Local governments may not report subsidies
Thanks to a new accounting rule, local governments have to publicly report any property tax breaks they give to companies, since the lost revenue means less funding for schools, roads and other services.
But a proposed update could exempt Tennessee and some other states’ local governments from disclosing one of their largest business subsidies.
Transparency advocates worry that the change could mean taxpayers would have no idea how much is being forgone in exchange for the economic stimulus associated with luring firms to the Volunteer State. Local economic development agencies offer companies subsidies to attract or retain jobs.
“Property taxes are the biggest single tax that companies pay in America. They have a big impact to local governments, especially school districts,” said Greg LeRoy, executive director of Good Jobs First, a watchdog group that advocates for more economic development accountability. “One of the biggest sources of revenue to these local governments is going to be hidden.”
The Governmental Accounting Standards Board issued a draft guide for municipalities that says they wouldn’t have to report property tax breaks in cases where the government — not the business — owns the property in question.
This is how local governments structure their property tax breaks throughout Tennessee and a handful of other states.
The deals allow companies to skip paying property taxes for up to 23 years in Tennessee, typically in exchange for creating a certain number of jobs.
In these PILOTs, or “payments in lieu of taxes,” a local government agency technically takes title of the property, and the company pays a nominal “lease payment” instead of property tax.
Source: Knoxville News Sentinel, Mike Reicher
The East Tennessee Economic Development Agency markets and recruits business for the 15 counties in the greater Knoxville-Oak Ridge region of East Tennessee. Visit www.eteda.org
Published February 23, 2018