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VOL. 130 | NO. 180 | Wednesday, September 16, 2015

New Tax Incentive Aims to Boost Declining Memphis Neighborhoods

By Madeline Faber

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Just north of Interstate 40, the commercially empty gateways to the Frayser neighborhood between North Hollywood Street and North Watkins Street are hardly fit to accommodate the thousands of vehicles that pass by every day.

Steve Lockwood, executive director of the Frayser Development Corp., stands at “Treasure Island,” a large, blighted apartment complex on North Watkins Street. 

(Daily News/Andrew J. Breig)

With a new “community builder” tax incentive maintained by the Memphis and Shelby County Economic Development Growth Engine, the Frayser Community Development Corp. hopes to attract businesses that would transform the area just off the interstate into a bustling commercial center.

“Nothing is there. I think that's sort of remarkable,” said Frayser CDC executive director Steve Lockwood.

Last month, EDGE announced its new Community Builder payment-in-lieu-of-taxes program, which applies to disinvested neighborhoods the same tax-break benefits typically given to large-scale office, manufacturing and distribution development projects throughout Memphis.

The new PILOT program is intended to be as flexible as needed, said EDGE president and CEO Reid Dulberger. For the past year and a half, EDGE has worked with the Community Development Council of Greater Memphis, Community LIFT and others engaged in neighborhood redevelopment to forge the new tool. It’s intended to attract outside investment to areas that haven’t seen development in decades.

“Some people might be concerned that we’re creating a new tax abatement program,” said Community LIFT president Eric Robertson. “But my reply to folks is that this is different. In a good portion of the instances where these projects will happen, there are going to be vacant lots where we haven't been collecting any or very little property taxes on or vacant and abandoned properties that are blighted and bringing property values down. Absent of this program, they won't be back on the tax roll.”

The Community Builder PILOT is similar to EDGE’s other initiatives in core ways. EDGE will hold the title to the properties associated with the project and will lease back the area to the applicant or PILOT recipient for a 15-year duration with a 75 percent reduction in city and county property taxes.

What is different is that the initiative is specifically tailored to aid distressed areas that qualify for the federal New Markets Tax Credit program. Eighteen sites will be selected by the city of Memphis and Shelby County to apply for the Community Builder PILOT.

“Rather than wait until all the other pieces are in place, we believe that having a Community Builder PILOT will help the other pieces fall into place,” Dulberger said.

After securing PILOT funding, applicants will have five years to get zoning changes or other financing in order.

The fees and payments given in lieu of taxes will instead be spread out over 10 years. “The Community Development Council said that in projects that they would envision applying for, up-front payments would be a deterrent,” Dulberger said.

There is no minimum dollar or impact required for the Community Builder PILOT, so the smaller-scale gas stations, sit-down restaurants and hotels that Frayser hopes to attract could be within nearer reach.

“Some people might be concerned that we’re creating a new tax abatement program. But my reply to folks is that this is different. Absent of this program, (the properties) won’t be back on the tax roll.”

–Eric Robertson
Community LIFT

Large-scale projects also are possible, and the program will likely help the Binghampton Development Corp. close the gap on its grocery store-anchored Binghampton Gateway Center at the corner of Tillman Street and Sam Cooper Boulevard. Lockwood is interested in entering into talks with Nike Inc. about building a Frayser outlet store to complement the nearby Nike distribution center that currently benefits from EDGE’s existing PILOT program.

“I think this will get their attention,” he said.

Nonprofits and for-profit entities can apply for the benefits, and what will likely emerge is a comprehensive type of development that partners private interest capital with community development expertise.

“The PILOT requires that the developer has to have some support from the community development groups,” said Robertson. “By including that requirement, it encourages and opens the door for that developer to potentially have a partnership or a mentor relationship with the community development corporations. This would not only benefit the property owner that’s developing that particular piece of property, but it would grow the capacity of the community development corporation to continue to work within its community well after the PILOT work is done.”

Because of the required partnership between developers and community-based organizations, on-site jobs are likely to be sourced from the area, Robertson added.

“It's the most interesting tool we've ever had,” Lockwood added.

The Community Builder PILOTs will be awarded across three or more application cycles. The first round of applications is due Oct. 2 and mandatory pre-application meetings with EDGE will take place from Sept. 14 to Sept. 25.

PROPERTY SALES 63 441 6,018
MORTGAGES 72 450 6,721
BANKRUPTCIES 0 1,045 4,093