Helen Burns Sharp is looking out for your best interests. Why?
Helen Burns Sharp does not look ferocious. A pleasant woman with a gentle Southern accent, she seemingly would be at home in a gardening hat and pruning shears.
But appearances are deceiving. Sharp is a passionate advocate for the public interest. If that is threatened, to paraphrase the song: Watch out, boys, she’ll chew you up.
Those who follow civic business know that a year ago, Sharp won a lawsuit she filed to fight an approval to use taxpayers’ money to fund a road up Aetna Mountain into the proposed Black Creek Mountain housing development. The developers, who included several wealthy and well-connected local businessmen as well as a New York-based hedge fund, had secured a $9 million Tax Increment Financing (TIF) agreement (see sidebar for terms explanation) from the city’s Industrial Development Board.
Sharp, a Chattanooga native who spent 16 years in the Tennessee State Planning Office as a principal planner, and 18 years as the community development director for the city of Albany, Oregon, is now retired. But she was galvanized into action by reading about the proposed TIF and the waste of taxpayers’ dollars she believed it was.
Her challenge was successful—but she then saw the same $9 million TIF agreement re-approved by the same Industrial Development Board, the proposal presented by former city attorney Mike McMahon, the same man “who admittedly violated the state’s open records law when he approved the TIF in 2012 without board hearing or a public hearing.” (Editorial, Chattanooga Times Free Press, Aug. 19, 2014).
What’s a watchdog to do? Sharp filed suit again against the Industrial Development Board, and the case is currently on appeal in Knoxville.
How does this directly affect you?
Sharp is well aware that for most people, the terms and concepts involved are opaque. We sat down with her to find out, in simple layman’s terms, why the average Chattanooga resident should care about these decisions, and how your life is potentially impacted by them.
Sharp came prepared. A document she presented contained the following facts: “$16 million dollars in potential tax revenue was forgiven in 2014 alone; the county currently has more than $300 million committed in PILOT tax breaks.” And this, she says, translates directly into an issue of social justice.
“All of this money that we are not collecting—this is money that is not going into the general coffers to be used for community development, such as infrastructure improvements and better services,” Sharp says. “The city and county receive as much as 55 percent of their revenue from property taxes. What happens when they don’t get that money?”
Even beyond that is the question of misuse of the original purpose of these agreements, she says. All of them need to be closely scrutinized for the number of new jobs they propose to create, the dollar amount of the investment involved, and the wage level of the jobs created. Sharp notes that much more stringent “clawback provisions” (see sidebar for definition) need to be included and enforced.
TIFs and PILOTs need to be subjected to the “but/for” test, she explains, as in, “the project, having been determined to be in the public interest, would not go forward ‘but/for’ the city or county’s agreement to a TIF or PILOT.” In Chattanooga and Hamilton County, however, these agreements are proffered as virtual “gimmes,” she says. “The current PILOT and TIF process is broken. The vetting process is flawed. Performance monitoring is flawed; enforcement is virtually nonexistent,” states Sharp in notes taken from a June 19 meeting. She also provided notes taken at the June 23 city council meeting, in which Nashville legal consultant James M. Waller made the following points:
- Not every project needs an incentive.
- City encouraged to negotiate the smallest possible incentive.
- Companies will ask for more than they need and city should ‘push back.’
- City should study return on investment (ROI) to see if project needed.
- TIFs and PILOTS should be a “tool in the tool box, and the decision to use them should be decided case by case.”
It’s important to point out that Sharp is not against all tax incentives—just the ones that do not deliver what the business/developer partner promises, are unneeded, or are egregious examples of crony capitalism. She notes that the Volkswagen incentives, for example, have in fact led to thousands of jobs and additional industry coming to the region. The problem, as she sees it, is that agreements such as that one are being used to justify many more that do not pass the “but/for” test.
Sharp also provided a copy of an Aug. 5, 2015 Wall Street Journal article titled “New Rule to Lift Veil on Tax Breaks,” which states, “Cities and counties have plied companies with tax breaks for decades hoping to attract jobs and commerce. A new accounting standard will force many to disclose the total annual cost.
“The rule approved by the Governmental Accounting Standards Board…will require government officials to show the value of property, sales and income taxes that have been waived under agreements with companies or other taxpayers. It kicks in next year.”
You’re now concerned. What can you do?
So, beginning next year, more governmental oversight will begin, but Sharp is convinced that the best oversight is local oversight. To that end, she’s formed Accountability for Taxpayer Money (ATM), a name she decided on after realizing that “businesses and companies were using the city and county as an ATM machine.”
A webpage devoted to the fledgling organization points out:
“Many of the subsidized jobs [of TIFs and PILOTs] are part-time without benefits. Some pay less than $15 per hour. Many of the jobs would likely be here anyway. The housing PILOT program for downtown allows developers to charge high rents for very small rooms and call it ‘affordable housing.’
“Many of the big companies with PILOTs fail to bring the jobs they promised. Yet our elected officials have never held these businesses accountable. They allow the tax breaks to continue when companies don’t meet their commitments.
“On the other hand, regular property owners who get behind on their taxes receive threatening letters and risk losing their property and have to pay fines and court costs.”
“Groups composed of people who ordinarily agree on nothing agree that something needs to be done about this,” she says, citing support from both Chattanooga Organized for Action (COA) and the local Tea Party as examples.
ATM membership is open to anyone who is concerned about better oversight of city and county revenue, she says. “Black Creek is the poster child of what is wrong with the current system,” she says. Asked if she thinks ATM will be a factor in local elections, she did not rule it out. City and county officials had better get used to the barking.
To find out more on how to join, visit helenburnssharp.com
TIFs, PILOTs and “clawback” explained
Tax Increment Financing (TIF): An agreement allowing cities to borrow against an area’s future tax revenues in order to invest in immediate projects or encourage present development. “When used improperly, however, TIFs can waste taxpayer resources or channel money to politically favored special interests.” (Reconnectingamerica.org)
Payment In Lieu Of Taxes (PILOT): An agreement made to compensate a local government for some or all of the tax revenue it loses because of the nature of the ownership or use of a particular piece of real property; usually relating to the foregone property tax revenue. (US Bureau of Land Management)
Clawback provision: “Clawback” provisions in IDA contracts can allow an IDA to recapture previously granted benefits, end the granting of additional benefits and/or proportionally increase the amount of PILOTs due if the agreed upon job creation is not forthcoming or if the developer violates other parts of the project agreement. (oc.state.ny.us)