MINUTES OF SPECIAL MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, January 30, 2019
The special meeting of The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee was held pursuant to public notice on Wednesday, January 30, 2019. The published meeting time was 12:00 Noon. The meeting was held at the Board office, located at 65 Union Avenue, Suite 1120, Memphis, TN 38103.
The following Directors were present:
Daniel T. Reid, Chair James Jalenak
Monice Hagler (by phone) Cliff Henderson
Buckner Wellford Brittney Rowe
The following Director was absent:
Dr. Manoj Jain Nancy Willis
Also present were:
Staff members Martin Edwards, Jr., Stephanie Wright, and Lauren Magallanes (by phone) were in attendance. Charles Carpenter and Corbin I. Carpenter, General Counsel, and Cheryl Hearn, Assistant City Attorney, and Charles Settle with the Shelby County Assessor’s office were also in attendance.
With a quorum present, the special meeting of the Board was called to order at 12:00 Noon by Chairman, Daniel T. Reid.
RESOLUTION OF THE COUNCIL OF THE CITY OF MEMPHIS, TENNESSEE MODIFYING ITS DELEGATION OF AUTHORITY GRANTED TO THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD OF THE CITY OF MEMPHIS TO NEGOTIATE AND ENTER INTO AGREEMENTS IN CONNECTION WITH PAYMENT IN LIEU OF AD VALOREM TAXES AND APPROVING THE TERM, AND METHOD OF VALUATION OF PAYMENTS IN LIEU OF AD VALOREM TAXES
Charles Carpenter began the meeting with a review of his meetings with the City of Memphis Treasurer’s office, Shelby County Trustee’s office, as well as a review of the written request submitted to the City of Memphis Attorney’s office for clarification of certain provisions of the Resolution. Carpenter also introduced Charles Settle with the Shelby County Assessor’s office. Carpenter works directly with Settle in applying and terminating PILOTs for the Board.
Carpenter reported to the Board his preliminary findings on whether (i) the Board should assess reserves at the beginning of a PILOT as a hedge in preparing the PILOT property to return to the tax rolls at full value, and if so, (ii) those reserves could be held by the City of Memphis Treasurer or the Shelby County Trustee. After meeting with representatives of each entity, the answer is no. Neither entity is authorized as a custodian or escrow agent to hold funds in this manner and it would not be allowed as proposed. As an alternative, Carpenter stated that for bond transactions, the Board regularly employs trustees in the trust divisions of Regions Bank and U.S. Bank National Association to serve as bond trustee and/or paying agent; and if the Board elected to proceed in this manner, this is an option that could be considered as a way to establish escrow funds for the various PILOTs.
Carpenter then initiated the discussion of the PILOT Payment increase of no less than the ten percent (10%) referenced in the Resolution, as well as, the timing of when the increase would be applied to the PILOT, in light of the responses received from representatives of the taxing authorities and the City Attorney’s office. In summary, Carpenter reported that he thought that the ten percent (10%) increase should be applied to the fair market value of the property because it is based on an effort to transition properties back onto the tax rolls at full value at PILOT termination. Further, the City Attorney opined that the increase provision in the Resolution would apply to every PILOT following the initial ten (10) year term.
As the discussion continued, Settle indicated that all properties, whether a PILOT is in place or not, is assessed at fair market value every four years. With the understanding of how the Assessor’s Office valuates all property, it would be known what the frozen assessed value is as well as the fair market value throughout the PILOT term. At the end of the ten (10) year PILOT term, the 10 percent (10%) increase could be assessed based on the most recent fair market value in effect at the end of the ten (10) year PILOT term. Using this premise it was discussed that the amount due to the City and County taxing authorities would increase annually with then goal of properties being at one hundred percent (100%) of assessed value by year twenty (20) of the PILOT. As an alternative option, it was further discussed among the Board that the ten percent (10%) increase could be based on the floor level of the amount of the current PILOT payment during the initial ten (10) year term of the PILOT.
The discussion proceeded to consider how the Board would handle PILOT Payment increases for PILOTs that have expired, but are approved for a PILOT Term extension based on the guidelines of the Resolution. The concern was raised that property owners whose PILOTs have already expired, but are able to apply for an extension based on the Resolution would have concerns about the full tax amounts that have been paid during the lapse between the expiration of the PILOT and the possible approval of a PILOT Term extension. It was recommended that property owners would not be able to request or receive refunds of these taxes paid during this time period, nor would monies still owed and accrued during this lapse be forgiven. Settle stated that the City and County taxing authorities set up budgets each year based on the taxes to be collected and for that reason, there would not be an ability to go back and refund, nor forgive monies owed for full tax payments billed or owed. For properties in this category, it was recommended that the valuation amount used for the Extended PILOT would go back to the assessed value in place at the end of the initial ten (10) year term of the expired PILOT and the PILOT Payment increases would be the greater of (a) ten percent (10%) of the original PILOT payment, or (b) the current assessed value. This same formula will be applied to all Extended PILOT terms following the initial ten (10) year PILOT term. The Board has also recommended that to be eligible for an extended term, the PILOT property would not be required to invest fifty percent (50%) of the acquisition cost in order to apply for the Extended PILOT term; however, this requirement will continue to be in place for any property applying for a new PILOT.
Monice Hagler left the meeting.
After further discussion, it was recommended as an eligibility criterion for an Extended PILOT term, among other requirements, the following:
1. Six (6) month trailing rent rolls with an average of seventy-five percent (75%) occupancy and staff has the authority to request any additional documents necessary during the review process of any application.
2. All properties receiving an Extended PILOT shall pay all required increases in PLOT payments to the City and County taxing authorities following year ten (10) of the initial PILOT term.
3. Notwithstanding the general eligibility guidelines for consideration of Extended PILOT terms, each application will be considered on a case by case basis and will be approved or denied based on the merit of the application.
4. Timing of when an Extended PILOT application could be submitted was deferred at this time.
5. The consideration of requiring escrow funds to be set aside for PILOT properties with the possibility of the developer receiving these funds back following successful compliance or being forfeited for noncompliance as a possible remedy short of PILOT termination when noncompliance takes place was recommended not to be a viable option at this time.
6. Discussion ensued regarding fees to be assessed by the Board at the closing of an Extended PILOT. Discussion was based on a formula of the amount of the original PILOT fee, increased in an amount equal to ten (10) basis points for each year of the Extended PILOT term; for example, an Extended PILOT application approved for fifteen (15) years would be assessed a closing fee of 1.5% of the original certified development cost of the project.
Lauren Magallanes left the meeting.
The Board directed Carpenter to revise the draft PILOT Application, policies, and procedures document with today’s updates and distributed to the Board for review prior to the next in an effort to have a final application to be considered for approval at the February 6, 2019 Board meeting. It was also agreed that this “final” document shall be distributed to the Board allowing time for review prior to the February 6th Board meeting.
Charles Settle expressed concern on how a PILOT Term Extension would be recorded. Carpenter expressed that documents will be recorded for public record. Settle also expressed interest in working closely with the Board to monitor PILOT properties for compliance issues and standards. The Board was very agreeable with expanding this working relationship.
There was no public comment.
It was announced that the next scheduled meeting of the Board will be held on Wednesday, February 6, 2019 @ Noon. There being no further business, the meeting was adjourned by the Chair at 2:15 p.m.