Approximately $800 million in city and county taxes has been waived in the past 10 years, but when the conversation turns to the out-of-control PILOTs here, attention generally turns to EDGE as the culprit.
That said, EDGE is only one of 10 other public agencies that are providing tax holidays for corporations and developers.
In other words, the Shelby County Board of Commissioners special committee on EDGE and the Memphis City Council special committee on EDGE (and apparently, it is too much to ask for our local governments to come together to consider the roles and responsibilities of various economic development players) should consider taking a comprehensive look at the issue of PILOTs and the determine why there is not a comprehensive plan to ensure that they are pulling in the same direction to achieve a shared vision for our community.
The Shelby County Trustee’s Office provides regular reporting about the amount of taxes being waived, who’s waiving them, and who the beneficiaries of this largesse are. It’s posting monthly reports online, but unfortunately, it has not posted a yearly report for 2017 yet. Hopefully, new trustee Regina Morrison Newman will continue the transparency provided by former trustee David Lenoir and will fill in the 2017 gap.
That said, the percentage of the total taxes waived by each public agency varies little over the years, so we’ll return to the 2016 report as the benchmark for the amount of Shelby County taxes being waived.
A Million Here, A Million There
The report states that in 2016, agencies with PILOT authority waived $52.9 million in taxes. And that’s just the amount of county taxes.
It’s cumbersome to determine the amount of City of Memphis taxes being waived by PILOTs, but it’s possible to project the additional loss of revenues to City of Memphis, bringing the total amount in lost city-county taxes to at least $80 million a year.
During the administration of Memphis Mayor A C Wharton Jr., the department of finance made the decision not to track its total lost revenues, and we are unaware if it is doing it now.
The annual reports by the trustee’s office also calculates delinquent taxes by PILOT recipients – $2.2 million – and the agency with the most delinquencies is one few people even know about – the Health, Educational, and Housing Facilities Board of Memphis, which had 15 of the 24 delinquencies. This board issues tax-exempt bonds and PILOTs for multi-family housing with a focus on affordability.
In addition to EDGE and the Health, Educational, and Housing Facilities Board of Memphis, the other agencies in Shelby County that can also waive taxes are the Downtown Memphis Commission, Industrial Development Board of Arlington, Industrial Development Board of Bartlett, Industrial Development Board of Collierville, Industrial Development Board of Germantown, Industrial Development Board of Millington, and the Shelby County Health, Education, and Housing Facility Board.
Obviously, only EDGE and the Downtown Memphis Commission can waive Memphis taxes. The various industrial development boards can waive their respective municipality’s taxes, but every agency issuing PILOTs has the authority to waive county taxes along with those of their municipality’s.
The Tale of the Tape
Here are the agencies and the percentage of the total waived county taxes each waives:
50.85% – EDGE
26.97% – Downtown Memphis Commission
10.01% – Health, Educational, and Housing Facilities Board of Memphis
3.59% – Industrial Development Board of Bartlett
2.89% – Shelby County Health, Education, and Housing Facilities Board
1.30% – Industrial Development of Germantown
1.16% – Industrial Development Board of Arlington
1.04% – EDGE (for projects located in unincorporated area of Shelby County)
0.88% – Industrial Development Board of Collierville
0.13% – Industrial Development Board of Millington
Total Taxes Forgiven – Shelby County Taxes Only:
$52,900,514.43 – 2016
$51,283,713.21 – 2015
$51,861,456.92 – 2014
$51,217,202.64 – 2013
Now, Can We Have The Right Discussion?
Of the 24 delinquent PILOT accounts, only two were approved by EDGE, four were approved by Downtown Memphis Commission, three by Shelby County Health, Education, and Housing Facilities Board, and 15 by City of Memphis Health, Educational, and Housing Facilities Board.
Former county trustee David Lenoir wrote that the purpose of his PILOT report was “to facilitate discussions as to the effectiveness and future direction of Shelby County’s PILOT programs.”
And yet, neither the mayor nor the legislative body stepped forward to kick off a long overdue conversation about the philosophy about tax freezes.
It’s a peculiar response since it would seem a basic duty of the Shelby County Board of Commissioners and Memphis City Council.
In such a discussion about overall PILOT policy, there are many questions that need to be answered, especially considering that $80 million in city and county taxes each year are being foregone by 10 agencies working in silos and without an overriding approach. If it’s not a timely issue now, it’s hard to imagine when it will be, considering that most public services are underfunded and tens of millions of dollars are being taken off the table.
There are dozens of questions about the EDGE process and skewed economic impact calculations, there are questions about the need to continue PILOTs in downtown Memphis if it is indeed in the midst of its much-touted renaissance, there are questions about PILOTs granted by the smaller cities for companies previously located in Memphis, and there are questions about the need for four different agencies granting PILOTs for apartment complexes.
Long ago, PILOTs went from business incentives to entitlements, and along the way, becoming wealth transfers from Memphis taxpayers to large corporations and well-connected developers.
There is a clear need for a reform of the PILOT program, but first, local government should consider how to eliminate the silos that are churning out tax freezes, most of them without the accountability and oversight that is required of every other part of local government and certainly without the scrutiny applied to EDGE.
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