Every time a PILOT is approved, it gives away property taxes that would otherwise go to schools.
That’s because almost 60% of the Shelby County property tax rate is allocated for education. Although only three-fourths of county property taxes can be waived in a PILOT, that still means that schools don’t get half of the property taxes that would otherwise come to them.
It’s made all the more puzzling since the Shelby County Administration, in its 2014 budget proposal cited that two of its major challenges were caused by lower property tax revenue for the first time in County history and the additional funding needs for education.
And yet, significant amounts of school money are still given away with every PILOT approval – $14.6 million this year ($218.76 million over 15 years if the trend line remains the same).
Redistribution of Wealth
The latest company in line for this largesse is Target Corporation’s fulfillment center for online ordering. It will undoubtedly get its request approved by the EDGE board for a 15-year waiver so it will not have to pay property taxes like the rest of us. In its case, that waiver forgives the company from paying $12.2 million in taxes.
This of course means that the costs of public services needed by the company will be shifted to homeowners and small businesses in Memphis and Shelby County.
We are asked once again asked to believe that this tax waiver was absolutely crucial for this national international corporation. It’s hard to imagine that Target doesn’t keep the $813,000 a year that’s being given in a tax freeze in its petty cash drawer. The company makes more than that in revenues every hour of every day.
The Data That Tell The Story
Here’s the tale of the tape:
* $72.6 billion – Target Corporation Annual Revenues
* $12.2 million – Amount of City-County Taxes Forgiven
* $2.32 million – County’s School Money Being Waived in Target Corp. PILOT
* $43.7 million – Amount of County Property Taxes Waived Yearly
* $14.6 million – Amount of School Funds Waived Yearly
* $218.7 million – Amount of School Funds Waived Over 15 Years
* $13.68 – Average Hourly Salary at Target Corp.
* $18.18 – Living Wage for Two Adults and One Child in Shelby County
The Target Corp. deal continues a troubling trend line for Memphis and Shelby County that shows that we are attracting $25,000-$30,000 jobs to replace the $55,000-$65,000 jobs we’re losing.
We Know What You Are, We’re Just Haggling Over The Price
As usual, the approval for a PILOT was as usual preceded by one of EDGE’s glowing return on investment analyses that reliably conclude that the community will receive much more in benefits than it gives up in property taxes. As we have written previously, these evaluations are incomplete and are akin to those City of Memphis annexation reports that always made the absorption of more land sound rosy.
The greatest paradox of all of this is that after 30 years of being “America’s Distribution Center,” Memphis and Shelby County are still paying these companies to love us.
A few even more troubling aspect of this:
– Only workers with graduate school training have seen their hiring rise in manufacturing/distribution in recent years. The employment of other kinds of workers in manufacturing/distribution is shrinking.
– The issue about attracting $25K jobs to replace $65K jobs is that many (probably around 30%) of the distribution jobs that they are seeking will be replaced by automation in the next 10-15 years. Factory automation, online purchasing, automated ordering systems, online banking, ATMs, etc will continue to reduce the demand for less skilled labor. The writing is on the wall, and it befuddles me that Memphis’ leadership continues to seek the easy way out and continue to seek these jobs.
– The Tennessee state legislature will likely refuse to raise the minimum wage for year to come. Cities and states that have done raised the minimum wage have ‘inexplicably’ done well. Studies have shown that it results in a smaller welfare state – in which Memphis’ is plenty large.
The dysfunction of the federal gov’t in recent years has caused many issues (such as minimum wage) to be punted to state and local gov’ts. This is creating two types of zones in the US: zones of the highly compensated and zones of the marginally existing. The Tennessee legislature has elected to become a zone of the marginally existing because the Republicans in control believe in magical economics. They could at least give municipalities the power to mandate increased wages. That will not happen either.
Meanwhile, cities with liberal policies such as high taxes and higher minimum wage laws (Portland, Seattle, San Francisco, Denver) are somehow prospering while cities under the heel of Republican policies (Memphis) are struggling. (Yes, I know it is not quite that simple, but this is proof that ‘liberal’ policies do indeed work)
Thanks, WCN. Great, great points.
Yes, just to add WCN & SCM, great posts. I notice that IKEA has confirmed opening a store in Memphis. My next thought upon hearing this was I wonder how much in PILOT incentives have already been promised them? I’ve been to IKEAs and think they’re grand but I hate that this is one of the first things that occur to me. We shall see…
Yep:
http://www.memphisdailynews.com/news/2014/dec/16/ikea-memphis-will-seek-pilot-incentives/
@ Memphisj
If it is consolation, there are other municipalities that are offering these dubious these tax incentive deals that benefit the corporations and do little (or in reality, nothing?) to address the intense poverty, unemployment and myriad of other problems that effect the citizens of those cities.
They rarely create enough jobs to justify the PILOT. Many of the jobs they do create go to citizens outside the municipality because there are no local hiring stipulations in the PILOT. At the end of the day, it is a giveaway to large corporations while the poor and middle class suffer.
This is what I mean in my comment above by “Republican policies” (even if the Memphis mayor is Democrat): refuse to raise minimum wage rates, tax breaks to large corporations, and hope there’s magical economic growth.
WCN-agreed that we’ve reached a type of messaging that thinks any tax break in any way shape or form is a “good” thing. Of course this helps the wealthiest individuals and corporations and puts more burden on the middle and lower levels. Smart City has done a great job of documenting how these costs are “trickled down”.
I do sense some increase in voices of concern about this rubber-stamping, I wish we had better news outlets doing more in-depth reporting and number-crunching on these tax breaks and their true cost. About every independent study I’ve seen finds that they never deliver the return they claim they will. It sounds like IKEA has a higher salary level than most retail outlets at least. But just within the past month or so we’ve heard of EP enterprises, Target, the UK tuxedo rental company (forget the name) and now without a doubt IKEA getting tax breaks. All of these companies have large revenues. It’s simply corporate welfare.