The use of tax increment financing (TIF) for a one block extension of M.L. King Blvd. was approved by the Chattanooga City Council, the Hamilton County Commission and the City Industrial Development Board in 2018 with almost no deliberation about any of the issues raised below. Groundbreaking took place on August 9, 2018.
1. Extending M.L. King Blvd. one block to the Tennessee Riverwalk is a good idea.
2. Using TIF funds to pay for this street was a very bad idea.
THERE WERE TWO IDEAL FUNDING SOURCES FOR THIS PROJECT. EITHER WOULD HAVE SAVED TAXPAYER DOLLARS.
3. The City Council passed a resolution in 2002 adopting the 21st Century Waterfront Plan. The plan lists the MLK Extension as a project. Council adopted an ordinance establishing a capital projects fund for funding projects in the Plan. The ordinance mentions that proceeds from bonds financed by the City's Hotel/Motel Tax can be used for construction of such projects.
4. Hotel/motel taxes were the ideal way to fund this project. The City and County each collect about $8 million annually from hotel/motel taxes. This project is specifically listed in the 21st Century Waterfront Plan (City). It relates to tourism downtown (County). This money could have been used and reduced the project cost.
5. The City and County recently received $6 million in a settlement agreement for a failed PILOT for Alstom located right next door to the new TIF. This money could have been used and reduced the project cost.
HERE IS A SUMMARY OF WHY THIS WAS NOT A GOOD TIF.
6. The City’s adopted TIF policies do not contemplate this kind of project. The project is not in a blighted area. It does not provide a lot of well-paying jobs. It is primarily residential in nature.
7. This project does not appear be eligible for tax increment financing under state law, which requires a finding that the project meets at least two provisions of Tennessee Code Annotated 7-53-101 (13) (A).
8. The Economic Impact Plan (EIP) states that this project meets subsection (ii), which refers to "any commercial enterprise involved in selling, providing, or handling any financial service or in storing, warehousing, or distributing or selling any products of agricultural, mining or manufactured products."
9. The project defined in the EIP consists of medical office buildings and retail/restaurants, as well as the public infrastructure. These uses have nothing to do with financial services or agricultural, mining, or manufactured products.
10. This TIF project fails the "straight-faced" test, the "but-for" test and, were someone to file a lawsuit, might also be found by a court to violate the "state law" test.
11. Using TIF revenues for privately owned land and improvements requires a determination that the use of TIF revenues is in the “best interest of the state.”
12. “Best interest of the state...means that the project would not have occurred but for the payment, expenditure or financing.”
13. Construction was well underway on the condominiums, the medical office building, and the restaurant well before the TIF was approved in the spring of 2018.
14. The private property where the TIF road will go was owned for years by Newton Chevrolet. The TIF application filed in late 2017 by the Nashville Cameron Harbor developer (Evergreen Real Estate) said that this property was under contact until April 2018. The public could not find out the names of persons who had contracted with “Newton”, even though public funds will be used for acquisition and construction.
15. On August 10, 2018, "Newton" sold the property to 726 Fulton Street LLC. The sale price listed on the Assessor's records is $0. According to online records from the Tennessee Secretary of State, this entity was formed the day before. Four days after the sale, this LLC merged with Riverwalk at Cameron Harbor LLC.
16. The Economic Impact Plan for the project says that the maximum amount of TIF financial assistance would be $3.5 million plus $1.7 million in carried interest, reserve accounts, fees and expenses for a total of $5.2 million. One third of TIF funds could go to "soft costs." Who benefits?
17. Was TIF selected as the funding source to increase the benefit to private parties? Interestingly, at about the same time this TIF was approved, Hamilton County nominated the adjacent Alstom property as an "opportunity zone" under a program created by the recent federal tax break. This site was recently acquired by local developers. The narrative is the application says that the Alstom site is "potentially eligible for TIFs or PILOT...and eligible for bonding financing."
The current TIF boundary is unusually small for a TIF. Did the master minders of the MLK TIF see it as a linchpin for a TIF boundary that would grow to include an additional 100 more acres along the waterfront? City staff announced in October of 2017 that they expected to get "multiple applications" for TIF.
18. The three line items in Exhibit D of the EIP that relate directly to the MLK street extension project total only $2.9 million.
19. The projected cost of “road land acquisition and loss of units to development” is $2 million. The public does not know the justification for the amount we would be paying.
20. The TIF application asks an applicant for a detailed cost breakdown of the public improvements, including quantity and estimated cost of street, sidewalks, lighting, traffic signals, etc. This applicant did not fill out the cost breakdown.
21. This TIF means that the private development would pay much less in property taxes to the general fund (fire, police, etc.) for about 18 years, leaving it to other commercial and residential taxpayers to fund these important services.
WHY SHOULD THE PUBLIC CARE HOW THIS PROJECT IS PAID FOR?
22. You should care because it involves the use of your tax dollars.
23. It is the responsibility of your government to be good stewards of your tax dollars and to be trasparent on how they are being spent.
24. Situations arise when you may support the use of your tax dollars to promote private development because of perceived public benefit that might not happen otherwise.
25. The State Legislature has enacted law and outlined what projects qualify for tax increment financing. ATM does not believe this is a qualified project under the law.
26. Using TIF unnecessarily to benefit private development is an abuse of this good economic development tool.
27. Using TIF in this case sets a bad precedent. It could make it more difficult to say no to other private developers.
28. Hamilton County led the entire state of Tennessee in 2016 in both the total dollar amount of property taxes abated ($24 million) and the abated property percentage of commercial and industrial assessment (11.6%). The amount is $26 million for FY 2018.
A TIF, unlike a PILOT, is not an abatement. However, it diverts property taxes from the city and county general funds for TIF project costs, resulting in less tax revenue for important services and programs.
Evergreen Real Estate of Nashville filed an application with the City of Chattanooga for tax increment financing (TIF) in the fall of 2017. Future property tax revenues will be used for a one-block extension of M.L. King Blvd. to the trailhead on the Tennessee Riverwalk and for intersection improvements at MLK/Riverfront Parkway. As originally proposed, TIF funds would have also be used for elements of Evergreen’s private development, including a medical office building and apartments. These buildings would be located on the four parcels within the TIF Plan Area. Property taxes on these improvements would be diverted from the city and county general funds (fire, police, etc.) to pay off the TIF project over a period that may last 18 years.
~Helen Burns Sharp
Accountability for Taxpayer Money