Balancing tax breaks with competition for jobs
EDGE Board Chair, Mr. Al Bright was featured as a Guest Columnist in The Commercial Appeal, Thursday, September 21 regarding PILOT effectiveness.
The public has a lot of questions about the Economic Development Growth Engine (EDGE) and its Payment In Lieu of Tax (PILOT) program.
People want to know what we are doing, how we are doing it and if we're effective. They also want to know whether companies are meeting their obligations and being held accountable.
We understand. The public expects businesses to benefit the community. For every business leader who thinks we're not providing enough incentives, there are thousands of citizens who think we are giving away too much or don't understand why we have to offer incentives at all.
EDGE's main mission is to create jobs. Memphis and Shelby County is under incredible pressure to be attractive to companies from other communities.
We think businesses should love Memphis and Shelby County as much as we do. However, most businesses are basing their decisions purely from a financial perspective, and in this regard, we need to be competitive.
We compete with cities such as Louisville, KY, Indianapolis, Atlanta and Dallas — for companies already here in Memphis and for companies thinking about relocating.
Incentive packages from other communities can include cash grants, free land, income tax rebates and tax abatements. Some of these tax abatements in our neighboring communities can stretch out for 20 years or more. The average EDGE PILOT is nine years.
Our policies are crafted to put this community in the best position to attract and retain businesses, while still respecting the trust the public has placed in us to be responsible for their tax dollars.
Every year, each approved EDGE PILOT project is reviewed based on the number of jobs created, wages promised and capital investment made. We analyze each project for direct tax increases during the PILOT term and post expiration.
We also look at indirect tax revenues, and we have requirements for spending with minority- and women-owned businesses and locally owned small businesses.
We require all PILOT recipients to submit annual reports and allow for on-site inspections. When a company hasn't met its targets for jobs, wages, investments or diversity spending, we rescore the project to determine if we claw back the incentive or terminate the PILOT altogether.
Memphis and Shelby County is holding its own in these competitive times. Since EDGE was formed in 2011, the board has approved 60 PILOTs that are projected to create and retain 14,000 jobs with an average wage of $76,000.
Those PILOTs will have attracted estimated spending commitments of more than $3.1 billion in capital investment, $1 billion in tax revenue and $432 million with minority- and women-owned businesses.
But for every one of the jobs we have attracted and retained, we lose some because we can't compete with other cities that offer more attractive economic development incentives. For every business we attract, we watch another pack up and leave.
Through our PILOT program, we believe we have reached a responsible balance between the community's investment in our businesses through tax incentives and business's investment in our community through jobs, wages and capital investment.
Our PILOT policies, procedures and performance reports can be accessed easily on the EDGE website (growth-engine.org).
Our system is transparent, accountable and allows for government oversight, while being as business-friendly as possible and without putting up unexpected hurdles for economic development.