ATM PERSPECTIVE
Proposed M.L. King Blvd. Extension TIF
February 9, 2018 (Updated May 31, 2018)
Helen Burns Sharp










Accountability for Taxpayer Money-Chattanooga (ATM) is a non-partisan public interest advocacy group focused on tax incentives and government transparency. 


POSITION
1. Extending M.L. King Blvd. one block is a good idea.
2. Using TIF funds to pay for this street is a bad idea.
3. Using TIF funds to support nearby private development is an even worse idea.


THERE IS AN IDEAL FUNDING SOURCE FOR THIS PROJECT.
4. The City Council passed a resolution in 2002 adopting the 21st Century Waterfront Plan. The plan lists the MLK Extension as a project on page 29. 
5. Later in 2002, Council adopted an ordinance establishing the 21st Century Waterfront Capital Projects Fund for the specific purposes of 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.
6. Hotel/motel taxes are the ideal way to fund the M.L. King Extension project. It is specifically listed in the 21st Century Waterfront Plan (City). It relates to tourism downtown (County). It would also make the project considerably less expensive.
7. The City and County each collect about $8 million annually from hotel/motel taxes.


HERE IS A SUMMARY OF WHY THIS IS NOT A GOOD TIF.
8. The City’s adopted TIF policies do not contemplate this kind of project. 
9. The project is not in a blighted area. It does not provide a lot of well-paying jobs. 
10. 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).

11. 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." 
12. 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.

13. This TIF project fails the "straight-faced" test, the "but-for" test and, if someone filed a lawsuit, might also be found by a court to violate the "state law" test.

14. 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.”
15. “Best interest of the state...means that the project would not have occurred but for the payment, expenditure or financing.”
16. Construction was well underway on the apartments, the medical office building, and the restaurant before the TIF was approved in March/April of 2018.
17. Some of the private property within the TIF boundary is owned by Newton Chevrolet and apparently is under contract. 
18. The public does not know the names of persons who have contracted with “Newton” or others, even though public funds will be used for acquisition and construction. 
19. The Economic Impact Plan 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. One third of TIF funds could go to "soft costs." 
20. The three line items in Exhibit D that relate directly to the MLK street extension project total only $2.9 million. 
21. 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.
22. 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.
23. A TIF would mean that the private development would pay much less in property taxes to the general fund (fire, police, etc.) for about 18 years.

WHY SHOULD THE PUBLIC CARE HOW THIS PROJECT IS PAID FOR?
24. You should care because it involves the use of your tax dollars.
25. It is the responsibility of your government to be good stewards of your tax dollars.
26. 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.
27. 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.
28. Using TIF unnecessarily to benefit private development is an abuse of this good economic development tool.
29. Using TIF in this case would set a bad precedent. It would make it more difficult to say no to other private developers.
30. 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%). 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.


Background


Evergreen Real Estate of Nashville filed an application with the City of Chattanooga for tax increment financing (TIF). If approved, future property tax revenues would 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 proposed, TIF funds would 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.