Chattanooga is home to a new grassroots movement organized by residents who believe we can and should reform our "system" for granting property tax breaks. This broad-based coalition calls itself "ATM" (Accountability for Taxpayer Money). The effort began with the Black Creek TIF and then expanded to included PILOTs. Our efforts have attracted national attention, with a story by the Associated Press (AP) and an interview by the Wall Street Journal.

Please click on the ATM tab at the top for more information.

In 2013, I filed a lawsuit challenging the tax increment financing (TIF) granted to developers for a road in a golf course subdivision known as Black Creek Mountain. This TIF is an enormous ($9 million plus interest), an improper and an illegal gift of taxpayer funds to developers who already have plenty of money. In 2014 a Hamilton County judge ruled in my favor and declared this TIF null and void. The developers, as intervenors in the lawsuit, appealed my court victory. This case has recently made its way to the Tennessee Court of Appeals in Knoxville.

The judge issued his opinion based on violations of the Tennessee Sunshine Law. However, just a few weeks later, the City Industrial Development Board--with no discussion or deliberation in public--put a band-aid on the project and re-approved it. My original lawsuit is on appeal. I filed a new lawsuit in September 2014 because I was appalled at how the city went about re-approving the TIF. Open meetings, open records, and ethics issues again surfaced. Rather than returning the case to the elected officials since new policy issues had emerged, the City Attorney chose to send it back to the IDB, which typically acts as a rubber stamp. This second lawsuit is in Hamilton County Chancery Court.

Please click on the Q&A tab at the top for more information on the TIF.


As the Black Creek lawsuits were working their way through the court system, I began to study the payment-in-lieu of tax (PILOT) agreements currently in effect in Hamilton County. (All but one are in the City of Chattanooga.) While we have only one TIF at present, sixty (60) PILOT agreements are currently on the books. Most last about 10 years; some last up to 30 years.

It has been very difficult to get complete information on the total amount of property tax being forgiven and the specifics of individual PILOT agreements. In 2014 alone, the city and county did not collect more than $16 million in property taxes because of in-lieu agreements. In addition to these tax breaks, in 2014 the two local governments (50-50 split) provided a grant to Volkswagen for $40 million for site construction and equipment. I have requested the total amount the current PILOT agreements represent over the entire time periods they are in effect. A conservative estimate is that our city and county goverments have already voted to waive over $300 million in property tax collections. 

The City Council and County Commisssion have not adopted policies and procedures on PILOTs. It is unclear how decisions are made on which companies get tax breaks. Many of the subsidized jobs are part-time without benefits. Some pay less that $15 per hour. Many of the jobs would likely be here anyway. Some existing businesses are "frequest flyers" under the PILOT program, visiting the government ATM "machine" when they purchase major equipment. The downtown housing PILOT program allows developers to charge high rents for very small rooms and call it "affordable housing." The PILOT agreements contain weak language spelling out the obligations of the business recipients. Enforcement is discretionary and rarely (ever?) happens. 

The Government Accounting Standards Bureau (GASB) will soon required all local governments in the United States to disclose information on property tax abatements like PILOTs. Chattanooga and Hamilton County have recently posted information on their websites. Please see Sixty (60) agreements are listed. Note that six (6) new PILOTs have already been approved in 2015. More are in the pipeline and headed to the City Council, County Commission and the bond board. In our current environment, approval is virtually automatic.

We have privatized our economic development program. The Chamber of Commerce and the River City Company are very effective lobbyists for private interests. Our elected officials also need to hear about the public interest dimension of property tax breaks. The city and county could begin to charge a PILOT application fee and use part of the money to hire an independent professional (likely a CPA) to do a detailed analysis of the costs and benefits of a PILOT to the City and taxpayers. In addition, the city and county attorneys could take a more active role in drafting the agreements. Today it appears that they allow the "commitment" and enforcement wording to be drafted by the Chamber and River City and the private attorneys representing the developers.

Please click on the PILOTs tab at the top for more information.

TIFs and PILOTs are appropriate tools in our economic development toolbox. However, we need to establish policies which target incentives to companies that will make a significant commitment to investment and quality jobs and can demonstrate that they would not be here without the incentive. We need policies to make sure that companies are held accountable for their commitments. We need procedures to create transparency so that information on tax subsidies becomes accessible to the public.

We need to realize how truly special Chattanooga has become and that it is not necessary to give away the farm. Out tax break "program" seems geared to 50 years ago when we were desperate to get new development. Companies choose to locate or expand primarily because of business and quality of life considerations. Greg LeRoy, founder of the non-profit Good Jobs First, cites IRS statistics showing that state and local taxes make up less than two percent of a typical company's cost of doing business. Tax incentives are the icing on the cake.  

It takes money to run a city and a county. This money has to come from somewhere, and the majority--almost 60 percent--comes from property taxes. We assume all taxpayers pay their fair share. When certain companies are given special consideration, this arrangement impacts other property owners by reducing the amount of revenue collected. It can lead to a tax increase or a reduced level of service. It means there is less money available for high priority community projects.

Let's use tax abatements judiciously. Let's make sure the PUBLIC INTEREST has a seat at the negotiating table.

Thanks for reading. I hope you will get involved in this important public policy issue by letting our elected officials know that we expect them to adopt and follow sound policies and procedures. We can make a difference.

~Helen Burns Sharp

  August 2015