Cities and counties across the U.S. are considering ways to make their tax incentives more strategic, but here, the nine PILOT-approving agencies seem stuck in time, which means companies and developers, not taxpayers, continue to benefit the most.
Job totals and investment amounts have been the metrics for success here for decades, but many economic development leaders across the U.S. agree that these measurements are no longer enough to determine if an incentive is effective and wise.
It’s why in other places, core questions are being asked: “Are tax breaks producing the outcomes policymakers expect and want? Are they measuring the right things so policymakers can weigh the benefits of new investment against the costs? And when is an incentive actually the right tool?”
There’s another question that should be asked here: even when If tax breaks are the right incentive, should it shift the tax burden even more onto those who can least afford it.
Tennessee has the 3rd most regressive state and local tax system in the country, meaning that low- and middle-income families pay a significantly larger share of their income in taxes than wealthy households do. Families in the bottom 20% pay 13% of their incomes in taxes while families in the top 5% pay 4.5%.
Asking The Right Questions
The need here is simple: elected officials and other stakeholders largely settle for jobs and investment totals but instead, they should understand the full profile of what a project that gets a tax break is delivering to Memphis and Shelby County – and what it is costing.
According to Ellen Harpel of Smart Incentives, putting incentives under a microscope means looking beyond jobs and investment data to consider questions like: What other economic activity is being generated? Are local businesses benefiting? What are the impacts on infrastructure and public services? Are residents gaining access to better employment opportunities? Are there costs or unintended consequences that should be considered.
PILOTs – the bureaucratic name for tax breaks for companies and real estate developers – permit beneficiaries to pay only 75% of their tax bill. Decades ago, the tax waiver was reduced from 100% to 75% on the basis that the 25% reduction would free up taxes for schools which lose revenues with every tax break. Of course, City of Memphis doesn’t fund schools any more so its portion is apparently deposited in the general fund.
In other words, homeowners and small businesses in Memphis regularly pay for the cost of streets, roads, and infrastructure while some of Memphis’s’ major employers – think FedEx and International Paper – continue to only pay 25% of their full tax bill.
And the agencies showing largesse with taxpayers’ money to the tune of about $750 million every decade issues news release after news release telling the public they should be thanking them for waiving 75% of a company or developer’s tax obligation.
International Companies Really Need Local Tax Breaks?
In other words, we’re left to live in a world where FedEx opened a Technology Center in Collierville 28 years ago and still only pays 25% of its full tax bill. To compound things, it has 12 more years in its last PILOT before it will be required to pay the other 75% – and even that depends on whether it will not once again game the system to get another PILOT retention extension by saying that it’s considering moving to Mississippi.
FedEx total revenues are $905 billion and $4.43 billion in profit.
Meanwhile, the Center City Revenue Finance Corporation (CCRFC), part of the Downtown Memphis Commission, granted a 12-year PILOT in 2023 for a developer to convert downtown’s Falls Building from commercial into residential. It never got underway and this month – three years later – the CCRFC upped the tax break to 20 years.
As usual, the news media (except for Memphis Business Journal) failed to tell taxpayers how much of their taxes are being abdicated. Instead, the daily newspapers parrot the press release touting that the project will pay $293,000 in taxes during the 20-year term of the PILOT but failing to remind readers that this amount is 25% of what it should be paying. It’s a remarkable enabling by the media to obfuscate the public which is investing $717,969 a year or $140.3 million over 20-year term.
In other words, city and county taxpayers are putting up 17.5% of the total project cost but without an equity position.
The Most Tax Breaks In The State
Although EDGE garners the most headlines because it grants the most tax breaks, it is only one of nine public boards with the power to approve PILOTs, but it accounts for almost half of the total taxes that are waived in tax breaks. According to the Shelby County Trustee, EDGE’s 266 PILOT agreements — more than Nashville, Knoxville, and Chattanooga combined — waived $20.4 million in county taxes (as of September 30, 2026) and an estimated $17.5 million in Memphis taxes (city government doesn’t report lost revenue from PILOTs, so calculated estimates are necessary, however, the trustee’s numbers are definitive).
In addition, 64 PILOTs approved by the Downtown Memphis Commission and 128 by the lesser-known Memphis Health, Educational, and Housing Facility Board totaled $17 million in county taxes alone in 2024. Then, too, Industrial Development Boards in Arlington, Bartlett, Collierville, Germantown, and Millington and Shelby County Health, Educational and Housing Facility Board also approve PILOTs that waive county taxes on each project that are more than the amount waived by each of the cities.
The 75% tax break is given to all companies and real estate developers who receive a PILOT. There is also EDGE’s retention PILOT which extends a company that already has a PILOT by 15 years — think FedEx and International Paper – and again reduces their tax bill for 75%.
To get a retention PILOT, a company merely suggests it is considering a move to North Mississippi. That’s how International Paper got a new PILOT despite the fact that it would cost millions to move its operations there.
International Paper has annual revenues of $18 billion. Clearly the PILOT savings amount to petty cash for the international company, but the thinking there is essentially if Memphis and Shelby County are willing to give away taxes, why shouldn’t it pursue it.
The Tale of the Tape
As of September 30, the amount of Shelby County taxes being waived is $44,019,917.
The following is the breakdown of county taxes waived by each PILOT-granting agency (remember these are county taxes only and for Memphis, it’s safe to assume the waived city taxes are almost the same):
$20,442,827 – EDGE
$ 9,651,856 – Downtown Memphis Commission
$ 163,533 – Industrial Development Board of Arlington
$ 220,000 — Industrial Development Board of Bartlett
$ 2,817,003 — Industrial Development Board of Collierville
$ 488,310 — Industrial Development Board Germantown
$ 261,270 — Industrial Development Board of Millington
$ 8,594,407 — Memphis Health and Education Board
$ 937,275 — Shelby County Health and Education Board
I’m not advocating the elimination of PILOTs but to remove the rubber stamps on the agencies’ desks and inject more common sense and Memphis-specific policy strategy into the process. Counting jobs and the budgets for construction are superficial metrics for PILOTs, especially when the latter in particular gives the impression that big things are happening in our community, while construction jobs are temporary.
Decades ago, City Council and Shelby County Board of Commissioners delegated their authority to waive taxes to the PILOT-granting boards. Years later, they changed PILOT policy to reduce the amount of the tax breaks from 100% to 75%.
Since then, the city and county legislative bodies largely act as if they have no power to change its rules. That’s why schools are still losing money with each PILOT and why the Shelby County Board of Commissioners should immediately pass a policy that requires school money to be removed from a PILOT as it is done in Chattanooga.
City and county legislators don’t even ask for regular reports on PILOTs.
That’s arguably the greatest peculiarity of all.
Next: Doing Better
**
Join me on Facebook, Instagram, and Linkedin where these blog posts are published along with occasional articles, reports, and commentaries that are relevant to Memphis.
