The Chattanooga City Council soon will consider an ordinance to create a Downtown Business Improvement District. BIDs are common in other cities and could be an excellent tool here in making the business area more attractive and safer.
BIDs are private sector initiatives for private property. Recent news articles suggest that city and county government are being viewed as private property owners and asked to provide public taxpayer funding based on the BID's assessment formula. Really?
The ordinance the River City Company submitted to the city reads quite differently from the ordinances that set up BIDs in Nashville and Knoxville. It appears to have been written by the local law firm that represents a majority of the major property owners in the district and has represented most of the successful applicants for various tax breaks awarded by the city and county. These private attorneys are good at advocating for their clients' financial interests. That is their job.
But who is doing the work for local government to look out for the public interest in negotiations? Based on my experience in monitoring tax incentives, I would say no one. That needs to change. Hamilton County leads the state in the amount of tax revenue abated through payment-in-lieu-of-taxes agreements, more than $26 million last year alone. Food for thought as the county considers a major property tax increase.
Chattanooga's proposed ordinance must change before passage to clarify that the BID cannot require our local governments to pay anything; that nonprofits exempt from property tax do not fall under the ordinance, and that properties under tax break agreements do not get special treatment.
The Nashville and Knoxville BID ordinances specify that special assessments only apply to taxable real property. Government properties are tax-exempt. The ordinance River City submitted to the City Council refers to property rather than taxable property.
The current draft of the ordinance includes the handful of tax-exempt nonprofits (two churches, the United Way and the YMCA) as commercial property to be assessed. In another departure from Nashville and Knoxville, the special assessments on commercial properties are not based on assessed value as determined by the county but primarily on (the larger of) building square footage or lot size.
The proposed Chattanooga ordinance states that any property located in the district subject to a payment-in-lieu-of-tax agreement shall be subject to the special assessment. Good. It goes on to say: " ... such special assessment may be abated upon written approval of the City Council" ... and extends this abatement to future PILOT or TIF properties. Bad.
What is the rationale for abating a special assessment on three properties that already enjoy substantial property tax breaks totaling about $6 million over the 14 to 18-year terms of the agreements? Those properties are the Market City Center Apartments, the Heritage Maclellan Apartments and the River City Company Majestic 12 Theater. Currently these properties pay zero property taxes to support fire protection, public safety, streets, courts, parks, etc.
If the city and county choose to approve funding for the BID, it would be approved as part of their upcoming budgets. It is a political decision. Mayors Berke and Coppinger can propose any amount or none for action by the council and commission.
Some may say that government is a major downtown property owner and should contribute as an economic development partner. Others might point out that our governments already provide major funding annually to the Convention and Visitors Bureau and the Enterprise Center; that the county nominated downtown as a "distressed" area for opportunity zone tax benefits, and that the city is spending more than a million dollars on Miller Park and Patten Parkway.
Even if you are not particularly interested in downtown, you may want to pay attention to this story. It is a fascinating case study on the power structure in Chattanooga. Public-private partnerships are great, provided we have a strong public sector willing to ask questions of the strong private players.
Helen Burns Sharp is the founder of Accountability for Taxpayer Money, a public interest advocacy group focused on tax incentives and government transparency. Contact her at firstname.lastname@example.org.