Tax incentive agreements for downtown housing projects were on hold for almost two years before the Chattanooga City Council approved affordability provisions last fall reviving their use.
Under those guidelines, city and county officials approved a payment-in-lieu-of-taxes agreement last month for new apartments on Lindsay Street. But the next PILOT to be considered might also be the last.
The Hamilton County Commission’s Building and Economic Development Committee plans to review current agreements to see what changes are necessary or even if county government should keep using them.
The review comes as several community groups are putting pressure on the commission to discontinue the program, which allows companies to pay discounted annual sums instead of taxes on a property’s full value.
Commissioner Joe Graham said in an email last month that he would seek a moratorium on the program. But in an interview Thursday, he said he changed his mind after the commission scheduled its upcoming review.
Tax incentives are increasingly common across the country, he said. Without them, Hamilton County risks losing investments to other communities.
“Am I a proponent of PILOTs? Absolutely not. Is it a tool that we have to use because we are competitive in the workplace and marketplace? Absolutely,” Graham said.
The commissioner represents the downtown area, where the agreements are used. He also sits on the board of River City Co. The nonprofit organization vets applications for those seeking tax incentives and walks developers through the process of getting the projects approved by local governments. However, the organization does not monitor the agreements once they are approved.
Chattanooga Tea Party President Mark West recently called on Graham to recuse himself from voting on the Lindsay Street project because of his position on the board. The commissioner declined.
Local officials have served as board members since River City Co. was founded 30 years ago. Mayors Andy Berke and Jim Coppinger are ex officio members. The County Commission and City Council are also represented by Graham and City Council Chairman Chip Henderson, respectively.
“I would suggest that continuing to offer incentives that erode our tax base is a tremendous mistake,” West told commissioners this week. “When you’re extending these benefits to these PILOTs, you’re standing up for the big for-profit guy, but you’re ignoring the struggling little guy.”
The next PILOT to be considered is for Jon Kinsey, a former Chattanooga mayor who once sat on River City Co.’s board. The tax incentives he’s seeking would help offset the cost of converting a building on the Chattanooga Choo-Choo campus into 97 studio apartments. Kinsey did not respond to an interview request Thursday.
It’s unclear how much local tax revenue is abated through the housing program or who is responsible for tracking it. The assessor’s office maintains records on the properties’ values. The county trustee collects payments, but does not calculate the level of incentives offered to developers. The properties are technically owned by the city’s Health, Educational and Housing Facility Board and leased to developers, but the information it provided to one county commissioner does not include data on abatements or payments.
Nor does River City Co. keep track of that information, President Kim White said. Before the recent addition of affordable housing provisions, “there really wasn’t a performance role” to monitor, she said.
“The PILOT program was created by the city and county,” White said. “We were asked as their partner to administer the program to make sure eligible projects are brought up.”
Commissioner Sabrena Turner-Smedley questions the effectiveness of the agreements’ affordable housing provisions. The rents being charged for the two recent projects, broken down by square foot, are “hard to swallow,” she said. She voted against the last housing PILOT and anticipates “being consistent” on the next one.
“I do a lot of selling to investors. I know the rental market pretty well,” the commissioner, a real estate agent by trade, said. “That’s not affordable housing.”
In the commission’s upcoming review, she is eager to find out how the program was handled and monitored prior to her joining the commission last year.
“I’m very curious to ask who is overseeing the PILOTs that are in place now and how are we policing those,” Turner-Smedley said.
While many conservatives have called for an end to the housing incentives, local progressives are urging city and county officials to attach more stringent affordability requirements to them.
Michael Gilliland, board chair of Chattanooga Organized for Action, said the city’s definition of affordable housing puts rent levels out of reach for communities of color.
Conversely, the housing program in the city of Memphis is “reaching double the level of affordability” than the one in Chattanooga, he said. Rather than subsidizing development, Memphis uses PILOT agreements to permanently increase the stock of affordable housing.
The organization believes that the process for establishing local housing PILOTs should be changed, whether that comes through a moratorium or not.
“We believe that PILOTs are a tool. They could be used for ill, or they could be used for good,” Gilliland said. “If it was built around a public interest that actually made sense, then they could be a powerful tool.”