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VOL. 129 | NO. 160 | Monday, August 18, 2014

PILOT Critics Push for Fuller Accounting

By Bill Dries

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One of the most vocal critics of payment-in-lieu-of-taxes economic development incentives – or PILOTs – says he intends to make them an issue in the 2015 Memphis elections.

Rev. Kenneth Whalum Jr. said his problem with the property tax abatements is the lack of disclosure about their details and how companies getting them have met the goals of creating jobs for Memphians.

Behind the Headlines

VIDEO: PILOT development incentives: Part II

“If I have anything to do with it, PILOTs is going to be a huge issue in the 2015 municipal elections. Why shouldn’t they be?” Whalum said on the WKNO-TV program “Behind the Headlines.”

Memphis Fire Fighters Association president Thomas Malone and Rev. Kenneth Whalum Jr. are among the most vocal critics of the city’s use of payment-in-lieu-of-taxes incentives for economic development.

The program, hosted by Eric Barnes, publisher of The Daily News, can be seen on The Daily News Video page, video.memphisdailynews.com.

It is the second half of a two-episode discussion about the property tax incentives that have become part of the volatile political discussion surrounding city finances, cuts in health insurance coverage and proposed pension changes.

“If they were all doing good, would they be coming after the employee benefits? Would they be balancing the budget on the backs of the employees?” said Thomas Malone, president of the Memphis Fire Fighters Association. “If these things were working and generating the economic income that they are supposed to do, they wouldn’t be trying to take retirees’ insurance. They wouldn’t be trying to take the pension.”

Whalum and Malone say they aren’t opposed to all PILOTs but want a fuller accounting and that they are critical of the expansion of the incentives to retain existing businesses.

The use of the tax incentives specifically to retain businesses and corporations in the city could get renewed attention and debate as city and county leaders began last week trying to counter incentives DeSoto County is offering Cummins Inc. to convince the diesel engine manufacturer to move most of its operations to North Mississippi.

“It has now become an entitlement program,” Malone said. “If you have a PILOT and you want another one and you don’t get it, they say, ‘We’ll move,’ and now they’ve added retention and expansion to the PILOT program. Where is the benefit? … To me, that’s almost like extortion.”

Reid Dulberger, CEO of the Economic Development Growth Engine of Memphis and Shelby County, which is among the agencies granting the tax abatements, said on the same program a week earlier that the payment-in-lieu-of-taxes agreements generate more in tax revenue than is abated and have an immediate positive economic impact. He also countered that the tax revenue generated is not revenue the city and county would otherwise have had anyway.

“My response is I don’t believe them,” Whalum said. “I don’t believe their numbers. Why would any of us believe their numbers? Their numbers come from them. … I would like to see … a complete accounting of every existing PILOT, every past PILOT and every PILOT that is still being granted. Right now, we are hemorrhaging tax base and nobody is stopping it.”

The incentives debate is related to the political struggle over the change in benefits and pensions in city government in which the Greater Memphis Chamber has put its newfound political voice behind the changes. The chamber also backs the payment-in-lieu-of-taxes as necessary for economic growth.

Whalum is critical of the chamber’s “overly aggressive involvement” in the issue.

“Somebody is definitely getting benefits from PILOTs. Until there is a complete and thorough accounting of every PILOT that has been issued in the past, present and future, we won’t know who’s getting those benefits,” he said. “How do we know what’s benefiting the people whose taxes are being given away?”

Malone disputes EDGE’s view that many of the tax incentives have worked out.

“We looked at some that do work, let’s be honest,” he said. “But the reality is about 63 percent of these aren’t working. That’s where we went on the attack. If they are not working, then to us, it’s like corporate welfare. You are getting something for nothing.”

For the coming election year in city politics, Whalum wants to compare contributions to candidates to the list of companies receiving tax abatements or those connected to the companies.

“There is a darker side to this picture. What if – I’m not saying this is the case – what if as a result of a complete accounting we find that there are connections between PILOT recipients and politicians who vote on these kinds of incentives?” he asked. “What if we find out that the millions of dollars that are being given away by taxpayers in Memphis and Shelby County are being used to make philanthropic donations, to make campaign contributions. That’s not legal. But we won’t know that until we have a complete accounting.”

PROPERTY SALES 74 74 17,458
MORTGAGES 93 93 20,128
BUILDING PERMITS 126 126 36,072
BANKRUPTCIES 63 63 11,227