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If you want to know how the City of Chattanooga decides which businesses receive property tax relief, stay tuned for the upcoming discussion on what our first-ever written tax relief policy will look like.

This issue is important because multi-year PILOT agreements generated approximately $25 million in revenue for cities and counties last year alone, which, if collected, could have been used to fund essential services. The tax burden to support General Fund services is shifting to private taxpayers and small businesses while these tax relief agreements are in place.

The draft policy proposed by Chattanooga Mayor Tim Kelly’s office and the Chamber of Commerce calls for a greater role for the Mayor’s office, the Chamber of Commerce and the appointed Industrial Development Committee – and a greatly reduced role for our elected officials on the City Council. I believe this is a mistake.

The fact that the City Council is no longer involved in the approval process for most PILOTs represents a significant departure from current practice. Six of the seven PILOTs approved by the Industrial Development Board since 2015 would not have gone to the City Council if the proposed guidelines had already been in place.

In the current approval process, the City Council passes a resolution stating: “We hereby conclude that the project is in the best interest of the City.” The Council then sends the resolution to the IDB, which is to approve the tax abatement agreement.

The Tennessee Constitution requires uniform taxation of similarly located properties, preventing city councils (and county commissions) from taking actions that would favor a corporation. However, the Constitution exempts government property from taxation. This exemption provides an opportunity to circumvent the constitutional requirement.

The Industrial Development Board is a low-profile, tax-exempt public corporation created by the city. It can acquire a PILOT company’s property through a waiver and then lease it back to the company, usually for a token amount.

Over the years, IDB members have said they were able to approve significant and complicated tax breaks with greater certainty because the City Council had reviewed them first.

Why do the Chamber and the Mayor’s office want to eliminate the step where council members discuss a tax abatement request? Their stated reason is that the current approval process is tedious, time-consuming, and may cause us to lose business locations to cities like Huntsville and Greenville (two cities that have lost less tax revenue than Chattanooga).

A Chamber representative expressed concern that the process “will be so slow that we will lose projects…” A senior mayoral aide said, “We keep getting the same questions about these PILOTS, and it becomes almost a theater… and it takes months and months.”

However, this narrative does not reflect reality. It took less than a month to move the three PILOTs approved since Mayor Kelly’s term began in 2021 from Council “best interest” decision to IDB action. The Mayor’s staff cites the “politicization” that comes with submitting PILOTs to Council. If it is “political” to include all 10 of our elected officials in the review process, isn’t it equally (or even more) “political” to give one (the Mayor) all the power?

Here are examples of questions council members are asking. They’re asking about the “but-for” test. They’re asking about apprenticeship programs and the mix of full-time and part-time jobs. They’re asking about the clawback clause in the agreement that governs what happens if the company doesn’t meet its obligations. They’re asking staff about the impact on the city’s general fund while the incentive is in effect. Good questions. No prodding. No political theater.

Council members are elected and therefore accountable. They vote on the budget: PILOTS affect the budget because they lead to revenue losses. They, like all of us, want the local economy to grow. But they are also aware of what else these revenue losses could be used for, such as public infrastructure and public safety.

Is there another reason why the Mayor’s Office and the Chamber want to limit the role of the City Council? Could it be something to do with political power and a preference not to be questioned? City Council members are more likely to ask questions of staff than IDB members. The Mayor’s Office and the Chamber act as staff for both bodies.

In Chattanooga’s “strong mayor” form of government, the executive branch (mayor) already has far more power than the legislative branch (city council). The executive branch seems to want more power. In the new PILOT process, let’s respect the concept of checks and balances to avoid one branch wielding too much power.

Helen Burns Sharp is the founder of Accountability for Taxpayer Money, a nonprofit advocacy group focused on tax incentives and government transparency.

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