VOTE APPROVED: The Shelby County Commission, including members James Harvey, left, and Sidney Chism, earlier this week approved changes to the way the local Industrial Development Board awards tax incentives to eligible businesses. -- PHOTO BY LANCE MURPHEY

With a vote by the Shelby County Commission Monday, legislative bodies for Memphis and Shelby County now have approved a major change to the way local tax breaks are awarded to eligible companies.

The County Commission’s vote was the last piece needed to give the official stamp of approval on the change sought by the city-county Industrial Development Board, which has moved quickly to lock the new rules in place. And it sets in motion a race to win over a type of business and capital investment that economic development officials say would be at risk of slipping through their fingers until now.

Criteria changes

With nothing approaching the level of discussion that characterized corresponding votes taken by the IDB and Memphis City Council, the County Commission swiftly OK’d a change to the eligibility for payment-in-lieu-of-taxes (PILOT) agreements. Under the new rules, companies that meet certain criteria can win the PILOT tax freeze for keeping jobs in Memphis, which is a difference from the way the award historically has been given out.

Before, companies got the award for bringing new jobs and investment into the city, rather than staying put and keeping what they’ve already got here.

“As you know, each time these PILOT agreements come before you, we’re bringing an employer here,” Memphis Mayor

A C Wharton Jr. told the City Council before that body last week gave its own approval to the new rules. “They promise to do this. They will come here if we do this. Well, the economic reality is there are not many people moving around doing anything. The game these days is to keep what you have, and this is precisely what this is.

“And the guidelines the IDB will establish are such that it will not allow folks who are just flying by night to float through here to pick up a benefit. You have to have been here for at least 10 years. You have to have invested a certain amount. So this is very carefully drawn to take care of serious employers.”

It was also drawn in direct response to one local employer possibly pulling up stakes, moving elsewhere and taking several hundred jobs with it. McKesson Corp., a San Francisco-based health care services company that employs 813 people in Memphis, has drawn up plans to spend millions of dollars on a new corporate campus in the city.

At the same time, it’s being heavily recruited by neighboring areas to make its investment there. McKesson has several options on the table its executives are mulling over, including moving some of its local operations to North Mississippi or Fayette County.

Once the company has incentive offers in hand from the areas where it’s considering new facilities, top brass at McKesson who have no ties to Memphis will decide what to do next.

‘Cannot afford to lose’

IDB members were told last month the board’s tax incentive program needed to be tweaked as soon as possible, since McKesson’s planning process was on a fast track. The timetable was so compressed that at least one City Council member who otherwise supported the new tax break plan said she wished the council would have been given more time to review it.

The new conditions to win a job-retention tax break include the company making an investment in their local facilities of at least $10 million, retaining at least 100 jobs in Shelby County and showing their long-term commitment to the county.

“The Industrial Development Board considered a draft of these rules in its last meeting in October,” said Charles Gulotta, executive director of the Memphis-Shelby County Office of Economic Development. “We feel that the barriers of entry are sufficiently high that these guidelines will be for exceptional and exemplary projects.”

McKesson has come up with four scenarios under which it would restructure some of its Memphis operations. The proposed level of capital investment ranges from a little more than $26 million at the low end up to almost $187 million, respectively.

Two other scenarios have the company spending $51.5 million and $162.1 million.

Wharton, who visited with the company’s executives in a bid to keep them here, said retaining McKesson could provide a foundation for bringing more jobs to the area.

“We in Memphis are quickly becoming the center in this country for the rapid distribution of medical implants, medical supplies, so this is going to have a multiplier effect,” Wharton said. “As we keep this business here, others in similar industries will locate here.

“We’re trying to adapt to the reality of today’s economy. The game now is holding on to what you have. I’m leveling with you. This is one we simply cannot afford to lose.”