CHATTANOOGA, Tenn. (AP) — A citizen-versus-city battle is being waged in Chattanooga by an open government activist who is challenging the process involved in giving tax breaks to private companies seeking to build or expand operations in the city.
Helen Burns Sharp says she has spent about $100,000 of her own money in legal fees as she questions the approval of tax increment financing of $9 million — plus interest — for developers who planned to build a road in a golf course subdivision known as Black Creek Mountain. She maintains that the process of granting financial incentives such as tax breaks to companies is not transparent and not subject to enough public input in this river city.
Local governments use methods like tax increment financing (TIF) or payment in lieu of taxes programs (PILOT) to attract new businesses and the jobs they bring to a community. A TIF allows local governments to use money generated from increases in property taxes to finance costs needed to attract development. Cities around the country use TIF to improve infrastructure and rebuild blighted areas.
“It’s not that TIFs are inherently bad, but make sure when you’re doing these you know what basis you’re deciding to do it on and also that you make sure that the public interest is protected in whatever agreement you come up with,” she said.
Sharp moved back home to Chattanooga after an 18-year career in economic and community development in Oregon. She is a board member of the Tennessee Coalition for Open Government.
Sharp says she first started following the progression of the TIF plan in 2012. She says the tax incentive seemed like an unnecessary gift to a private company for a project that was going to generate few if any jobs and divert money from more necessary projects with greater public benefit.
Sharp attended council meetings, filed open records requests and sent emails inquiring about the approval process. She hired an attorney and eventually sued the City Council, the County Commission and Chattanooga’s Industrial Development Board, claiming the project was not eligible for funding under the TIF statute in Tennessee law.
“I was taking on the power structure,” she said.
A Hamilton County judge nullified the deal last year based on violations of Tennessee’s Sunshine Law. The decision is currently under appeal.
Sharp filed another lawsuit after the development board re-approved the deal without a vote from the council or commission. In that suit, which is active, she alleges there was no discussion or deliberation by Industrial Development Board members in a public meeting where they voted to re-approve, raising the question of another violation of the Tennessee Open Meetings Act.
Sharp also is closely watching the way local government reached deals on tax breaks in PILOT agreements with companies.
Sharp estimates there are about 60 PILOT agreements in Hamilton County. But she says it has been hard to pin down which companies have PILOTs, the reasons why the deals were granted, and whether the companies are living up to their end of the agreements when it comes to the amount of their investment, job creation and average wages.
“I don’t think this problem is unique to Chattanooga and Hamilton county,” Sharp said. “But what has really depressed me a little bit is that it’s been so hard to get anyone’s attention to thinking that there’s an issue here that we need to look at.”
Chattanooga City Attorney Wade A. Hinton said he could not comment on the lawsuits because litigation is ongoing. However, he did say he has made the issue a priority since he took office in June 2013.
“We have made significant changes to the agreements to provide more accountability,” Hinton said. “We will continue to look for opportunities to improve not only the process but also the agreements.”