Our most popular tax break in Chattanooga/Hamilton County is called "Payments in Lieu of Taxes" or PILOT. About forty-five PILOT agreements are currently in effect or have been approved.   

Click on this link to the Hamilton County Finance Department for lots of information about individual PILOTs. FY 2019 PILOTs.

About $26,000,000 was abated in fiscal year 2019. This amount is more than for any other county in Tennessee, including the three urban counties larger than Hamilton. 

This ATM webpage contains an overview of the PILOT program and some detail on jobs PILOTs. (Please check out the web page on this site for the housing PILOT program.) 


  • Tax breaks are not inherently bad.
  • We need the PILOT tool in our economic development toolbox. HOWEVER,
  • Tax breaks should be used strategically.
  • Tax breaks should be reserved for projects with significant public benefit that would not happen without the incentive. (This is called the "but-for" test.)
  • The City gets about 60 percent of its general fund revenue from property taxes.
  • City and County taxes make up less than two percent of a typical company's cost of doing business.
  • Some current PILOTs do not provide significant public benefit and likely would have happened anyway.
  • Companies have not been held accountable for commitments they made to get the PILOT.
  • "Clawback" language in current agreements is weak and does not protect the taxpaying public.
  • It is unusual for a city and county our size not to have written PILOT guidelines.
  • Since 2013, about 20 PILOT applications have been approved by the City Council and County Commission.
  • The lack of transparency in the existing program provides fodder for citizens who wonder about appearances of corporate welfare and conflicts-of-interest.
  • The current program raises questions of tax equity (fairness) and social justice. 
  • Revenue not collected could be targeted to high priority needs.
  • The City and County abated about $26 million in property tax revenue in fiscal year 2019. This amount is higher than for any other county in Tennessee.
  • The City and County have agreed to forgive about $400 million total in property taxes  over the multi-year durations of the PILOTs.


1)  Why Does It Matter?

In fiscal year 2019, PILOT agreements resulted in some 26 million dollars of lost revenue to the city and county. An  "in-lieu" agreement typically lasts at least 10 years. $400 million is an estimate of the amount of tax revenue that will not be collected from benefitting companies while these existing agreements are in effect.

The City gets almost 60 percent of its general fund revenue from property taxes.

When our city and county governments approve PILOT agreements, the businesses pay dramatically less property tax. This arrangement raises both tax equity and social justice concerns. 

Why should homeowners and small businesses pay their fair share of taxes and also pay for the services (fire, police, etc.) for these companies? What about high priority community projects these uncollected tax dollars could be used for? Is it appropriate for government to be picking winners and losers?

Greg LeRoy, the founder of the non-profit Good Jobs First, cites IRS data suggesting that tax breaks rarely influence corporate locations. 

State and local taxes make up only 1.2 percent of the typical company's cost of doing business, far less than labor, materials, marketing, overhead, transportation---the business basics. He maintains that the "cake" may have already been baked when a company mentions a possible location or expansion and that the PILOT is often the "icing" on the cake. 

2)  What is a PILOT?

A PILOT is a property tax abatement used to "recruit" business. The Tennessee constitution prohibits local governments from exempting businesses from property taxes.  

Some years ago, wealthy companies and their lawyers devised a "creative"  way around the constitutional prohibition to greatly reduce the amount of taxes certain businesses pay. 

The private company transfers its real and personal property to the public Industrial Development Board (IDB)  or the Health Education and Housing Facilities Board (HEB) and then leases it back for a nominal amount. These boards, as public corporations, are exempt from taxation. 

In exchange for favorable tax treatment, the private company agrees to pay the local government a negotiated (low) amount, referred to as a "Payment In Lieu Of Tax" or PILOT. 

Lease amounts here are so low that our program has been dubbed "Profits in Lieu of Taxes."

3)  What Companies Currently Have a PILOT?

Today there are about  45 PILOT agreements in effect in Chattanooga.  Some of the companies currently benefitting from PILOTs include multi-billion dollar corporations such as Amazon, Chattem, Coca-Cola, Unum (Provident), Volkswagen, Westinghouse and Wrigley. Other very successful companies under PILOTs are Blue Cross Blue Shield of Tennessee, CBL & Associates, and Southern Champion Tray.  

Chattanooga is not alone in granting property tax incentives. However, many other communities only grant them in situations where the investment is high, the jobs are well paying, and the applicant has demonstrated that they would not do the project or would do it somewhere else were it not for the incentive. 

In looking at the list above, one has the feeling that many of these highly successful corporations would be here anyway, due to our location, transportation, internet speed, and quality of life. Are PILOTs are being used as rewards rather than inducements? 

Why are Chattanooga and Hamilton County seemingly unwilling to adopt policies that would help ensure that applications meet certain criteria, such as number of jobs and wages?

4)  Who Decides Who Gets a PILOT? 

It is unclear who negotiates a PILOT agreement, who makes the decision on which companies will be offered a PILOT and what factors they consider. 

It is unclear who writes the actual agreements. 

Much of the work appears to be done by the company's private attorneys, who understandably advocate for the best deal for their clients.

We do not know how involved the city and county attorneys are in trying to make sure taxpayers are represented at the negotiating table.

We do not know how large a role the city and county mayors play in the negotiations. 

Members of the Industrial Development Board, who are unelected and thus non-accountable to taxpayers, find themselves in the unenviable position of being rubber stamps. They are not provided much if any staff analysis outlining key policy provisions. (The IDB is involved because the ownership of a PILOT property is transferred to the IDB to confer tax-exempt status.)

The chamber of commerce plays an important role in vetting applications for "jobs" PILOTs. Through this arrangement, our elected officials have privatized a government function by in effect delegating decisions on who does not have to pay property taxes. 

City and County government provide $1.2 million annually to the Chamber and yet our elected officials have not provided their economic development partner with policies  to guide them on PILOTs. 

In a presentation at a City Council Strategic Planning meeting on August 14, 2018, a Chamber official (Charles Wood) acknowledged that  currently there is no site  that the public (or elected officials) can go to find the "policies" the Chamber  uses in deciding whether to negotiate a PILOT.  Councilors requested that the factors that the Chamber considers be posted on the city website. 

In August the Council also mentioned reporting, noting that they have not been getting reports showing how companies are doing in meeting their commitments of jobs, investment and wages. 

On October 13, 2018, at an Avondale neighborhood association meeting, the City's Deputy Administrator  for Economic Development (Charita Allen) was asked about the existence and location of PILOT policies. She said that there are Jobs PILOT policies and that they are housed at the Chamber. She said that the city "will get" and put on the city website.

Six months have passed  with apparently no progress on posting the policies as City Council requested and no reporting on performance.

Site development consultants hired by companies seeking PILOTs may influence the process. They are very good at trying  to convince both local economic development officials and corporate executives that the use of subsidies is an inevitable part of the site location process. 

The consultants play to the fear of communities that they will be shunned by corporations unless they create an appealing "business climate," which usually includes "incentives" such as the availability of substantial  tax breaks and infrastructure assistance. 

The non-profit Good Jobs First  (GJF) writes: "Candid site location consultants will admit: the only time subsidies can actually tilt the scales is when a company has two equally compelling choices. But that rarely happens." (It happened here at least once, with Volkswagen.) 

"So subsidies are a really crude tool that can only affect a really tiny percentage of deals. All the other times, the subsidies are just wasted windfalls, paying companies to do what they would have done anyway. That means less money for things that really do help create jobs, like skills and infrastructure." Here is a link to the GJF webpage on Site Location Consultants. ​

5)  What Are the Stated Criteria that Must Be Met?

Chattanooga and Hamilton County currently have no established criteria. Our local governments have no written policies. 

One threshold criterion should address "public purpose," which might relate to the amount of investment, the number of permanent jobs and how much those jobs will pay. 

The other threshold criterion should address whether the tax subsidy is needed for the project to happen (the "but/for" test). Some local governments require applicants for tax breaks to submit an affidavit certifying that the project can't proceed without the incentive. 

Policies would spell out who monitors the PILOT agreements and address what happens if companies do not live up to their promises relative to jobs and investment or housing units (so-called "clawback" language). 

The clawback language here remains weak. Such wording is intended to protect the public if a company does not meet the commitments it made to get the tax break. Rather than having teeth, many current agreements--likely written by the attorneys for the company--contain wording stating the city and county "reserve the right but are not obligated" to adjust the terms by requiring them to pay an additional amount. 

Given our weak record of enforcement, companies may view the city and county as toothless tigers. 

In announcing a settlement agreement with Alstom, Chattanooga Mayor Andy Berke said: “It’s the first time we’ve pursued a company that has not met its obligations.” 

Let that statement sink in.

The PILOT program has been around for over 30 years and over 100 agreements have been approved. A number of companies have likely "fallen short" in meeting their commitments. Yet we have clawed-back only once and, even then, agreed to settle for less than half the amount the City's outside counsel said we were due. 

Contrast those enforcement statistics with Memphis/Shelby County. The state research agency TACIR included in a recent report to the Legislature a statement that their economic development agency (EDGE) "has reduced, restructured, or terminated 44 agreements since 2011."

A former chair of the City Industrial  Development Board called for more standards and transparency in this article from the Chattanooga Times Free Press comparing the Chattanooga process to other cities in the state.  TFP Article on Tennessee Cities

The 2014 PILOT Agreement/MOU for the Volkswagen expansion is a poster child for how our local governments have let us down as city and county taxpayers by not having policies in place to protect us.  Commentary on Volkswagen PILOT Crash Landing 

The State of Tennessee had clawback language as part of its incentive package. Chattanooga and Hamilton County apparently had nothing. ATM supports the decision to give VW a PILOT but we are appalled that our "negotiators" allowed the agreement to be so one-sided.

In late 2018 VW announced plans to expand its Chattanooga plant to build an electric vehicle. If a new PILOT is offered, ATM hopes it will be for no more than 20 years and that the average annual wage for new production workers will be at least $50,000. These numbers would be similar to what Huntsville reportedly negotiated with Toyota-Mazda when they announced a 4,000-job plant in 2018.

ATM would also expect to see sound clawback language to protect local taxpayers if the company closes its plant or does not meet its commitments on jobs, investment or wages or is fined by the federal government or State AG for corporate misconduct.


These policies are drawn from a variety of sources, including policies adopted by other Tennessee cities. We address issues that have come up during the five years we have been following the PILOT process locally. ​

Documents. The City and County shall rework the PILOT application form and templates for payment-in-lieu-of-tax and lease agreements to better protect the public interest and improve clarity. (Comment: Perhaps UTK's MTAS or CTAS provide technical assistance.) 

Ineligible Projects. Retail projects and projects for Housing, Entertainment, Hospitality and Recreation are not eligible for a Jobs PILOT. Projects that are already underway or have begun construction are not eligible for a PILOT.

Real v. Personal Property. Projects involving real property (land & buildings) rather than personal property (movable specialized equipment) are viewed more favorably.

Required Information.  The Applicant shall provide information on number of existing jobs, number of new jobs to be created, average wages to be paid for new jobs, and amount of investment to be made. 

Jobs. The Applicant shall create a minimum of 50 new jobs. Existing jobs, if any, shall be retained. To be counted, new jobs must be at least 1,820 hours/year FTE (an average of 35 hours per week). The obligation to maintain the number of new PILOT jobs must last at least five years beyond the length of the PILOT agreement.

Wages/Benefits. To be counted for PILOT purposes, the new PILOT jobs proposed by Applicant shall pay at least $17 per hour, with the employer covering at least half of the cost of health insurance. (Comment: $17 per hour for 1,820 hours is $30,940 annually. For a 40-hour week, it is $35,360. The website PayScale reports that the average salary in Chattanooga is $43,890.)

“But For” Analysis. The Applicant shall demonstrate that  the requested tax break is a determining factor for the company to locate or expand here. “But for the PILOT, we would not do it.”

Third Party Review. If the project eligibility and “but for” tests are met, the City and County shall refer the application  for independent third party analysis of project economics and public benefit. Third parties must have expertise in public finance. (Comment: Knoxville uses Municap, Inc. based in Baltimore to review all TIF projects.)

Duration of Subsidy. The maximum period for any PILOT shall be  ten (10) years.

Schools. All PILOT recipients shall pay education property taxes in full.

Stormwater Fees. All PILOT recipients shall pay stormwater fees in full.

Community Benefit Agreement. PILOT agreements shall include CBA provisions to ensure that major development projects benefit local residents and neighborhoods.


 Workforce Development: The company shall endeavor to award at least twenty percent (20%) of the total dollars of the contracting and related work for the Project  to qualified, certified Diversified Business Enterprises (“DBE”). DBE is defined as a business which is at least fifty-one (51%) percent owned or controlled by minority group members or women controlled. The term “contracting work” includes any or more of the following roles or positions with respect to the Development: (i) general contractor; (ii) subcontractor; or (iii) supplier. 

Targeted Hiring Requirements.  The Company shall endeavor to ensure that at least twenty percent of all work hours are performed by individuals whose primary place of residence is within a city zip code that includes a census tract  in which the median annual household income is less than $40,000 per year, as measured and reported by the U.S. Census Bureau.  

Clawback Language. The City and County shall ensure that all PILOT agreements  contain clawback language spelling out what shall happen if the company does not meet the commitments represented in the PILOT agreement or in the event of corporate misconduct. 

  1. Subsidy Recapture. For each year the company falls short of its obligations for job creation, wages, and health care insurance, the value of the subsidy shall be reduced on a prorated basis by the same share of jobs that were not created and/or that failed to meet wage and health care insurance obligations. If the subsidy has already accrued to the company, the subsidy reduction shall be recaptured. 
  2. Subsidy Recission (Jobs). If a company falls short on its job creation obligations by 25 percent or more for three consecutive years, the pro rata recapture shall apply for the third year in default and the subsidy shall be rescinded effective January 1 of the following year. 
  3. Subsidy Recission (Corporate Misconduct). If a company is fined by the federal government or the Tennessee Attorney General for corporate misconduct during the period the PILOT agreement is in effect, the City and County reserve the right to immediately terminate the tax abatements provided by the agreement and require the repayment of amounts that would have been payable on the property during the Tax Abatement Period as if it were subject to property taxes,  giving credits for those payments made.
  4. Project Closure. In the event the Project closes or moves from the County during the Tax Abatement Period, the City and the County shall  immediately terminate the tax abatements provided by the agreement and require the repayment of amounts that would have been payable on the property during the Tax Abatement Period as if it were subject to property taxes, giving credits for those payments made.

Citizen Participation. The City Council and County Commission shall hold public hearings at least one week before a project is presented to them for a vote.

Transparency. City and County government shall monitor annual reports based on actual outcomes (jobs, wages, investment) and post findings on local government web sites. Governments shall disclose the amount of the PILOT subsidy over the entire length of the agreement and shall disclose the value of any other local subsidies provided to the company, such as land, site preparation, and grants.

Assignability/Transfer.  A PILOT Agreement shall not be assigned without the prior written approval of the Industrial Development Board and without a written commitment from the assignee that the new company acknowledges they are bound by the terms in the original agreement. Before agreeing to assign, the IDB must confirm that the company is in compliance with their jobs/wage/investment commitments.

Accountability for Taxpayer Money-Chattanooga

~Helen Burns Sharp

February, 2019