PILOT Questions Searching For Answers

It would dispel suspicion if the public could see online the length of each tax freeze (Payment-in-lieu-of-taxes), how much in city and county taxes are being waived, the number of jobs being created and their average wages, and the beneficiaries as well as the application for the PILOT and the cost-benefit report.

Surely, there’s no reason that advocates of the status quo with the PILOT program wouldn’t object, since they confidently praise the program’s worth and tell the public that it’s good public policy.

Often, it’s a case of the rich get richer because small businesses get no such financial incentives. It’s also often a case of the poor staying poor, because some of the companies that enjoy the largesse of government barely pay enough to keep its employees from needing public social services.

In other words, this is an issue that deserves serious consideration based on its public policy implications rather than its political implications. In the end though, if people want to argue that the PILOT program should be protected from the fundamental reform that it needs, the least they can do is show us what they are talking about.

When the tax freezes were created, it was said that they would be a stop-gap policy used until Memphis and Shelby County could recruit jobs on the basis of quality rather than cheapness.  When and how do we get to that point?

Answers Needed

Why do Memphis and Shelby County need to dole out tax waivers to distribution companies who should recognize the benefits of being adjacent and accessible to FedEx?  At what point can we stop offering incentives for these low-wage jobs?

What are major distribution operations in our community doing to avoid providing a living wage and benefits envisioned by local elected officials?  How pervasive is the policy of hiring temporary workers in warehouse and distribution facilities and releasing them to prevent the legal requirements of fulltime employees?

What do the trend lines look like for the amount of tax waivers given each year and the number of jobs created?

What is the trend line for the taxes waived per job?  Are there any general guidelines to ensure that we are not overpaying for jobs?

Doesn’t the new policy of giving waivers for people to keep jobs in Memphis and Shelby County now make the threats of moving them to Mississippi pro forma?

Regionalism

What harm does it really do to Memphis and Shelby County for businesses to locate in DeSoto County? Why not let DeSoto County bear some of the cost of the regional economy for a change?

Why are we so obsessed with North Mississippi any way since about 75% of the jobs and 80% of the earnings are here in Shelby County?  We say that Nissan located to Nashville when it’s actually in Franklin/Cool Springs, and we say Dell located to Nashville when it’s Lebanon.  Hernando is Memphis in the eyes of everyone but us.  How do we walk the walk of regionalism instead of just talking the talk?

If a company is not viable enough to pay decent salaries and provide basic benefits, why is it in the public interest of Memphis and Shelby County taxpayers to subsidize them in the first place? Are these really the companies on which we want to rest the future of our economy?

What is our strategy for attracting good jobs by leveraging existing high-quality assets by enlightened leadership with a visionary ownership of opportunity?  What do we do to shift our focus to high-value, nonreplicable global class assets?

Fishing Upstream

Often our economic development strategies seem to be akin to fishing downstream and whatever comes by, we fight mightily to pull ashore.  What could we do to move upstream where we can compete for the really big fish?

What can we do to compete with other regions of the U.S. rather than compete within our region?

Since the Industrial Development Board has been delegated the power to waive taxes by the City Council which could have retained the power, does the Council have priorities that should be incorporated into the current criteria for a tax freeze?  How does the IDB align its objectives with the city of choice objectives of City of Memphis?

Economic development officials said that tax freeze policies had to be loosened up because of the recession.  Now that the recession has passed, can the policies be tightened?

It’s An Entitlement

The former head of Nashville’s economic development office said, “Incentives should incentivize. Once it becomes an entitlement, it’s no longer an incentive.”  Haven’t our tax waivers become an entitlement?

What is the average cost of public services to these companies that have to be shifted to property owners because the companies pay no taxes?

If these tax freezes are such good deals for taxpayers, what about posting the PILOT applications and approvals in an easy-to-understand report on the Internet?

The Principles

We made these suggestions six years ago when asked what our principles would be for economic development if we were in charge:

#1 – Quit selling Memphis on the cheap.

#2 – Exhibit loyalty to Memphis citizens, not just blind loyalty to new businesses.

#3 – Define success by people, not buildings and real estate.

#4 – Abandon “commodity economic development.”

#5 – Set national standards in economic development.

#6 – Don’t wait for the game to come to us.

Here’s the main thing about PILOTs: the public might be more willing to tolerate them if there was even a whisper that economic development officials are trying to create a context where success is defined by how few tax freezes are handed out, not by how many.

Still Waiting

For seven years on this blog, we’ve been asking if there is a plan to move us from the cheap category to the quality category and if there is a plan to reduce our extreme overreliance on tax freezes.

We asked it when we were the first to report that Memphis and Shelby County gives away more tax freezes than all the other large urban counties combined.  We asked it when the city-county’s own consultants reported that the IDB procedures were badly flawed and that reform of the program was temporary at best.  We asked it when professors and Forbes criticized our tax freeze program as counterproductive and illogical.  We’re still asking it.

We’ve heard a lot of comparisons between our community and Nashville, and here’s another one: while we’ve tried to give away the store, decades ago, Nashville decided to send a message about quality government, quality of life, and quality of public investments. It set out to execute “quality strategies” that make it today a magnet for college-educated 25-34 year olds and skilled jobs. It identified key public investments to make this happen, and because of it, today, Nashville is fighting Charlotte as the South’s “Second City” (behind Atlanta).

Memphis took the road rooted in “old school” economic development that sold our city on the basis of cheap land and cheap labor. Ultimately, what we’ve learned is that throwing money at companies to convince them to love us is not only poor public policy, it is also counterproductive, stimulating a shift in the tax burden and increases in taxes that choke off the small businesses and the entrepreneurs who create most of the new jobs in the first place.