How will Chattanooga fund the new Lookouts Stadium?
By William Newlin
Fast facts:
The City of Chattanooga and Hamilton County are using Tax Increment Financing (TIF) to help pay for the new $80-million Chattanooga Lookouts stadium
TIFs are a way to pay for up-front infrastructure costs (roads, sewers, or a publicly-owned stadium) using future property taxes
The stadium is meant to jumpstart development in South Chattanooga as part of the city’s South Broad District Plan adopted in 2018
'Skin in the game'
Local officials expect the new Lookouts stadium to pay for its own construction. That’s the goal of Tax Increment Financing (TIF), which is how the City of Chattanooga and Hamilton County will pay for a majority of building costs.
A TIF relies on new public infrastructure to encourage private development in blighted or unused areas. The idea is that tax revenues created by the development will pay for the up-front infrastructure costs over time.
The stadium TIF is central to the city’s plan to revitalize part of Chattanooga south of Broad Street. Adopted by City Council in 2018, the plan recommended the stadium as a “catalytic project” to kick off wider development.
“When a city and county are trying to take on transformational projects, there has to be substantial skin in the game from different parties,” said Jermaine Freeman, senior advisor for economic opportunity to Chattanooga Mayor Tim Kelly.
In this case, some of the skin in the game is the nearly $80 million the city and county will access through the TIF to build the stadium.
Why a TIF
Under Tennessee law, local governments can use a TIF to fund certain public facilities. And TIFs like the type going toward the stadium require state approval — local officials must show that the development wouldn’t happen without government involvement.
Freeman said the stadium TIF meets those criteria. The site for the new stadium contains two vacant iron factories and is partially designated as a brownfield, meaning it may contain pollutants or hazardous materials from past use. Since the plants shuttered in the early 2000s, the site hasn’t seen any new development.
Now officials expect at least $350 million in new construction to follow in the wake of building the stadium. For them, the TIF is the “complex financing” needed to get it all started:
“Cities just can't go pay for those things out of our general fund,” Freeman said.
How this TIF works
Last August, the city and county approved a special tax zone around the stadium site called a TIF district.
They also authorized the new Chattanooga-Hamilton County Sports Authority, which can manage funds and direct construction similar to a housing authority, to issue municipal bonds. The bonds will function like a loan — big banks buy them to provide capital to build the stadium.
Development over time will make properties in the TIF district more valuable, and property taxes will increase. Under the rules of the TIF, most of this incremental increase in property taxes has to go to paying down the bond debt. The TIF earmarks the rest for Hamilton County Schools and for general use by the city and county.
Officials project these new tax revenues will pay for 58% of the debt. The remainder will come through sales taxes from stadium purchases, parking at events, and the $1 million-per-year lease the Lookouts will pay to the Sports Authority, which will own the stadium.
The TIF can last up to 30 years. Once the bonds are repaid, incremental property taxes can go to other infrastructure projects throughout the TIF district, like a greenway planned to give Alton Park residents better access to the Riverwalk. Or, the city and county can decide to amend the TIF, and all tax revenues would return to their normal uses.
What's ahead
One criticism of TIFs is this limited use of new property tax revenue. An extremely successful TIF — one that spawns development far more than expected — would divert significant tax revenue away from city and county coffers for years.
And although development will focus on the site of the old factories, new growth can impact home and rent prices in surrounding neighborhoods.
"When these projects succeed in eliminating blight, residents nearby could see their property values rise, which can lead to unaffordable rent if protections are not put into place," said Ellis Smith, the City of Chattanooga’s director of special projects.
A coalition of 10 community organizations is planning discussions about the impact of further development in South Chattanooga.
But in the meantime, they’re focused on creating community benefits agreements (CBA) with the Lookouts and developers building near the stadium. A CBA is a legally binding contract to ensure community goals become part of development plans.
While the contracts aren’t finalized, the organizations have raised concerns about local hiring, sustainable construction and operation, and the recognition of the South Broad area’s cultural and industrial histories in the finished stadium.
Michael Gilliland is the head of community outreach for CALEB, one of the coalition members involved in negotiating the agreements. He said going forward he’d like to see CBAs signed before developments get approval and hoped the CBA process would strengthen local groups in all aspects of civic life.
“The potential for this is really exciting in being able to chart a path forward,” Gilliland said.
To learn more and provide your input on the Community Benefits Agreements related to the stadium, go here. You can find a detailed breakdown of the city’s South Broad District Plan and stadium financing here.