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C’MON Chamber Get ReAL
By Joe B. Kent
$70M IN MEMPHIS-SHELBY TAX REVENUE SHORTFALLS
Memphis/Shelby County has sacrificed the true economic growth engines of safe/paved streets, education and public transit for excessive tax abatements that do not serve the overall business community and the taxpayer. The cost to the community in excessive tax abatements is estimated to be $70M in annually recurring tax revenue.
This $70M figure is derived from an article in The Commercial Appeal and another in Smart City Memphis that combines $22M in annual tax losses from retention PILOTs with $47M in tax shortfalls from slow total wage growth versus Memphis/Shelby County peers’ average total wage growth rate.
Greater Memphis Chamber Blog on PILOTs
Last week the Greater Memphis Chamber released a blog that discussed the economic development tool of payment-in-lieu of taxes (PILOT) administered by the local Economic Development Growth Engine (EDGE). The Chamber opens the article by admitting that PILOTs are controversial and then touts the benefit of PILOTs to taxpayers. The problem is the Chamber blog only tells part of the story.
The blog explains that a lowered tax burden in the abatement of property taxes encourages economic growth resulting in higher local tax revenue through capital investment. The article further discusses the TAG Truck Center project that increases property taxes from less than $77,000 to $200,000 for the PILOT term. What the blog does not tell you is that $200,000 per year in tax revenue or $2,200,000 over the 11 year PILOT term cost Memphis/Shelby County taxpayers $6,278,000 per EDGE project summary !!!
Analysis – C’mon Man…..
In this case, Memphis/Shelby County was competing against West Memphis, AR. C’mon Man, what are the chances that TAG prefers West Memphis over Memphis ? So why would economic developers overpay? Because they do not know that economic development is a community process to improve the well-being of its people. Instead, economic developers in Memphis appear to believe that economic development is predominantly tax incentives for corporations. As a result, Memphis is losing population and declining as an ecosystem versus their peer municipalities.
In closely reviewing the EDGE project summary, the retention PILOT does not account for: 1) some probability that TAG will remain in Shelby County without a retention PILOT for retaining existing jobs of $4.3M but with a PILOT for new jobs of $1.9M, 2) local impact of remaining workforce upon TAG departure or 3) Forgone economic impact of investing $4.3M into the community. When fully accounting for the TAG PILOT and referencing the EDGE project summary, the following calculation results that assumes a $1.9M tax abatement for new job creation:
TAG projected revenue ($11.5M) – Retained revenue 60% probability ($7M) – Remaining local economic impact of remaining workforce upon TAG departure (RW $1.3M) – Forgone economic impact of investing in the community (LI $6.5M) = $3.3M revenue loss less $4.3M retention tax abatement results in a $7.6 loss or $633k per year Memphis/Shelby County taxpayer loss.
Conclusion – C’mon Man Get Real !
The Chamber blog does not disclose the bogus incomplete accounting of EDGE which is a design for community decline. If the Chamber can’t get real, Memphis/Shelby County can’t get economic development right. C’mon Man!
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