Some local officials believe payment in lieu of tax agreements are big for bringing development to Loudon County.

“Essentially you have to think of it like a coupon,” Jack Qualls, Loudon County Economic Development Agency executive director, said. “Instead of you paying the full amount of taxes that would be normally owed, you pay a discounted rate for a set number of terms and then it goes back on the tax roll at that valued rate that it’s at at the current time in the PILOT. PILOTs are used to incentivize growth, whether it be growth in jobs, whether it is for residential or for manufacturing or for commercial. It’s used as a tool in the toolbox to recruit growth.

“... As an investor you’re trying to recoup your money, right? You’re looking at trying to get return on your investment,” he added. “Why would you go build somewhere that has a high tax rate or a low tax rate? What is the incentive for you to go put your investment in a certain location?”

Lenoir City officials hope to lean into growth and encourage developers to come.

The city in 2018 approved a 10-year PILOT for about $50,000 per year to allow LHP to remodel and renovate Springplace Apartments.

Last year there were four PILOTs — three residential and one commercial. The three residential were outside of the central business district, which in September required the city create a Health, Educational and Housing Facility Board to meet state law, Tony Aikens, Lenoir City mayor, said.

The city in December gave the go-ahead for the standalone commercial PILOT “Project Gator” off McGhee Boulevard for three years at $19,381 per year. The three residential-use PILOTs are Universal at Town Creek for five years at $139,098 per year, West Point Place for 20 years at $182,745 per year and Cityview for 10 years at $61,010 per year.

Amber Scott, Lenoir City administrator, said the residential PILOTs were approved by the housing facility board, but no other action has been taken.

The developer for West Pointe Place could break ground in March, Aikens said.

Aikens said an agreement is in place with the Cityview developer to acquire the property, but the land has not transferred. Aikens owns the property, which he informed Lenoir City Council prior to the September vote. He said he has no involvement in the development.

“When you look at the growth of our community right now, most of the growth that’s happening is $300,000-plus homes in the Village,” Qualls said. “That is a retirement community. Those are not your workforce. When you look at your workforce, you’re at average medium age of our workforce is 48. What happens in 10 years is they’re 58, they’re getting closer to retirement. What we’re trying to do is incentivize growth to come here and people to bring their families, people that want to be part of our workforce. If they have housing, they’ll come here. If they don’t have housing, they can’t afford to come here.”

Qualls pointed to a 2020 migration trends report from U-Haul ranking every state, with Tennessee ranking No. 1 for one-way trips. East and Central Tennessee had the largest gains for U-Haul arrivals.

Aikens said the city should continue to be aggressive to get residential and commercial developers.

“We have to do creative things sometimes to make that happen,” he said. “Will it always be that way? No, not if Lenoir City keeps growing. But for right now we have to think of creative ways to get those developers to come in here and build those type houses and those type homes for people to move into Lenoir City. I personally want Lenoir City to grow. If Lenoir City doesn’t grow, we’re not going to have more restaurants, we’re not going to have movie theaters, we’re not going to have big box stores until Lenoir City gets more rooftops. It drives every bit of it, and we’ve been told time and time again from the community leaders and from the businesses and people that’s doing these studies, ‘You need more rooftops. You’re never going to get those things until you get more rooftops’.”

According to a 2020 Loudon audit, there are four agreements active, including Tate & Lyle at $90,000 per year through 2026, Del Conca USA Inc,. at $168,574 per year through 2023, Poindexter Properties LLC at $56,399 per year and Wells Fargo Equipment Finance Inc., at $66,433 per year, both through 2026. Another agreement for Vanhoosco Precast LLC expired Dec. 31.

Loudon Mayor Jeff Harris said the city has not entertained a new PILOT in years, but he believes incentives are important to bring development.

“I mean it’s just a necessary evil, it’s just something you’ve got to do,” Harris said. “If you’re going to be competitive you’re going to have to offer incentives and PILOTs are a big incentive. Hopefully you make it back up after the PILOT expires or whatever, make it back up with new businesses. A lot of times it’s something that’s not been on the tax roll so after the PILOT’s over you’ve added something to the tax roll. It’s just the nature of the business now and that’s just where we are competing with other counties and other regions. You just got to get creative with it. Sometimes it’s tax abatements and it could be land, so there’s other different options and you’ve just go to get creative with it. I think our EDA does a pretty good job offering those PILOTs and incentives to attract businesses.”

Harris said offering incentives is imperative before another community does.

“You may think you have the most attractive PILOT and then someone comes up with something different so you might have to change your strategy as you go,” he said. “It’s something that has developed over time and that’s just where we are and if we’re going to recruit some of those businesses we’re going to have to be willing to do PILOTs. I think if you don’t offer them, it shuts a lot of doors. I just think that that’s where we are today and we just got to continue offering them.”

Ty Ross, Loudon city manager, agreed.

“Capital investment is discretionary,” Ross said. “No person or company is required to build anything anywhere. Therefore, one that strongly desires new capital investment tries to encourage and attract investors. Capital goes where it is welcome and PILOTs are one way of welcoming investment.”