REWIND: Walker County Is Close To Squandering All It Has

A new multi-family housing development in Rossville could burden local governments with millions in additional costs, all while bringing minimal tax revenues or benefits.

This article first appeared on Chattanoogan.com on July 13, 2021. I’m sharing it again in light of a newly proposed low-income housing tax credit project within the Rossville city limits, situated behind the Sonic and methadone clinic on Chickamauga Avenue. The developer behind this project is the same one responsible for the developments I discussed in the original column.

Every concern I raised in 2021 remains relevant for the newly proposed project—same developer, same issues, just a different location, and potentially even greater problems. View the 11/21/2024 Rossville planning commission meeting on the new project.

Walker County, tucked away in Northwest Georgia, is known for rural character, natural beauty, and rich history. It’s truly unique in that it offers such a wide variety of ways to live your life all within minutes of a modern mid-size city and everything it offers. Whether you want a Mayberry experience, a mountain life, secluded retirement, rural farm living, or modern suburbia, it can all be found in Walker County. 

As with any county, Walker has its share of problems, infrastructure and balancing growth with preservation of rural character have and will continue to be challenges. Most of the county is heading in the right direction to meet these challenges. Chickamauga is an idyllic small town as one could imagine. Lafayette is reinventing its downtown for today’s generation. Lookout Mountain offers unmatched beauty with one of the best schools and safest neighborhoods in the state. A truly world class golf course, community, and resort holds more promise than any other development in the nation, and the farms and open space seen in the cove transport one back to simpler times and the county is committed to preserving it. 

The north end of the county has proven to be the most challenging part of the county. Rossville is an old mill town with a long history. Like most mill towns it has struggled since the closing of the mill. There is hope. A lot of it. The old peerless mill, long a symbol of the decline in Rossville, is recognized by a new guard of leaders and residents as the untapped resource it is. Countless old mill towns across the south serve as the example. I am confident that the coalition of engaged citizens and determined thoughtful leadership will deliver the revival of the once great gateway to Georgia.

For all this, Walker County is on the verge of squandering all that it has. The family who opened the Peerless Woolen Mill in Rossville in 1905 had a farm just south of the city limits that has remained farmland ever since. While subdivisions and homes developed all around it, this remained an oasis of the rural character so cherished in Walker County less than 10 minutes from downtown Chattanooga. During 2019, after the death of Bit Hutcheson, all of this became available for sale and development. In the ensuing months one large tract was set to become a new 500 home subdivision and the Happy Valley Farms was purchased by a local developer with a history in senior developments. Another tract was purchased by Gateway Companies out of Alabama. Gateway specializes in multi-family developments utilizing state and federal low income housing tax credits (LIHTC). Local residents did not want this to happen. With so much growth planned, they rightly worried the addition of a 156 unit development would only exacerbate an already problematic—too often lethal—traffic situation in the area. A meeting was held to discuss various traffic problems and solutions with residents and ended without resolution or a plan to address resident concerns. The Gateway project came before the planning commission late last year and was approved as there was not a clear legal ground to deny the request. 

I was against the project but I agreed that denial of the rezone request would likely be challenged and overturned. As I am now on the planning commission I can confirm, rezone requests cannot be denied arbitrarily. Despite this I was confident the project could be stopped because there was an existing low income housing tax credit (LIHTC) development within 1.5 miles, and multiple other subsidized housing developments in the area. Additionally, new census data will show the area is not a good fit for LIHTC developments. I didn’t think the DCA would approve the project for its competitive funding. Indeed they have not. 

The only other way the project could get LIHTC is if it obtained tax-exempt funding. The Georgia department of community affairs (DCA) offers this directly and it can be offered to developers and businesses through local government and/or development authority pass-through bond financing. This is a discretionary tool that can be very useful and valuable when used as part of a thoughtful master plan for economic development. It offers developers and businesses access to cheap money and is often coupled with other incentives to attract or retain businesses. There is no liability for taxpayers. If no incentives are offered then it is often said it doesn’t cost taxpayers anything. 

That is true with most deals. However, with a LIHTC deal it is not. 

Much research has been done on LIHTC developments over the years since its introduction in 1986. For the most part the program is viewed as a success in addressing a shortage of affordable housing. Most complaints tend to be not in my backyard or NIMBY arguments. Fears of crime, lower property values, negative consequences on area schools are the leading complaints. In most cases these are unwarranted. However, the research, while vindicating the program as a whole, does offer clear markers when these complaints are more than warranted. When a LIHTC development is placed in a mid or upper income area it is most often successful and has little effect on property values, crime, and schools. When a LIHTC development is located in a transitional or lower income area there are negative effects. 

The area where this LIHTC development is planned has potential and has improved since 2008 but remains one of the poorest in the county. Crime remains a problem. The schools are the lowest ranked in the county. The LIHTC development will only exacerbate these problems. Its residents will add a tremendous burden on the Walker County School system. The reason for this is not necessarily that they will likely be transient or from a low income household but because the development itself will not deliver property tax revenue equivalent to even a fraction of the cost to educate the additional students. 

Because the development will be federally subsidized through LIHTC four percent credits the county cannot assess the property as it would a non-LIHTC multifamily rental property. Put another way, the county will receive significantly less revenue through property taxes than it would from a non-LIHTC property. The problem is not new but is often overlooked. Across the country LIHTC properties pay less in local property taxes than similar non-LIHTC properties. In effect, local taxpayers are subsidizing the federally subsidized housing. 

For the 156 unit Gateway at Rossville development let’s conservatively assume one child per household. Using the most recent per-pupil-expenditure(PPE) of $10.584 then Walker County schools will need an additional $1.6 million each year to just maintain current funding levels.

Annual Per-Pupil-Expenditures

$10,584

Additional Students

156

Estimated Annual Deficit

$1,651,104

Just $618 of the PPE came from federal funds. Make no mistake, property taxes will increase to meet this deficit. There is an additional effect on schools to expect as well. In a 2010 study published through the Federal Reserve Bank of Dallas, it was observed that test scores went down in schools where LIHTC developments were built if the area schools were already struggling or underfunded. Test scores are tied to so much in education today, namely funding and teacher evaluation. If test scores go down in schools which are already underperforming, what will the effect be? Will the minimal federal funding Walker receives decline as well? Will good teachers face unwarranted consequences? Will class sizes increase? 

The effects are not contained to the school system. Indeed they grow and worsen. A good school system will attract economic development across the county and improve the quality of life for all residents. It is the cornerstone of economic development in many ways. The nearby developers and nearby homeowners will surely see lower prices and more difficulty selling if the quality of the school system declines or is expected to decline. The concern should extend to property taxes as well. Buyers are savvy these days. No one wants to move to an area where taxes will surely rise. 

To this point only the school system has been discussed. The development will result in an increased burden on county EMS, fire and police.  Again, without even a fraction of the necessary revenue to pay for it. The list goes on and on.

The pandemic changed the economy in many ways. The move to work from home full or part-time changed things. Quality of life at home and community became so much more important for so many. Living close to where one works became less important. Walker County with all it has to offer and the unique ways one can choose to live life in Walker yet remain connected could be the main driver of the economic future of the county rather than attracting new industry. 

So how is Walker County close to squandering all that it has?

On Thursday July 8, the Walker County Development Authority issued $19 million in tax exempt revenue bonds for the Gateway at Rossville Project. This cleared the way for Gateway at Rossville to receive LIHTC and alter the entire county and Northwest Georgia for a generation.

I want to be clear. I do not write this to cast blame and I do not think the people who made the decisions on this from the beginning are in any way bad people or corrupt or were acting in any way other than with a desire to genuinely improve Walker County. That said, the same can be said of much maligned former Commissioner Heiskell. Save for a handful of decisions she would have been remembered well. A handful of seemingly simple decisions is all it takes to do tremendous good or tremendous harm to a lot of people for a long long time. 

LIHTC properties have a minimum compliance period of 15 but are more often 30 years. Using just the annual additional funding needs of the school system, a conservative estimate that all county taxpayers can expect from this development is $49.5 million. Add in water and sewer, roads, and public safety with the costs to the school system and you might get nauseous seeing it.