Hanukkah Vinderson, director of housing finance for the City of Chattanooga, told the Washington State Senate Housing Committee on Sept. 16 that her office has reworked the city’s payment‑in‑lieu‑of‑taxes (PILOT) tool to calibrate tax abatements on a per‑unit basis to produce mixed‑income development.

Vinderson said the PILOT program deeds property to a local housing facilities board and uses a lease and pilot agreement to govern affordability, clawbacks and compliance; the lease obligates annual pilot payments in lieu of property tax. “What is a pilot? A pilot stands for payment in lieu of taxes,” she said.

The city’s design links the annual abatement to the difference between a market rent and an affordable rent (the rent loss), with a modest premium. Vinderson described the calculation as market rent minus affordable rent, then multiplied by 12 and increased by about 2 percent to cover application and compliance costs and to provide extra incentive for deeper affordability. Chattanooga uses ZIP‑code small‑area fair market rents (adjusted with a 1.3 multiplier in current practice) to set market rents, and HUD rents at 50–80 percent of area median income for the affordable rent option.

Vinderson said the pilot is flexible: developers may mix unit sizes and AMI tiers to stack abatements up to their tax liability rather than face an all‑or‑nothing requirement. She said the pilot does not abate existing predevelopment taxes or county school taxes — those revenue streams were retained by city council decisions — and applies to the improved value only. The program’s standard agreement term for abatement and affordability is 15 years; Vinderson said that term was chosen to align with tax‑credit timing.

Vinderson told senators that Chattanooga adopted the new structure in 2024 and that the first project under the retooled approach will be considered by city council: a 278‑unit development in which 42 units (about 15 percent) are proposed at mixed AMI levels. She described the program as attracting market‑rate developers who previously would not have provided affordable units, and said the city requires annual compliance monitoring and reporting to city council.

Committee members probed term length, monitoring and whether the program is a local exercise under state enabling law; Vinderson said the program operates under existing state enabling provisions that allow industrial development and housing facilities boards to structure PILOT leases.

The city provided a publicly posted calculator showing the per‑unit abatement schedule, and Vinderson said the schedule is reviewed annually to keep numbers aligned with market data.

The presentation was followed by committee questions about developer types, auditing and whether the program could be made by‑right if council confidence grows.