The recent letter by FedEx executive Richard Smith critiquing the work of the Economic Development Growth Engine (EDGE) will hopefully provoke a long overdue and fact-based conversation about why the city-county agency hasn’t fulfilled its highest priority of creating an actual economic development plan, why tax freezes are now entitlements, why we continue to conflate real estate development with economic development, why we fight to keep every low-paying distribution job in Shelby County instead of letting them go to DeSoto County where its taxpayers can foot the bill for infrastructure, and why there has been no fine-tuning of the PILOT program as it waives taxes while city and county services need more funding and the number of jobs being created lags significantly behind 15 years ago.
If we want to have the kind of wide-ranging, deep discussion that this community needs about economic development and its incentives, here are a few of our questions:
When the modern tax freeze program was created about four decades ago, it was said that they would be a stop-gap tool used until Memphis and Shelby County could upgrade its workforce and recruit jobs on the basis of quality rather than cheapness. When is there a real plan to get us there?
Why do Memphis and Shelby County need to dole out tax waivers to distribution companies which should recognize the benefits of being adjacent and accessible to FedEx? At what point can we stop offering incentives for these low-wage jobs?
More Q’s Seeking A’s
When do we quit acting like the construction costs of distribution centers like the one for Amazon is the ultimate indicator for success? When do our officials understand that real estate development is not economic development?
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 firing them to prevent the legal requirements of full-time employees?
What do the trend lines look like for the amount of tax waivers given each year and the cost of each job that is created?
Doesn’t the new policy of giving waivers for people to keep jobs in Memphis and Shelby County make the threats of moving them to Mississippi now pro forma?
What harm does it really do to Memphis and Shelby County for distribution centers 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 since about 75% of the jobs and 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 with tax freezes in the first place? Are these really the companies on which we want to base 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?
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 with our own region?
Since EDGE has been delegated the power to waive taxes by the City Council and Shelby County Board of Commissioners and those legislative bodies could have retained the power, does the Council and Commission have priorities that should be incorporated into the current criteria for a tax freeze? How does the IDB align its objectives with the priorities of the Greater Memphis Chamber?
The former head of Nashville’s economic development office said, “Incentives should incentivize. Once it becomes an entitlement, it’s no longer an incentive.” How do we make PILOTs incentives rather than entitlements?
And There Are More
What is the average cost of public services to these companies that are shifted to property owners because the companies don’t pay their fair share of taxes?
Why not review the 2005 city and county government-funded report by URS Corporation and NexGen Corporation that called for a “but for” test to see if their recommendations could result in smarter investment of incentives and the George Mason University’s Mercatus Center’s 2006 study that concluded that the PILOT program violates the principles of good tax policy? Could a more disciplined, strategically targeted PILOT program increase public confidence in the program?
What is the logic of retention PILOTs that are based on an overstated return on investments and do not include factors like the cost of a company moving from Memphis? What is the logic of retention PILOTs that allow giant corporations with annual revenues in the billions of dollars to avoid paying their fair share of taxes when small businesses and startups – the source of most new jobs – don’t have this luxury?
How do we dislodge the PILOT program from 1980s thinking and move it into the 21st century?
Why not hire a third party independent analyst to develop the facts and statistical context for the PILOT program? We have an overabundance of talking points and a paucity of facts.
If tax freezes are working, why have we not returned to the 10,000 jobs level we were experiencing annually as the 20th century was drawing to a close (and at a time when the Greater Memphis Chamber was responsible for jobs recruitment and incentives negotiations)? Why does our economy continue to languish near the bottom of the ranking of 50 largest metros in the economic indicators that matter most if the PILOTs program is working so well?
Old Economy Thinking
Too often, it seems that our economic development thinking is built on “old economy” beliefs rather than the realities of the “new economy.” The old economy is about being a place where it is the cheapest to do business, but the new economy is about being a place rich in ideas with talent as the driver.
In the old economy, chasing companies was the priority, but in the new economy, attracting educated people is. In the old economy, high-quality amenities were a barrier for cost-conscious businesses, but in the new economy, physical and cultural amenities are keys to attracting knowledge workers and young adults which in turn attract jobs.
In the old economy, regions won if they possessed a fixed competitive advantage, but in the new economy, regions succeed if organizations and individuals have the ability to learn and adapt. In the old economy, minority workers were the sources of low-wage jobs, but in the new economy, African American entrepreneurs and businesses are the paths to prosperity.
In other words, we are often having an outdated conversation when it comes to economic development, even as the income disparity between African Americans and whites remain the same as it was about 40 years ago and 40,000 Shelby County Schools students live in families earning less than $10,000.
If EDGE and other agencies are to treat incentives as entitlements, they must at least set performance standards that define its success in an increase in income, decrease in poverty, and an increase in higher-wage jobs.
If the letter by Mr. Smith about EDGE could stimulate this kind of honest analysis and candid conversation, he would have moved this community a major step forward in actually competing for the kinds of jobs that we have long coveted. We would all owe him a debt of gratitude.
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