Friday, October 31, 2014 · 3:18 p.m.

Discussion on PILOTs dominates Chattanooga City Council meeting

Group approves PILOT status for projects near UTC

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Council members at a City Council meeting. (Photo: Staff)

After a lengthy discussion during their afternoon agenda session, Chattanooga City Council members voted to approve a resolution adopting a temporary policy of assessing PILOT agreements until a Chamber of Commerce study is completed. 

PILOT funds—an acronym used to abbreviate payment-in-lieu-of-taxes agreements—are brokered between local governments and businesses or developers who are expected to bring an added economic benefit to the city. Recent examples of PILOTs awarded by city and county governments include Volkswagen, Amazon, BlueCross BlueShield of Tennessee and Alstom. 

The group's discussion on PILOT agreements began as they heard from River City Company President and CEO Kim White, who answered questions about a duo of redevelopment projects near the University of Tennessee at Chattanooga for affordable housing aimed at off-campus students desiring to be close to the school. Both projects requested PILOT status. 

White said that the housing facilities, one planned for the old women's health facility on McCallie and the other located along Lindsay Street, would bring "new life and more services" to an area characterized by many vacant buildings. White said prices for renting the buildings would be between $475 and $625 per bed.

"We feel great about what this developer is doing," White said. "They need a PILOT to move forward."

White added that total cost for the development is expected to be $3.8 million and encouraged council members to act quickly because of a construction timeline with an end date of before next school year. 

"If it doesn't pass in three weeks, the project is dead," she said.

Several council members had questions regarding the project. Councilwoman Carol Berz asked White if UTC would be participating in any way, if White thought there were other areas in Chattanooga that could use the type of housing proposed and what cost—in a loss in taxes—the city would be incurring if they were to award PILOT status to the project. 

White answered that UTC was supportive of the plan but not participating and added that River City Company traditionally did not place their focus on areas outside of downtown. White said the city would not lose any of its current tax base because taxes were not being collected on the property as is and suggested that new services and businesses, which would eventually take residence near the facility, would increase the tax base in general.

"We will fill up everything around it," she said. 

Berz called on the city's chief financial officer to comment on her perspective toward PILOT programs in general, for both business and housing projects. Daisy Madison said that although she felt the city had done a "wonderful job" at providing incentives for major businesses and employers, the time had come for the city to begin reassessing the goals of PILOTs. 

"The city has the responsibility to make sure it can financially support the increased activity that the incentives will bring," Madison said. "I feel like PILOTs so far have been generous and necessary, but the time has come where I'd like to see them re-evaluated. We take a look at our economy and decide where our community needs to be."

The group then transitioned into discussing the resolution to assess PILOTs on an individual basis until a study conducted by the Chattanooga Area Chamber of Commerce is complete. Ron Harr, newly named president of the chamber, said that the group was "very close" to issuing a request for proposals to groups that could provide a comprehensive assessment of the scope and economic influence of recent PILOTs in Chattanooga and Hamilton County. 

"We can probably do that in another week," he said.

Harr added that the results of the study could be returned to the chamber as soon as February. 

Despite voting in favor of the temporary change to PILOT consideration, Councilman Peter Murphy suggested PILOTs may not have as much of an influence at drawing major businesses to Chattanooga as city officials might think. Murphy said that local assets such as infrastructure, the Tennessee River and the gigabit-per-second network were appealing to groups without PILOTs.

"Companies are going to locate here whether we do it or not," Murphy said.

Before closing discussion, the Economic Development Committee chairman announced that future discussion of PILOTs related to housing would go before the city Housing Committee, chaired by outgoing Councilwoman Sally Robinson.

The council also voted unanimously to approve two new hires for the Chattanooga-area gang task force.

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