​​​​​The JOBS PILOT Program in Chattanooga/Hamilton County

Helen Burns Sharp for ATM

The most popular tax break in Chattanooga/Hamilton County is called "Payments in Lieu of Taxes" or PILOT. About thirty-seven (37) PILOT agreements are currently in effect.  Click on this link for lots of information about individual PILOTs for  

Tax Year 2019

About $25 million was abated (not collected) last year by our city and county governments. This amount of non-collected tax revenue is more than for any other county in the state, including the three urban counties larger than Hamilton.

This ATM webpage contains an overview of the Jobs PILOT program. Please check out the web pages on this site for information on the Housing PILOT program and Tax Increment Financing. The pages on Sunshine and Governance go into more detail about changes we can make to make our governments more professional and accountable.

ATM Perspective

  • Tax breaks are not inherently bad.
  • We need the PILOT tool in our economic development toolbox. HOWEVER, 
  • Tax breaks should be used strategically.
  • The City gets about 60 percent of its general fund revenue from property taxes.
  • Tax breaks should be reserved for projects with a significant public benefit that would not happen without the incentive. (This is called the" but-for" test.)
  • Some current PILOT projects likely would have happened anyway.
  • City and county property taxes make up less than two percent of a typical company's cost of doing business. The tax break is often the icing on a cake that is already baked.
  • Companies are not held accountable for commitments they made to get a PILOT. 
  • "Clawback" language in the agreements is weak and does not protect the taxpaying public.
  • It is unusual for a community of our size not to have written PILOT guidelines.
  • The lack of transparency in the current 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. 
  • Tax breaks reduce revenue for needed services.
  • Revenue not collected could be targeted to high priority needs.
  • About $400 million total will be forgiven by current PILOTs over their duration, typically between 10 and 30 years.

I. Q&A about Jobs PILOT Program 

1)  Why Does It Matter?

We have lots of needs in our community. We are seriously eroding our revenue base with the number and magnitude of PILOT agreements.

It takes money to run a city and a county. This money has to come from somewhere, and the majority comes from property taxes. We assume all taxpayers pay their fair share. When certain companies are given special consideration, this arrangement impacts other property owners by reducing the amount of revenue collected, which can lead to a tax increase or a reduced level of service. 

Regular folks and small businesses pick up the slack for services when multi-million/billion dollar corporations have their taxes forgiven.

For tax year 2019, PILOT agreements resulted in some 25 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 the government to be picking winners and losers?

Enforcement of agreements is another issue. Some companies with PILOTs fail to bring the jobs they promised and yet are not held accountable and their tax breaks continue.  On the other hand, property owners who get behind on their taxes may receive threatening letters, risk losing their property, and may be faced with fines and court costs. What sort of message does that send and how does it affect public trust?

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 back-door way 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  37 PILOT agreements in effect in Hamilton County.  Some of the companies currently benefitting from PILOTs include multi-billion dollar corporations such as Amazon, Sanofi (Chattem), Coca-Cola, Unum (Provident), Volkswagen, Westinghouse, and Wrigley. Other very successful companies with PILOTs are Blue Cross Blue Shield of Tennessee, CBL & Associates, and Southern Champion Tray.  You can view details here on all PILOT agreements for Tax Year 2019

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? 

Several of these companies have received multiple PILOTs over the years. The list of PILOT "frequent flyers" includes Chattem; Coca Cola; Gestamp; McKee Foods; Provident/Unum; Southern Champion Tray; Volkswagen, and Wrigley. One wonders if anyone checked to see if they had met the obligations of their previous agreement before entering into a new one or if anyone voting to approve the agreements was aware of the impact on the tax base over the duration of the agreements.

Why do Chattanooga and Hamilton County seem reluctant to adopt policies that would help ensure that applications meet certain criteria?

4) Who Decides Who Gets a PILOT? 

The public does not know 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 attorneysare in trying to make sure taxpayers are represented at the negotiating table.

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

What is clear is that the details have been worked out before the requests get to the public meetings before the City Council, County Commission, and the Industrial Development Board (IDB) for approval. 

Members of the City Council and County Commission and Industrial Development Board hear a verbal report from the Chamber of Commerce and the company representatives. They are not provided with a written staff report giving background and outlining policy issues. The legislative bodies are usually asked to vote quickly to approve a PILOT agreement. Rarely do the public officials ask about the details of the agreement There is no designated opportunity for the public to comment.

The IDB is involved because the ownership of a PILOT property is transferred to the IDB to confer tax-exempt status. A former city attorney once described this board as a "rubber stamp."

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. 

Governments and chambers of commerce have different missions. While the Chamber is focused on more narrow (but important) issues regarding businesses, governments have the more difficult job of representing the PUBLIC interest. Elected officials must grapple with the question of what else this subsidy could be used for if collected.

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. Government transparency may also suffer. 

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. Over the years, the Chamber's "criteria" have been referred to by some as a "black box."

In the August meeting, Council also mentioned reporting, noting that they had 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.

Almost two years have passed with apparently no progress on posting the policies as City Council requested and no reporting on performance.

5)  Why Aren't We More Selective?

Why do our officials sometimes seem willing to give away the farm for jobs that do not pay especially well to companies that would likely locate without a PILOT?

Most of the people they hear from --company representatives and their attorneys, Chamber of Commerce staff--have a vested interest in promoting the tax break. While no one questions the importance of good jobs, it sometimes appears that our officials get caught up in wanting to be perceived as business-friendly and not realize what we are giving up in tax revenue in the longer term.

We need to realize how truly special Chattanooga has become. Our tax break "program" seems geared to 50 years ago when we were desperate to get development.

Companies make location decisions primarily based on business and quality of life considerations.

Site development consultants hired by companies seeking PILOTs may influence the process. They are 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. 

Greg LeRoy, the founder of the non-profit Good Jobs First, cites IRS data suggesting that tax breaks rarely influence corporate locations. Here is a link to his article on how site development consultants may try to manipulate the process.

Site Location Consultants

He writes that 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, overheard, transportation--the business basics. Mr. LeRoy suggests that the "cake" may have already been baked when a company mentions a possible location and that a PILOT is often the " icing" on the cake.

"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. 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."

6)  What Criteria Must Be Met to Get a PILOT?

Chattanooga and Hamilton County currently have no established criteria. Our local governments have not adopted 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.

Some PILOT jobs pay less than $13 per hour. Should taxpayers be subsidizing those jobs? It is stated policy in other counties to say that the hourly wage for a PILOT job must equal or exceed the prevailing hourly wage paid in the county.

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.

For example, one might wonder if Volkswagen suppliers--several of which have received PILOTs--might have located here anyway to be close to VW. The two Unum/Provident parking garages are another example. How likely was it that the company would build the garages for their Chattanooga employees in another city or move their office buildings if they did not get the two PILOTs?

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 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.

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.”

The local PILOT program has been around for over 35 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 (Alstom) and, even then, the city and county government 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 wrote in a recent report to the Legislature that the economic development agency for Memphis/Shelby County (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 result of such lax enforcement is that taxpayers end up subsidizing companies for things they don't do. In most cases, the failure of a company to live up to the terms of the subsidy means that it creates fewer jobs, or jobs of lower quality, than promised. In some cases, subsidies have gone to companies that later eliminated jobs, closed up shop entirely, or moved to other states, literally taking the money and running. Chattanooga has approved several PILOTs for companies that filed for bankruptcy within a few years.

In 2017 City Councilor Darrin Ledford showed initiative and did research on what policies and procedures might look like. He met with ATM for our ideas. He met with the Chamber, the Mayor’s staff, and the City Attorney. By the time the City Attorney presented a work product to City Council a year later, it was a watered-down document that contained procedures but no polices. Apparently the current mayoral administration likes not having policies.

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 

Since VW's diesel emission scandal of several years ago, the company reported it is paying $23 billion in court-ordered consumer, federal and state settlement agreements.

The State of Tennessee had clawback language as part of its incentive package. Chattanooga and Hamilton County had nothing in the original agreement. While ATM supported the decision to give VW a PILOT, we do not understand why our "negotiators" allowed the agreement to be so very generous.

Volkswagen has announced plans to build its electric vehicle plant in Chattanooga. If the company requests another PILOT for this expansion, this would present an opportunity to tighten their other agreements, including the stormwater fee. Currently VW does not pay this fee. Somehow they were able to negotiate in 2008 that the fee amount is subtracted from their school taxes, meaning the schools could lose about $20 million in revenue over the term of the agreement.

II. ATM Recommended Policies 

ATM respectfully submits this list of draft policies for Jobs PILOTs for City Council and County Commission consideration. They are drawn from a variety of sources, including policies adopted by other Tennessee cities. We address issues that have come up during the eight years we have been following the PILOT process locally.

Document Revisions. Redo PILOT application form and prepare new templates for payment-in-lieu-of-tax agreements and lease agreements. The new documents could better protect the public interest and improve clarity. This work needs to be done by an independent professional with expertise in municipal law who does not have ties to the current PILOT program.

Required Information.  The applicant will provide information on the number of exiting jobs, the number of new jobs to be created, average wages to be paid for new jobs, and the amount of investment to be made. 

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

Jobs, Consistency in Reporting.  End current practice of showing one projected number of jobs in a press release and recital of PILOT resolution and a reduced number in the body of the agreement for monitoring and enforcement purposes.

Wages/Benefits. To be counted for PILOT purposes, new jobs must pay at least $17 (?)  per hour, with the employer covering at least half of the cost of health insurance. (Comment: $17 per hour for a 40-hour week is $35,360 per year.) The mean (average) hourly wage paid to non-managerial workers at the project site must be at least 100 percent of the state rate for the industry, as most recently established by the U.S. Bureau of Labor Statistics.

Duration of Subsidy. The maximum period for any PILOT shall be 10 years unless compelling reasons warrant a longer period and findings are adopted to justify.

The Minimum Necessary. Limit the agreement to as few years as possible. Phase in general fund taxes. 

Investment. Determine the minimum investment threshold for PILOTs.

School Taxes. All companies must pay education property taxes in full.

Stormwater Fees. All companies must pay stormwater fees in full. They may not be deducted from the school taxes they pay, as was allowed to happen on Volkswagen.

“But For” Analysis. The applicant must 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.”

Ineligible Projects. Retail projects and projects for Housing, Entertainment, Hospitality, and Recreation are not eligible for a Jobs PILOT unless compelling reasons are presented.  Projects that are already underway or have begun construction are not eligible for a PILOT because they would not meet the but/for test.

Real v. Personal Property. Projects involving real property (land & buildings) rather than personal property (specialized equipment) are viewed more favorably. Tax abatements on personal property have diminished capacity for long-term public benefit because equipment is movable.

Third-Party Review. If project eligibility and “but for” tests are met, the application may be referred 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. http://www.municap.com/about-company-overview.htm)

Targeted Hiring Requirements. The Company shall try 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. All PILOT agreements shall 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 Input. The City Council and County Commission shall hold public hearings on PILOT applications at least one week before a project is presented to them for a vote.


  1. City and county governments shall disclose the amount of the PILOT subsidy for the first year it is in effect and the total over the entire length of the agreement.
  2. The governments shall disclose the value of any other local subsidies provided to the company, such as land, site preparation, and grants.
  3. The governments shall monitor annual reports based on actual outcomes (jobs, wages, investment) and post findings on their web sites.

Amount of Fee at Closing. Currently, PILOT recipients pay an economic development fee based on a percentage (about 15% according to the CAFR)) of the total taxes that would be required if the taxpayer were required to pay 100% of the total tax levy. Evaluate that percentage. 

Disposition of Economic Development Fee. Involve City Council and County Commission is discussions of how this money is directed. Currently, the mayors make those decisions unilaterally.

Community Benefits Agreements. Explore the use of CBAs to ensure that major development projects benefit local workers and neighborhoods

Assignability/Transfer.  A PILOT Agreement may not be assigned without the prior written approval of the IDB 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 following their jobs/wage/investment commitments.

III. Quotes

“If it a sound investment, the market will make it. If it is not sound, why should taxpayers be asked to subsidize it?”  

(David Cay Johnson, Pulitzer Prize-winning reporter)

“I don't need a tax break - Trek doesn't need a tax break. We are going to succeed and fail in the market based on how good our products are and how good our services are. As a member of the community, we have a moral duty to be a good corporate citizen, and one way you're a good corporate citizen is you pay your taxes."

(CEO of Trek Bicycles to Business Insider)

“The wisdom to know and the courage to defend the public interest.”

(National Association of Counties)

 "It is easy to confuse what is with what ought to be, especially if what is has often worked in your favor." 

(Tyrion Lannister, Game of Thrones)

"Sunshine is the best disinfectant."

(Supreme Court Justice Louis Brandeis)

Accountability for Taxpayer Money-Chattanooga

~Helen Burns Sharp 

October 2020