City officials make case for housing incentives

The Chattanooga City Council approved the Extended Benefits and Non-Discrimination Ordinance in November

Authored By david.morton

As the City Council prepared to approve tax incentives for the Chattanooga Choo-Choo, city officials defended the controversial deals for developers.

The council’s 8-0 vote Tuesday evening comes two days before the Hamilton County Commission will discuss the county’s role in future payment-in-lieu-of-taxes agreements. A county moratorium would put pressure on the city to either increase the tax breaks it gives or put an unofficial freeze on the agreements.

City leaders are hoping to grow the base of technology workers. But future recruitment efforts will also require more “workforce housing” options in the downtown area, they said.

“We are way behind on producing housing for the people we want,” Councilman Moses Freeman said.

Nick Wilkinson, deputy administrator of economic development, said Chattanooga is “becoming more of a destination for startups and the technology sector.”

“We want to do everything we can to help people get those well-paying jobs,” he said.

Choo Choo Partners LP is seeking a 12-year PILOT agreement that would save it an estimated $26,000 annually on city and county taxes. The developers plan to convert a hotel building into 97 apartments. The 350-square-foot units would rent for $800 a month and include utilities and Wi-Fi.

Developer Jon Kinsey said the apartments are “integral” to a $12 million renovation at the legendary hotel, which will include restaurants and new entertainment venues.

Tax incentives for the residential project were put on hold for two months. The City Council had to make new appointments to the Health, Educational and Housing Facility Board, which enters into PILOT agreements with developers.

“We’ve been ready to go for months,” Kinsey told council members. “Let’s keep this city moving forward.”

Plans for micro-apartments in Chattanooga have been touted in recent weeks by The Wall Street Journal and The Atlantic’s CityLab.

But locally, some elected officials have expressed skepticism about granting tax breaks through PILOT agreements, which are partly intended to increase the city’s affordable housing stock.

Commissioners and council members have questioned the implementation of federal affordability standards used to draft the agreements. They have pointed to a lack of diverse tenants being targeted through the projects. And they’ve been critical of the incentives being exclusive to downtown developers.

City Attorney Wade Hinton said the PILOT agreement for Choo Choo Partners LP was recently modified to reflect some of those concerns and others raised by citizens.

The tax incentives would be subject to future approval by the city and county if property ownership changes hands. The developer will be required to report annually on compliance with affordability requirements. The agreement also includes different clawback provisions than previously used.

Downtown is not yet at a point where it has a lot of housing options. There are expensive condos, vacant buildings and too few studio apartments. But that’s beginning to change.

“We’re starting to become a city,” Councilman Jerry Mitchell said.

Updated @ 8:45 a.m. on 3/11/15 to correct a factual error: The company is called Choo Choo Partners LP, not just Choo Choo LP, as originally reported.