work - Commercial tenant south of 4th Street
— Steve Hunt - Berry & Hunt - Large property owner, commercial south of 4th Street
— Walter Johnson - Plaza Foods - Commercial tenant north of 4th Street
— Travis Lytle - SmartBank- Small property owner, commercial south of 4th Street
— Donald O’Connor - River Pier Landing - Residential owner north of 4th Street
— Lisa Maragnano - CARTA - Large property owner, non-profit and commercial north of 4th Street
— Matt McGauley - Fidelity Trust Company - Small property owner, commercial south of 4th Street
— Charles Perry - Loveman’s - Residential owner south of 4th Street
— Darian Scott - Chattanooga Area Chamber of Commerce - Small property owner, non-profit and commercial south of 4th Street
— Ember Souchet - DeFoor Brothers Development - Large property owner, commercial and hotel south of 4th Street
— Gordon Stalans - Tennessee Aquarium - Large property owner, non-profit north of 4th Street
— Erskine Oglesby (Automatic Seat) - District 7 City Council
— Todd Gardenhire (Automatic Seat) - Tennessee Senate, District 10
— Robin Smith (Automatic Seat) - Tennessee House of Representatives, District 26