Abatements Return As Budget Season Issue

By Bill Dries

With the arrival of spring this week, city and county government leaders prepare for the coming of another season about which there is rarely as much excitement.

It soon will be budget season. And while county government’s budget season is without the dramatic decisions city government leaders are facing, the county budget season will include the annual raising of perennial issues, including payment-in-lieu-of-taxes incentives.

The tax abatement incentive for economic development made an early appearance last month as Shelby County Trustee David Lenoir filed his office’s annual report on PILOT properties for calendar year 2013.

“I try to be very careful of the responsibility creep that can occur. But ongoing compliance ... is not the Trustee’s role.”

–David Lenoir
Shelby County trustee

At the Shelby County Commission’s committee sessions, the filing of such reports is usually an item that yields quickly to other items requiring a recommendation by the committees on a schedule that usually runs over the scheduled time for individual committee sessions.

But at the Feb. 19 committee session, Lenoir added a comment at the end of his presentation.

He encouraged the commission to continue to evaluate the awarding of PILOTs.

And the single encouragement got the attention of commissioners getting ready for an extended discussion on school board redistricting. They pressed him to go further.

“What do you mean?” Commissioner Henri Brooks asked.

Lenoir said he and the commissioner all have a role in evaluating the use of the tax breaks.

“Ongoing compliance and benefits of PILOTs, clawback provisions, adherence to the contracts, job creation, things like that – I know have been a concern of mine as well as others,” Lenoir added. “That’s not my role as the trustee. My role as the trustee is to properly bill and collect on the contracts.”

He then cited figures from his report on the amount of Shelby County property tax revenue abated.

“It is $50 million that is being abated, and it is 31 cents on the tax roll that impacts you and I as taxpayers and many others,” he said.

Brooks said the numbers validate her ongoing concerns about the incentives and called on the commission to put the issue “on the big table” for discussion.

Commissioner Mike Ritz called for a review of the incentives in a few months as he reviewed companies receiving the PILOTs who are delinquent in making the payments that come with the agreement to abate property taxes.

“Why don’t we go take this business,” he wondered aloud about a business on the books as owing $1.1 million.

Lenoir walked the commission through the complex arrangement that begins with the transfer of a company’s property to a nonprofit board that has the authority to issue the tax abatement in order to get around the state’s ban on waiving or forgiving property taxes for any individual or entity.

“If they’re not going to squeeze them,” Ritz replied, referring to the Economic Development Growth Engine – or EDGE board – “and he can’t squeeze them, we need to find a way to collect.”

Commissioner Steve Mulroy asked if Lenoir was recommending better enforcement of the PILOT agreements or better terms at the outset.

“I don’t know that it’s an ‘either/or.’ I think it may be an ‘and,’” Lenoir began, adding that he and Ritz, as well as others involved in the process, had met to talk about the process and the audit trail.

“I try to be very careful of the responsibility creep that can occur. But the ongoing compliance of these contracts is not the Trustee’s office’s role,” Lenoir added. “But as an elected official and as a taxpayer, I think we need to make sure their feet are held to the fire in terms of the promises made and the benefits given to those entities.”