What is the difference between PILOTs and TIF districts?
Developers can take advantage of two different tax incentives for building: PILOTs and TIF districts.
In the first time in Knox County’s history, a small group of homeowners will foot the bill for infrastructure improvements needed to support their new subdivision.
Those who move into a development on Tipton Station Road in South Knox County will fund around $6.5 million of infrastructure improvements in the area thanks to a new Tennessee law that allows counties to impose the fees.
Developer D.R. Horton is the first to ask Knox County to use a residential infrastructure improvement district. The Knox County Commission approved the designation, somewhat akin to a tax increment financing district or payment in lieu of taxes, in a 10-1 vote Jan. 22.
Commissioner Angela Russell, who represents West Knox County, was the only commissioner in opposition.
The approval is contingent on two votes the commission will make at their Jan. 27 meeting. They’ll vote on an overarching policy to guide future infrastructure districts, as well as a memorandum of understanding between Knox County, D.R. Horton for the management of road improvement projects in the district.
If those votes fail, the D.R. Horton will go back to the drawing board.
Realistically, towns, cities and counties will be incentivized to approve projects that include the fees because they will take road and utility costs off all taxpayers and put them on homeowners in that development. County property taxes have been unchanged since 1999, creating shortfalls on the costs of maintaining and developing new roads, bridges, sidewalks and utilities, and paying for schools, police and libraries.
Residential infrastructure development districts push costs onto individuals who choose to live there, who pay over an extended period of time.
What’s coming to Tipton Station Road?
Approximately 340 single-family homes are coming to the new Tipton Station Road residential infrastructure development district.
Each homeowner will have to pay a $1,000 fee annually for 25 years. The fees will be billed and collected as an additional item on regular property tax bills.
Those collections will pay for a roundabout, water and sewer treatment upgrades, and a street extension.
“It’s like making lemonade out of lemons,” South Knox County Commissioner Andy Fox said.
The Knox County Commission will receive monthly reports from developers and the county engineering department on the progress.
Who gets the money from homeowners’ fees?
Developers have to borrow money to afford the development. The residential infrastructure development district designation allows the county’s Industrial Development Board to borrow the money instead of the developer, taking advantage of lower interest rates than developers can secure.
The Industrial Development Board will transfer the borrowed money to Knox County Engineering and Public Works, which will hire a contractor to do the infrastructure improvements. The fees homeowners pay will reimburse the Industrial Development Board.
“What we’re trying to do is a policy that we think puts firm guardrails (on the developer) going forward,” said Chris Caldwell, chief of staff to Mayor Glenn Jacobs. “We think this policy puts the guardrails there. This is a tool that the state has given us. … If you don’t like (development districts), you don’t have to approve them.”
Allie Feinberg reports on politics for Knox News. Email her: allie.feinberg@knoxnews.com and follow her on X, formerly known as Twitter, @alliefeinberg.