Every dollar given in an unnecessary or excessive tax break – referred to as PILOTs – to a company or real estate developer is a dollar that can’t be spent on education, workforce development, quality of life, public transit, and other drivers of economic success.
It’s a truism, nevertheless, I wonder if it crosses the minds of the members of the nine agencies in Shelby County that reduce the tax obligations of companies and real estate developers.
And just when we think we’ve seen the most egregious example of the abuse of the PILOT program, there’s always one more. Most recently, it’s the tax giveaway in Collierville for a project that never needed one because it was never in danger of not being built – Campbell Clinic.
It was one of those tax breaks given under the heading of “retention PILOTs,” a category invented years ago as a new way to dole out tax breaks, even to influential corporations whose first PILOT was expiring and they felt they deserved more.
Essentially, retention PILOTs became a check the box exercise – “we may move to Mississippi if you make us pay all our taxes.” It became a new way to grant PILOTs which in turn meant that some companies like FedEx and International Paper ended up with 40 years without paying their full tax obligations.
It’s not as if this is the first time the Collierville Industrial Development Board has stretched the limits of common sense, not to mention logic, to hand out a PILOT. After all, in the past, it has waived taxes to companies that were only changing zip codes in Shelby County, moving from a location in Memphis to one in Collierville.
All tax freezes should be weighed on whether the PILOT does in fact have a community benefit or whether it is just an entitlement posing as an incentive. In regularly being treated as entitlements, public benefit is overlooked and lost.
There’s now a new winner in what one observer calls the “open the window and throw tax money into the street” competition for PILOTs – the Campbell Clinic tax break.
How Do We Know We Couldn’t Have also Gotten the 75%
When the Collierville Industrial Development Board approved a six-year tax waiver, it meant the orthopedic clinic would not have to pay $1.5 million in town and county taxes. According to Daily Memphis reporter Abigail Warren, who unlike most news media reporters, included the amount of the tax break in her coverage – $89,000 a year in Collierville taxes and $164,000 a year in Shelby County taxes.
The Collierville board, emulating the example of Memphis and Shelby County Economic Development Growth Engine, engaged in a favorite misdirection play. Because the taxes being waived are 75% of what the company should pay, the emphasis is placed on the new 25%.
Unlike Ms. Warren, most reporters don’t even bother with the easy math needed to calculate the 75% and the public is left with the impression that they are better off getting 25 cents on a dollar. Left unsaid is whether the tax-forgiving agency actually tried earnestly to get the other 75 cents.
It is a peculiarity of state law that every time a city waives taxes, it is also waiving county taxes. The process requires approval of Shelby County Mayor Lee Harris, who unfortunately handles the requests in a largely pro forma way.
MIA: County Board of Commissioners
Interestingly, in Collierville, its legislative body, the Board of Mayor and Aldermen, vote on tax incentives regarding its city’s taxes. Strangely, the Shelby County Board of Commissioners has no similar voice in the process although it is the one delegating its taxing authority to the nine PILOT-granting agencies in our community.
More than half of Shelby County taxes are paid by Memphians – which amounts to about $85,000 a year of the Collierville PILOT. That’s roughly the same amount that Collierville taxpayers are “investing” in the new Campbell Clinic building at Bailey Station Road and Poplar Avenue.
The notion that the retention PILOT was needed is undercut by a simple fact: Campbell Clinic bought the property about 11 months ago. And Collierville had already approved the building plans and issued a development contract.
It’s incredulous to believe that Campbell Clinic would take those steps if it was still weighing whether it would build in Collierville and that without the PILOT, it could not make it happen, keeping in mind that it has more than $300 million revenues each year.
A Voice in the Wilderness
The Collierville IDB, like most of these kinds of boards, is heavy on people who are predisposed to support tax giveaways because of where they work. There’s the real estate agent who was concerned that Campbell Clinic was in rented space and there was an IDB member who works at Helena Chemical (which had previously received a Collierville IDB PILOT) who was concerned that Campbell Clinic could have chosen North Mississippi over Collierville – although it already has Southaven and Olive Branch clinics.
Campbell Clinic is a business and it decided to build in Collierville based on dollars and cents and the strength of a market that includes a city with 52,000 people and easy access for patients from Fayette County, Tennessee, and Marshall County, Mississippi.
The voice of reason on this occasion was IDB Chairman Mark Moody, entrepreneur and owner of two businesses in Collierville who questioned whether the city was under an actual threat of losing Campbell Clinic if its PILOT wasn’t approved. We give the other members of the board enough credit to know that his point was valid but they voted to give away the taxes anyway.
And to say it once again, every time a PILOT is granted, it takes money that would otherwise go to schools. For a suburb that markets its school system as a prime reason for people to move there, it’s particularly strange behavior.
EDGE Shift in Gears
Meanwhile, at EDGE, there seems to a new emphasis on massaging political egos and apparently it’s paying off. County commissioners voted down a study about tying incentives to workers’ salaries on the promise that EDGE would undertake one.
It’s an example of local politicians turning to EDGE for reviews about its own policies rather than obtaining an independent, objective sources for the work. This is a troubling tendency of local legislative bodies, whether it is EDGE, Crime Commission, or MLGW.
The newly redesigned EDGE Newsletter, since the exit of its former president, Reid Dulberger, is now heavy on PR and patting itself on its back. Such is the nature of these kinds of newsletters, but this one now is heavy on cheerleading and personal posturing which seem to reflect a new attitude at the joint city-county economic development organization.