published Thursday, June 21st, 2012

Tax Increment Financing vote a bad precedent

The Chattanooga City Council voted 5-2 Tuesday to approve the use of city's first Tax Increment Financing plan for a multimillion road up Aetna Mountain. Private developers say the roadway is essential to construction of what they claim eventually will be a more than $500-million mountaintop community of homes, offices, commercial and retail buildings and greenspace. The council's affirmative vote allows the project to move forward. It does not eliminate reasonable questions about the approval of TIF for such projects.

Developers say -- and some public officials agree -- that the use of TIF does not expose government to risk. The plan, governed by state law, allows developers and their lenders to put up funds for the road and then recoup the cash over a period of a decade or more by using future tax revenues above current general and city taxes -- but not the county's school tax -- to pay off the loan. Neither the city nor county would benefit from increased tax revenue until the loan is repaid. TIF is a novel idea and has been used successfully elsewhere in the state. Still, its use in this instance is questionable.

The question the City Council had to answer Tuesday was whether the Aetna project met the criteria put forth by the state Legislature when it authorized the use of TIF. The requirement for such assistance is that a development would not take place without the use of TIF. City taxpayers are unlikely to ever know if the Aetna project would have gone forward if TIF had not been approved.

The council vote, it should be noted, was not unanimous. Councilwoman Deborah Scott urged the council not to approve TIF. She and Councilman Peter Murphy voted against it. Andrae McGary, who rightly said the city needed more time to consider the long-term ramifications of approving the TIF, and Sally Robinson abstained. Council members Jack Benson, Carol Berz, Russell Gilbert, Pam Ladd and Manny Rico voted affirmatively and the TIF resolution was approved.

Approval sets a bad precedent. It allows private developers to do their work with a public subsidy -- the sort of tax abatement granted by a TIF can hardly be described as anything else. Moreover, approval of the TIF for the Aetna Mountain project no doubt will inspire other private developers to seek the same sort of assistance from government. Given what transpired Tuesday, it would be difficult for the council to deny such requests, even though it could impact city revenues.

TIF and similar programs have their place in community and regional development. Generally, though, such tax abatements and subsidies should be reserved for projects that create jobs -- new businesses or expansion of existing businesses -- or for enterprises like downtown redevelopment that serve the entire community rather than the interests of the few at the expense of the many. The TIF plan approved too quickly by the City Council on Tuesday does neither.

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Hey now, this is corporate welfare, it can't be questioned.

Go bash some welfare for poor people!

June 21, 2012 at 12:20 a.m.
fairmon said...

An additional property tax increase will occur earlier than necessary. This is a gamble that the ROI will be there. Does anyone have any idea what the current unfunded future liabilities of this city is? How much is current and future pension, health care and other cost under funded? This appears to be another future liability since failure of the development to generate the projected revenue may become a city liability. Would those voting for this plan invest their own money in the development projects?

June 21, 2012 at 2:49 a.m.
aae1049 said...

Here is the agreement for Black Creek. What they have done, is added conceptual amenities to an upscale neighborhood to give the appearance of a false public benefit, and to fit a TIF agreement in concept. The project does not meet the bar for public good in any shape, form, or fashion. The City will have to provide services with no additional tax funds, so who the heck pays? we do.

The principles and/or lobby of this development group is Doug Stein (appointed Stormwater Board Chairman) Mike Mallen (Councilwoman Robinson's son in law), and Gary Chazem (Given small campaign donations to Council members Berz and Rico). You would be amazed how easy it is to gain political favor for a small donation to the campaign fund.

Here is the agreement. You decide what kind of deal the taxpayers got.

June 21, 2012 at 10:13 a.m.
Leaf said...

How could there possibly be demand for new housing developments? We are just coming off a huge bursting housing bubble. There are still lots of forclosures in the area. McMansions are pretty inexpensive if that's what floats your boat. I hate to be cynical, but I hope the developers aren't getting investments, loans and government handouts while paying themselves and their buddies exhorbitant salaries to sit on the development board. All the while not really caring whether the development goes bust or not. Nah, I'm being silly. That kind of thing never happens.

June 21, 2012 at 2:38 p.m.

I guess we all agree on this one. Public money shouldn't be used to fund private businesses.

June 21, 2012 at 4:10 p.m.
aae1049 said...

I like Sheeple Eaters. You will never want for food, plenty in these here parts.

June 21, 2012 at 5:07 p.m.

Afraid not, for example see the concept of space prizes.

June 21, 2012 at 5:15 p.m.
MasterChefLen said...

If this does not work our for Chattanooga, the city can always resort to illegal annexing of adjacent areas (for tax revenue) like Mayor Littlefield and his rubberstamp city council have been doing the past couple of years. Who knows, maybe they will try to annex North Georgia next?

June 21, 2012 at 9:58 p.m.
cooljb said...

People of Chattanooga and Hamilton County get use to it. Your Chattanooga City Council and the Hamilton County Commissioners just made it tougher on each and every one of you and their own employees needing raises. A premier development, Black Creek Mountain, is going to be draining your resources for the next decade or two and are you aware of this? Both political houses I spoke of are making YOU... provide government services for decades, to come, to the new Black Creek Mountain project going on Aetna Mountain. You are so neighborly by taking care of a multi-billion company, York Capital, like that! I just read where the sheriffs department is running short and so is just about everything else. So, when they start building the road up Aetna Mountain you get to pay for the sheriffs deputies keeping an eye on things until they get the road up there. When they get the road up Aetna Mountain and at least a house or two, guess what, you get to provide everything else to them that everyone else gets. But the catch is, to the best of my understanding, that Black Creek Mountain won't be paying any properly taxes on the thousands of acres they develop and plan to develop until they reach the 9 million dollar thresh hold of Tax Increment Funds given to them by your local politicians, minus Council members Scott and Murphy, since they said no to the freeloader's. It is my guess, that it will take the maximum amount of years before they reach the thresh hold, if ever, since who wants to pay property taxes anyway? Certainly not Black Creek Mountain. But Mr. Doug Stein can look into the camera and smile while informing the other land owners on Aetna Mountain that their property will be worth more, whether they want to build some premier development or not. How comforting this must be to the people that own the lands on Aetna and don't have a pass for decades on not paying their taxes and want to keep it "unspoiled" as Mr. Stein has described Aetna Mountain before the development. Some land owners will not be able to pay the higher rates and since Black Creek Mountain will have money on hand, you see they won't be paying taxes, they may do their best to increase their holdings on Aetna Mountain as some loose their lands to tax liens. The government picking winners and losers right here in southeast Tennessee. Thank you commissioners and council members, minus Scott and Murphy, again! So the next time you see someone standing at an interstate exit or they walk up to you as you pump some gas with a hard luck story, you have a great excuse to not give them a hand-out. Just tell them you already donated, to Black Creek Mountain, they have the best hard luck story of all.

June 21, 2012 at 9:58 p.m.

Georgia already tried to annex up to the river, turnabout is fair play.

June 21, 2012 at 10:39 p.m.
librul said...

Burn, baby, burn.

Or, heck - Obama has a national kill list, why can't we have one?

June 22, 2012 at 7:57 a.m.
frumpster65 said...

IMO the council members who approved this should have their heads examined. The council members who abstained should have stepped up and voted against it , instead of being afraid of offending anyone. Lastly Kudos to those council members who stood up and voted NO. I would have thought that Doug Stein would have had more respect for himself than lower his standards and ask for TIF money to help in his endeavor. Its a sad day to see a educated business man turn into a WELFARE recipient. Poor pitiful Doug.

June 23, 2012 at 9:24 p.m.
AliceS said...

Looking at the satellite shot it's tough to see how they would build two smaller ones with some amount of space between them would result in better visibility for the western building... And they're holding the cards to their vest about new tenants. Can they give a number of how many? Any at all? And will anybody address the Dominick's in the room? Do they still have refusal rights to any possible tenants? Alice from

November 15, 2012 at 3:50 a.m.
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