dollar signs tornado












Here’s hoping Shelby County Mayor Mark Luttrell will insist on smart tax policy by turning down Germantown’s request for a county PILOT for a corporation moving about 2,100 feet eastward on Poplar Avenue from the eastern edge of Memphis to the suburban city.

A similar request was made about 16 years ago to then-Shelby County Mayor Jim Rout.  He rightly pushed back, asking the relevant question: Why should county taxpayers give up tax money for a company that’s only changing its zip code in Shelby County?

The answer was obvious.  There is no public benefit that justifies a waiver of county property taxes.

More to the point, when you consider that more than 60% of these county taxes are paid by Memphians, they are being asked to pay most of the cost of an incentive for a company to leave their own city.  In a word, it is indefensible.

Tax Breaks

We know we’re suspicious, but we suspect that Germantown officials are counting on Shelby County to increase the size of its tax break for a company that has $1.04 billion in revenues: Mid-America Apartments LP.  The PILOT Application said the company “has positioned itself to have a total market capitalization of approximately $17 billion.”

The Germantown application for a tax freeze is an interesting document in a city where budgetary discipline and financial planning have such prominence.  It has information to justify the 15-year PILOT but the application never manages to list the amount of Germantown property taxes to be waived, much less the amount of Shelby County taxes that Germantown Mayor Mike Palazzolo has asked Mr. Luttrell to waive.

Here’s our estimate of Germantown’s largesse in waiving 75% of taxes for a decade and a half.  The annual Germantown taxes being waived are about $191,250, or roughly the amount of revenues the company makes every two hours.  For the 15-year term of the PILOT, Germantown taxes will total about $2.9 million.

So, here’s the kicker: Germantown wants Mayor Luttrell to support a county PILOT.  However, the county tax waiver amounts to about $433,000 a year, or about $6.5 million over 15 years.

If The Hole Is Deep…

All in all, it seems an exorbitant tariff for county taxpayers to pay, considering that the company is moving only four-tenths of one mile to the east of its present headquarters on Poplar Avenue near Kirby Road.

We fully understand that we have dug a deep hole with local PILOTs that now amount to about $80 million in waived taxes a year, but surely, it is obvious to even the most ardent supporters of our community’s overreliance on PILOTs that a $9.4 million, 15-year tax holiday in this instance is simply bad tax policy.

The Germantown PILOT application states that the project will create 219 jobs, but that is of course misleading.  These jobs primarily move from 6584 Poplar Avenue in Memphis to 6797 Poplar Avenue in Germantown, so there’s no new net jobs created for Shelby County.

Germantown’s economic development officials and committees and its Industrial Development Board are aggressive about attracting the offices of higher-profile companies.   It was easy to predict that the Mayor and Board of Aldermen would unanimously approve the tax freeze for the new 83,265 square feet corporate headquarters for the city’s West Poplar Gateway District, just as they did at their last meeting.

Mississippi, The Magic Word

Shelby County officials have excoriated North Mississippi for raiding Memphis for new business.  The same logic that applies to Mississippi also applies to Germantown.

We admit that local PILOT policy abandoned reasonable, balanced tax policy long ago.  Fairness was already questionable enough – tax freezes having evolved from an incentive into an entitlement – but the imbalance escalated when city and county governments approved policies that allowed corporations to get a second tax freeze after their first one expired.

Essentially, all they had to do was to suggest they were thinking about a move to Mississippi.  Once they checked that box, it was automatic that another tax freeze would be given and it could be just as long as the original one, meaning some major corporations don’t pay property taxes for 30 years.

We assume that the end of the second PILOT term, Mississippi will suddenly surface again, and in the present context, it’s reasonable to wonder if these companies will ever pay taxes again.

All this contradicts the promises made when the PILOT program was put in place.  Way back then, politicians sold it on the premise that taxpayers would give up the tax payments for a specific period of time but in return, the companies would pay taxes even longer when the PILOTs expired.

Moving The Burden

Without that social contract being upheld, the local tax burden is over time being shifted from businesses to homeowners and small business, and that is what is happening now.

In other words, in a state with a tax structure that is one of the most regressive in the U.S. (the less someone earns, the greater percentage they pay in taxes), the tax burden leans even more regressively.

Better tax policy is a goal everyone should be seeking, but equally important is the message being sent to the rest of the country that the companies that know us best are unwilling to invest in the community with their property taxes.


Join us at the Smart City Memphis Facebook page for daily articles, reports, and commentaries relevant to Memphis.