IV. Best & Worst Run Cities
Helen Burns Sharp for ATM
On March 2, 2021, Chattanooga voters will elect a mayor and nine city councilors. All elections matter, but this one seems especially important, given the millions of dollars of projected revenue loss due to the COVID-19 pandemic.
The months leading up to the election provide a great opportunity to have a community discussion.
Several years ago the Times Free Press penned these words: "Local elections are the ground zero of our democracy. It is a daunting endeavor to run for public office, to put yourself out for public scrutiny, to outline policy positions on thorny issues. Running for public office takes courage, a thick skin, and money."
ATM appreciates those who are willing, in President Teddy Roosevelt's words, to get into "the arena." We have followed our city government for eight years. You cannot do this without coming away with an appreciation of all of the hours our elected officials spend on complex issues.
The upcoming election gives us an opportunity and an obligation to make city government work better for everyone.
Below is a summary of some policy areas that need immediate attention.
Let's ask all of the candidates for mayor and council to take a position on the issues raised below.
I. Property Tax Incentives
"The problem associated with tax-exempt property is one of the most complex and controversial facing the city. Given that property tax is the major source of tax revenue, the large amount of exempt property imposes significant economic costs to the city." This wording is from another city's website. Since Hamilton County leads the entire state of Tennessee in the amount of property tax revenue abated, it is time we regard it as a major issue and a problem here.
CHALLENGES TO REFORM
"Sunlight is the best disinfectant." This is a famous quote from former Supreme Court Justice Louis Brandeis. He advocated for financial and government transparency. He argued that simply making the actions of public officials more visible to the public was a powerful way of stamping out unethical and unprofessional behavior.
The more that transparency increases, the more likely that public trust will increase.
Public-Private partnerships can be appropriate but they require transparency and strong negotiators for the public at the table. We need to level the playing field between public and private interests.
Summarized below are examples where Chattanooga would benefit from more transparency.
III. Transparency Case Studies
City Councilors and members of various city boards frequently are not given enough information by the mayor's office when asked to make policy decisions. The public is clueless when there is no attempt to explain what is going on and why.
The City Council takes official action by two means: A resolution states a policy or opinion of the City Councill and is passed by a single vote. It can be reversed or amended by another vote of the Council. An ordinance is a local law that usually regulates a person or property. It requires two readings at two separate Council meetings. It can only be amended by the passage of another ordinance.
The content of resolutions and ordinances can either explain the "why" of the action or can leave public officials and citizens in the dark. Contrast these resolutions from Chattanooga and San Diego, dealing with the disposition of surplus property.
The San Diego resolution explains how the city got the property; why they do not or will not need it for any public purpose, and gives details on a purchase and sale agreement. San Diego Resolution
The Chattanooga resolution the Mayor's Office and City Attorney asked City Council to pass pertains to the King Street parking lot, which was being actively used for city employee parking. Note that there is nothing in the resolution to explain anything. Chattanooga Resolution
1) "Surplus" Buildings (2018)
In the summer of 2018, Mayor Berke’s staff asked City Council to declare “surplus” three city-owned buildings near City Hall so they could be sold to private developers. The buildings provide office space for city staff, including Internal Audit, City Attorney, and 311.
Property is typically considered "surplus" when it no longer serves the needs of the City and, therefore, the public. Two of the buildings were (and are) being used by city staff. Where were these employees going? What was the cost of the move, both long-term and short-term? What impact would moving them have on efforts over the years to create a city "campus" where city offices are close to one another?
The City Council and the public were not provided with a fiscal impact analysis or information on how the buildings would be sold; whether there would be an appraisal; what the evaluation criteria would be in determining the successful buyer; where the city employees currently in these buildings would go; how much the City might be looking at in future lease payments, and whether informal “negotiations” with building owners have already taken place.
ATM raised these issues at Council meetings. Council voted to defer action until they got more information from the Mayor’s Office.
2) King Street Parking Lot (2016-2018)
In July 2016, City Council responded to a request from Mayor Berke's Office by declaring a heavily used city employee parking lot on King Street as "surplus." Council was not asked to adopt findings explaining why they believed this property was surplus and where city employees would park and if the City would have to pay for employee parking in the future.
In the presentation to Council, City staff said that they had been talking for several years to the developer of the adjacent commercial property and that the City wanted to facilitate the development of this property. In 2017 the City's Downtown Redevelopment Corporation (CDRC) issued a request for proposals to sell the parcel. Two companies responded.
The CDRC was prepared to sell to the preferred developer at a price much less than the city had paid for it in 2007 and well below its current market value. The public got wind of this plan, an appraisal was done, and the price more than doubled.
In April 2017, the CDRC Board accepted the developer's proposal but added a provision that the purchase price would be based on the results of a new appraisal. In January 2018, the CDRC President (Daisy Madison) reported that the recommended buyer had rescinded his offer. No reason was given.
In April 2018, the City Deputy Administrator for Economic Development informed the Board that the City had learned in January of 2018 that the parking lot is causing flooding in the warehouse building on the adjacent property owned by the LLC that had been interested in buying the parking lot. Apparently the developer had been made aware of the drainage issue in June of 2017.
City staff reported that a permanent fix (grading, paving) was estimated to cost about $400,000 and seemed to presume a role for the CDRC in making the improvement.
ATM suggested that the CDRC at least explore the concept of cost-sharing with the developer since their nearby properties would benefit from the long-term fix. He indicated at the meeting that he might be willing to go 50-50, provided he could also share in the revenues from the lot.
CDRC member (and then Council Chair) Ken Smith asked if the city had legal liability relative to water on the adjoining property. A key question in common law drainage is whether the property owner (here, the City) has done anything to change the water flow since the adjoining property owner bought their parcel (in 2014). The drainage on the city parking lot was believed to be the same as in 2014. (It has likely been that way since and before the City bought the parcel in 2007.)
The Board voted unanimously to authorize the “full fix," which was now estimated to cost about $500,000. No one brought up the topic of negotiating with the developer to cost-share both the construction costs and the revenues. There was no discussion of the drainage issue being a "pre-existing condition."
The issues here are government transparency and the wise use of taxpayer dollars. Who was looking out for the public interest?
3) Opportunity Zones (2018)
“Opportunity Zones” were created by the federal government as part of the 2017 tax cut bill. The program provides an additional source of capital to investors and gives them a temporary reduction or deferral on their federal income tax bill if they reinvest their capital gains in low-income neighborhoods.
The program is intended to spur private development into projects that will strengthen low-income neighborhoods. Here--and throughout the country--there is a risk that instead of helping residents of poor neighborhoods, the tax break will end up displacing them or simply provide benefits to developers investing in already gentrifying areas.
Hamilton County Mayor Coppinger selected certain census tracts for designation as opportunity zones, choosing areas that were already attracting developer interest, like Downtown; MLK/UTC (including the Innovation District, home of the "surplus" properties discussed above); the Erlanger area (including Lincoln Park); the Southside (including the former U.S. Pipe and Wheland site), and the Westside, (including Cameron Harbor and the former Alstom site.) These developers might not have needed the opportunity zone incentive to convince them to move forward with their plans.
Areas that could have been selected as Opportunity Zones but were not include Avondale, more of East Chattanooga, Glenwood, Orchard Knob, Highland Park, Ridgedale, Oak Grove, East Lake, Eastdale, North Brainerd, and Woodmore. The incentive might have been a determining factor in persuading someone to invest in a "real " low-income neighborhood.
The selection "committee" included representatives from the City of Chattanooga economic development staff, the Enterprise Center, and the Chamber of Commerce. The selection committee did not include representation from neighborhoods that might be impacted and whose leaders are familiar with neighborhood assets and needs.
Were the City Council and County Commission even brought into the discussion about a program that picked winners and losers? Yes, there was a tight time frame, and yes, readiness to proceed is a factor that should have been considered. But there could have been some sunshine in this process.
Another interesting aspect of opportunity zone selection is wording contained in the application to the state that alludes to future eligibility for PILOTs and TIFs for properties within these zones. In the cases of the former U.S. Pipe/Wheland and Alstom sites, the application goes so far as to say that these sites are also eligible for bonding financing. In the future, will someone try to use this wording in an obscure application to claim that these areas are "entitled" to these incentives?
Public trust suffers because of a lack of transparency.
4) Business Improvement District (2019)
In 2019, the City Council passed an ordinance creating a Downtown Business Improvement District. In an opinion piece in the Times Free Press, ATM wrote that a BID could be an excellent tool in making downtown more attractive and safer. But the piece went on to suggest changes to the ordinance as originally proposed, describing it as a Case Study of Power in Chattanooga.
The ordinance the River City Company submitted to the city read quite differently from the ordinances that set up BIDs in Nashville and Knoxville. It referred to "property" rather than taxable property. The BID ordinances in the other cities specified that special assessments only apply to taxable real property. Government properties are tax-exempt, as are tax-exempt non-profits such as churches.
In another departure from Nashville and Knoxville, the special assessments on commercial properties are not based on the assessed value as determined by the county but primarily on (the larger of) building square footage or lot size.
The ordinance River City submitted gave special treatment to properties under current or future PILOT or TIF agreements. What is the rationale for abating a special assessment on three properties that already enjoy substantial property tax breaks? These properties are the Market City Center Apartments, the Heritage Maclellan Apartments, and the River City Company Majestic 12 Theater. Currently, these properties pay zero property taxes to support fire protection, public safety, streets, courts, parks, etc. Is the intent of the wording to pave the way for a TIF district that would include the current site of the baseball stadium?
The River City ordinance appears to have been written by the local law firm (Miller& Martin) that represents a majority of the major property owners in the district and has represented most of the successful applicants for various tax breaks awarded by the city and county. These private attorneys are good at advocating for their clients' financial interests. That is their job.
But did anyone do the work for local government to look out for the public interest in the ordinance?
5) Walnut Commons Housing PILOT (2010-2017)
The Housing PILOT for the Walnut Commons apartments is the poster child for how the 2002-2015 housing PILOT program failed and how city government has remained unwilling to address non-compliance.
The River City Company administered this program for the City of Chattanooga and Hamilton County during this period.
Neither River City nor the City Attorney ever addressed why it was OK for the Walnut Commons apartment complex not to benefit low and moderate-income citizens, as required by state law, or why it was OK for the developers not to build a parking structure, which they agreed to do in their PILOT and lease agreements or why this is the only PILOT since 2008 where the developer was not required to pay school taxes.
6) Dubious Downtown Housing PILOTs (2015-)
$13.2 million--That is the estimated amount the Chattanooga City Council and the Hamilton County Commission agreed to forgive in general fund property taxes when they approved the following Housing PILOTs recommended to them by the River City Company: 1400 Chestnut; Market City Center; the Maclellan on Broad; the Vue on Lindsay, and the aforementioned Walnut Commons. These developments pay no general fund property taxes at all for 10 years and then pay a percentage for the following 4 years.
At the public meetings, there was little to no discussion about the benefit to the public in subsidizing what are essentially market-rate apartments that likely would have been built without the subsidy (the "but/for" test). River City did not disclose the total estimated impact on city revenues over the 14-year life of the agreements. (Neither does the Chamber of Commerce when they bring forward a project for a "Jobs" PILOT.)
The provision in state law enabling local governments to approve housing PILOTs references housing units to be occupied by low and moderate-income citizens. The local program only required 20 percent of the units to be for "low-mod" residents. And it set an income definition that allows developers to charge more than $1,000 per month for these units.
In 2019 the developer of Market City Center began advertising almost half of their apartments as vacation rentals. If allowed, this would mean that tax-payers are subsidizing a business operation. The city and county did take legal action. Any future housing PILOT agreement should contain clear language that conversions void the agreement.
Who was looking out for the public interest?
7) Public Parking for Private Apartments (2015-2016)
A local developer built the 10 North apartments next to Renaissance Park at the corner of Cherokee Boulevard and Manufacturers Road.
Other multi-family developments in the area, including nearby condominium and apartment complexes, provided structured parking for their owners and tenants.
A representative for the developer said at a neighborhood meeting that a parking deck would be too expensive and that they would negotiate with CARTA about leasing 75 spaces in its Renaissance Park parking lot. Apparently the lease is for 50 years.
Residents of the adjacent Bridgeview and One North Shore condominiums said there was already a shortage of parking for Renaissance Park and that the lease of this many public spaces would not leave enough public parking. The lot is heavily used by people visiting Renaissance or Coolidge Parks and the county-owned Business Development Center across the street.
This public policy question did not seem to concern the two public entities who oversee the lot. CARTA manages the lot for the Chattanooga Downtown Redevelopment Corporation (CDRC).
Who was looking out for the public interest?
8) Zoning Contrary to Public Interest (2015)
On Cowart Street, a previous City Council had limited the height of future buildings to respect the height of neighboring buildings in a National Register historic district across Cowart Street in the 1200 block of Market Street.
When a prospective buyer in 2015 proposed a 7-story complex, the City Council Chambers filled with people in opposition to the height. One of the opponents was an architect/urban designer (Stroud Watson) who had played a major role in Chattanooga's downtown Renaissance. The only advocates speaking in favor of the change were the City Councilor for the district and the applicant's engineer. The height restriction was lifted with very little discussion.
Who was looking out for the public interest?
9) Temporary Disappearance of Parking Requirements (2016)
In 2016 the City of Chattanooga made significant changes to its zoning ordinance by creating form-based code provisions for the Downtown and Northshore. During the public process, a number of downtown residents and business owners commented that new apartment and condo complexes should be required to provide adequate on-site parking for their residents. New apartments had recently been built without enough parking, thus negatively impacting existing residential neighborhoods and, in one case, a city park.
Parking requirements were put in the draft. But they mysteriously disappeared as the code changes moved closer to adoption. Reports circulated about a private meeting between certain developers who opposed the requirements and certain city officials who had influence over the wording in the code. After a public outcry, parking was reinstated.
Here is a link to an opinion piece titled "Transparency elusive in zoning rules revamp."
10) Environmental Regulations (2017-2020)
Homebuilders and other development interests were successful in 2017 in weakening the City's stormwater standards on South Chickamauga Creek. The change to the stay-on-volume requirement allows more sediment and pollutants to run off properties after heavy rainfalls.
The new rules replaced standards based on state guidelines and EPA advice. The higher standard for the South Chick had been adopted because of previous loss of wetlands and floodplain and its state designation as a threatened and endangered stream. Developers now pay a reduced stormwater fee for new development while taxpayers throughout the city will pay for more stream restoration.
More recently the homebuilders have been successful in slowing down the adoption of regulations about development on hillsides and in the floodplain throughout the city. One of our greatest selling points for economic development is our quality of life. The mountains, ridges, rivers, and creeks are among Chattanooga's greatest assets. Recent development in North Chattanooga has shown what can happen without adequate standards.
In 2018, Council passed a resolution directing the staff of the Regional Planning Agency (RPA) to analyze the city's steep slope and floodplain challenges. The planning staff worked with an advisory committee and a technical committee. Their analysis resulted in the Natural Resources Assessment. RPA is still awaiting Council guidance relative to the parameters and scope of the recommendations. Apparently the Home Builders Association (HBA) interpreted the assessment as being recommendations and has pushed back.
The Council could show leadership and ask RPA to reconvene the committees and come up with recommendations. The public and the HBA will likely agree on a number of things. What does this Council want its legacy to be? Does it include environmental stewardship?
11) The Role of the City Attorney's Office (2012-Present)
One might expect that the Office of City Attorney would be particularly sensitive to issues that might appear to involve conflicts of interest or special treatment. The City Charter designates the City Attorney as Chief Ethics Officer.
However, in most of the examples listed above, the City Attorney seems to have assumed (or been asked to assume) the role of facilitator. Rather than being an independent voice, it sometimes appears that the City Attorney sees his job more narrowly, with a focus on carrying out whatever policy the Mayor favors and business interests want.
The City Attorneys' office has allowed one-sided PILOT and TIF agreements that seemingly are prepared by the attorneys for the companies seeking a PILOT or TIF and are written to benefit the companies. We need the City (and County) Attorney to negotiate for the taxpayers to produce a more balanced agreement.
In the City's first TIF, the City Attorney told the Industrial Development Board that he understood that the mayor supported the project. The City Attorney himself had a personal financial stake in the outcome of the TIF, even though he was a city employee. He received a check for $7,500 after the TIF was approved. It is quite uncommon for public employees to receive "bonuses."
The Volkswagen PILOTs represent the largest tax incentives in Chattanooga's history. The original 2008 PILOT was amended when VW expanded to build SUVs here. This involved a separate agreement, one begun by Volkswagen's attorneys, and then sent to the City Attorney for review and presentation to Council. One of the VW attorneys who lobbied City Councilors in 2012 in favor of the PILOT became the City Attorney in May 2013. City Council approved the second PILOT agreement in July 2014. Was it appropriate for the same attorney to play for both teams, with no public disclosure of what might appear to raise at least the appearance of a conflict of interest?
In July 2020 the City's Office of Internal Audit (OIA) issued a report about discrepancies concerning LED light fixtures that the City had purchased for about $6 million and then stored in a city warehouse. OIA discovered that the fixtures had gone missing and key city personnel had no explanation. The lighting company provided a copy of a settlement agreement between the company and the city. (The City could not locate its copy.) The agreement was signed by the City Attorney in 2018. However, the City Council never approved the settlement agreement, as required, but the City Attorney apparently allowed the company to remove the fixtures.
This office needs to be de-politicized.
The lack of transparency on the issues listed above may contribute to a public perception of so-called "crony capitalism," which has been described as preferential treatment based on personal relationships. Public confidence is eroded when a system seems rigged.
If one were to make a list of the names of prominent business leaders benefiting from the tax breaks and public/private partnerships described above, it would be a Who's Who list of the power structure in Chattanooga. ATM acknowledges the risks taken and the investments made by these individuals in our community. We would like to believe that their projects were rewarded based on merit and not influenced by personal connections and campaign contributions.
We want our governments to be clearer about how and why they are making decisions. Doing more staff reports and adopting findings to explain their reasons in resolutions and ordinances would go a long way towards getting rid of the perception of "sweetheart" deals.
These examples are in the past. But they remind us that we need to make changes to make our government more transparent and more professional. We can do better.
Each year WalletHub rates the operating efficiency of 150 of the largest U.S. cities to determine which are managed best. They look at how well city officials manage and spend public funds by comparing the quality of services residents receive against the city's total budget.
In the report that came out in June 2020, Chattanooga had an overall ranking of 147 out of 150.
Click here to open the WalletHub report.
V. Forms of Government
Chattanooga currently has a strong mayor form of government. ATM believes a council-manager government would be a much better choice for the city and would address many of the issues raised on our website. We also realize that there needs to be a broad community conversation before this issue is put before the voters as a charter amendment.
With the city election for mayor and council only a few months away, the timing is premature to try to schedule a vote on our form of government. BUT, it is the perfect time to begin that conversation and to ask candidates if they would be willing to explore the concept if they are elected.
Below are reasons why ATM believes the council-manager government would be better for Chattanooga.
ICMA REPORT: COUNCIL-MANAGER OR STRONG MAYOR: THE CHOICE IS CLEAR
Here are excerpts from a report prepared by the International City/County Management Association (ICMA).
"Everyone wants strong political leadership—neighborhoods, civic leaders, and the business community included. And today’s complex communities cannot succeed without the guidance of effective mayors who provide a sense of direction and contribute to the smooth functioning of a local government.
But communities also need thoughtful, dedicated council members, who work with the mayor to establish appropriate policy, and competent, professional managers to carry out those policies. None of the three are mutually exclusive; they can and do work together today in many of the country’s successful council-manager communities.
Today council-manager government is the fastest growing form of government in the United States; it frees up the elected body to establish policy, which is carried out by an appointed manager and an administrative staff. The manager is accountable to the entire council for the satisfactory implementation of council policy and the day-to-day administration of municipal affairs.
There are compelling reasons why many of the nation’s most successful cities and towns have adopted the council-manager government rather than the “strong-mayor” form. Council-manager government encourages neighborhood input into the political process, diffuses the power of special interests, and eliminates partisan politics from municipal hiring, firing, and contracting decisions.
People who take time to learn the facts about council-manager government are likely to join the ranks of those who favor this popular form. Consider the following when deciding which form of government is best for your community:
1) Neighborhoods Strengthen Their Voice
The council-manager form encourages open communication between citizens and their government. Under this form, each member of the governing body has an equal voice in policy development and administrative oversight. This gives neighborhoods and diverse groups a greater opportunity to influence policy.
Under the “strong mayor” form, political power is concentrated in the mayor, which means that other members of the elected body relinquish at least some of their policy-making power and influence. This loss of decision-making power among council members can have a chilling effect on the voices of neighborhoods and city residents.
2) The Power of Special Interests is Diffused
Under the council-manager form of government, involvement of the entire elected body ensures a more balanced approach to community decision making, so that all interests can be expressed and heard—not just those that are well funded. Under the “strong mayor” form, however, it’s easier for special interests to use money and political power to influence a single elected official, rather than having to secure a majority of the city council’s support for their agenda.
3) Merit-Based Decision-Making Vs. Partisan Politics
Under council-manager government, qualifications and performance—and not skillful navigation of the political election process—are the criteria the elected body uses to select a professional manager. The professional manager, in turn, uses his or her education, experience, and training to select department heads and other key managers to oversee the efficient delivery of services. In this way, council-manager government maintains critical checks and balances to ensure accountability at city hall.
Functioning much like a business organization's chief executive officer, the appointed professional manager administers the daily operations of the community. Through a professional staff, the manager ensures the effective provision of services and enforces the policies adopted by the elected body. He or she, in turn, uses merit as the leading criterion for making all hiring and personnel decisions.
Appointed local government managers have no guaranteed term of office or tenure. They can be dismissed by the council at any time, for any reason. As a result, they constantly must respond to citizens and be dedicated to the highest ideals of honesty, integrity, and excellence in the management and delivery of public services.
Under the “strong mayor” form of government, the day-to-day management of community operations shifts to the mayor, who often lacks the appropriate training, education, and experience in municipal administration and finance to oversee the delivery of essential community services. Also, under the “strong mayor” form, the temptation is strong to make decisions regarding the hiring and firing of key department head positions—such as the police chief, public works director, and finance director—based on the applicant’s political support rather than his or her professional qualifications."
EXAMPLES OF COUNCIL MANAGER CITIES
Council-manager is the most prevalent form of government in the United States. More than half the cities with populations over 100,000 use it. Examples of council-manager cities include Charlotte, Dallas, Oklahoma City, Phoenix, San Jose, and Colorado Springs.
In the WalletHub list of best-run cities, four cities in the top 10 are under the council-manager form (including Durham) or a unified city/county government (Lexington-Fayette, KY). None of the cities in the bottom ten, including Chattanooga, have the Council-Manager form.
Business Facilities magazine annually ranks the best business climates for cities and states. In the 2020 rankings just released for large cities, six of the ten--Austin, Phoenix, Dallas, Charlotte, Kansas City, Las Vegas--have a council-manager government, and one (Nashville) has a metropolitan city/county government.
THE ROLES OF THE MAYOR, COUNCIL, AND CITY MANAGER
Political power in a council-manager city is concentrated in the entire governing body, which includes the mayor and council. This form of government combines the strong political leadership of elected officials with the strong managerial experience of a professionally trained manager. The elected officials set policy for the city; the manager is appointed by the mayor and council to manage the day-to-day operations of city government.
Council members are elected by district to represent the people in that district. The mayor is elected at large, by people from all over the city.
The Mayor is regarded as the leader of the entire city and presides at council meetings. Examples of highly regarded "council-manager" mayors in the South include Joe Riley in Charleston and Knox White in Greenville. Almost all council-manager communities have a mayor who is a leader in developing community policies. With the council, the mayor is responsible for soliciting citizen views in developing these policies and interpreting them to the public. The mayor also represents the city in official functions, appoints advisory committees, coordinates their work, and maintains liaison with other governmental agencies and civic groups.
The Council sets policy, approves the budget, and determines the tax rate. It also hires the manager and supervises his/her performance. The City Manager serves at the pleasure of the council and can be dismissed at any time with the vote of a majority of its members.
The City Manager prepares a recommended budget for the council's action, serves as the council's chief adviser, recruits and hires the government's staff, and carries out the council's policies. The council works with the manager to develop policy positions, and then delegates to the manager the responsibility to carry out their decisions.
The manager makes policy recommendations to the council, but the council may change or modify them. The manager is bound by whatever action the council takes. The manager and his or her staff do the background research on various topics in order to present the council with objective pros and cons on policy alternatives.
Accountability for Taxpayer Money--Chattanooga
~Helen Burns Sharp
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